The Value Of Independent Contractors
A 1099 sales representative is essentially an independent contractor. The name comes from the tax form they fill out, a 1099 misc. This form puts things like benefits and financial liability on their side. It also means there’s a cognitive psychological difference between this kind of employee, and a “full time” employee. Believe it or not, all the additional benefits and tax complications which silhouette full time employees actually diminish their ability to cogently sell. Consider the motivation factor. A full-time employee is going to draw a regular hourly wage in addition to their incentive bonuses, or whatever commission programs are available. This will ensure such individuals will never transcend a certain level of salesmanship. Consider an individual selling over the phones at $9.25 and hour, plus commission, plus benefits. All they’ve got to do is show up for ten hours a day and they bring in $92.50 before taxes. If they work twenty days in a month, that’s $1,850. And, potentially, no single sale could ever have been made during their tenure. Incentivizing commissions may increase the likelihood of sales. But if there is no base pay from which to cushion the blow of poor salesmanship, then an individual has a natural drive to work harder in order that they may end the month successfully. A 1099 sales representative has the fire of necessity burning beneath them, and is always prompted to stand in an effort to quench that fire. The cushion of base-rate has no such desperation.
What Qualifications Are Necessary For 1099 Misc Sales Representatives?
The sales representative must do several things in order to legally be designated in this fashion. They must:
- Control how and when potential customers are seen
- Pay all their own expenses sans reimbursement
- 1099 salesmen require a contract wherein you specify them as an independent contractor
Understandably, this indicates there are some qualities of independent contractor sales which aren’t desirable for everybody. You don’t have the same kind of control over the individual; they come and go as they please, and may use practices which your organization wouldn’t necessarily endorse for the acquisition of sales. Such individuals could end up becoming a liability if not carefully chosen. Also, they can terminate their relationship with you on their own grounds at any time, depending on the contract. Usually that’s not going to happen, though. Because usually, when you bring a 1099 sales representative on with you, they’ve got a stake in your operation which is much stronger than that of a conventional hourly employee in sales. They’re actually in a position that puts them much nearer a managing force in the company.
Who Benefits Most From 1099 Sales Representatives?
It doesn’t make sense to hire such an individual on contract at a department store, though there are retail outlets that have done this, and some still do. That’s a bad deal for the salesman, though. No, usually it’s small businesses that employ this tactic, and large corporations. Generally, the best and most trustworthy utilization of such a salesman is going to be in sales which require more professionalism and specialization. High-powered organizations will use such individuals to broker deals with counterpart salesmen at other companies. When it comes to such deals, you actually kind of need a 1099 guy with a vested interest in the organization.
Takeaway
Outbound direct sales in small and large businesses benefit from using 1099 sales representatives. Additionally, from a tax and expenses angle, such employees save money and diminish the complication of regular operation. They must have autonomy, though, so contract very carefully.
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