Frequently Asked Questions


1099 vs w2 vs C2C

In simple terms, 1099 and c2c are similar in the responsibilities the contractor is responsible for within the scope of the relationship between them and LEVERAGEncy (pay 100% of taxes, assumed to provide insurances or buy them from LEVERAGEncy, etc.). The only difference is how LEVERAGEncy reports income to federal, state, etc entities. With a 1099 the income is reported against the contractors social security number (SSN) and with c2c (corporation to corporation) the income is reported against the EIN (federal employer identification number) that is associated to the corporation he works for. C2C is a bit more paperwork to maintain, but there are tax advantages in operating under one of its various forms (LLC, Corp, etc). You would need to talk w/ an accountant familiar with your situation to figure out if its worth it.

W2, or more accurately limited term employee (LTE), is defined by Leveragency covering the mandatory W2 items only (professional insurances, state filings, tax withholdings employer/employee) and the contractor handles the rest (medical, dental, sick leave, vacation 401k etc.). So the contractor can outsource, basically, his tax witholding and professional insurances (Errors & Omissions, General Commercial, Business Auto Non-Owned, and Workers Compensation) and just get a paystub each period and a w2 at the end of the year for his tax filings. Note, going LTE results in the hourly wage to a contractor in a w2 structure for the same job being lower to cover the costs to provide those items. The exact difference varies as the employer taxes are % based on rate but tends to vary from $5-10/hr depending on what you are getting paid gross. A detailed breakdown for your situation can be made on request (ask your agent).

Limited W2 vs Full W2

Candidates seeking w2 often ask what we mean by limited w2. Here is our standard definition:

Limited W2 in our model is defined by LEVERAGEncy covering the mandatory W2 items only (professional insurances, state/fed filings, employer/employee for taxes) and you handle the rest (medical, leave, etc.). Also assumes (by default, one can buy an early pay option) that employee is paid immediately AFTER we are paid by end client via check. So if a client pays us typically 45 days after we invoice you would see a similar lag till your first payment.

We can do 'full w2' which means the above but WITH medical if need be. We do that by running the candidate through a sister company that carries a full benefit plan and such and then they sub the resource back to us. For this to make sense we typically only do that for contracts that are full time and 6+ months in duration.

Does LEVERAGEncy do W2? If so, what benefits does that include?

Default answer is we don't do W2 if they need benefits like health or 401k. Instead we refer them to a LEVERAGEncy partner (i.e. MBO Partners) that does offer benefits a la carte as part of their W2 model. The LEVERAGEncy partner would then source them BACK to LEVERAGEncy as a corp-to-corp resource @ our corp-to-corp rate (the default rate we typically post on our positions). So the partner gets the full posted rate and then the candidate gets a subset of that (delta occurring to pay for the partners w2 employer taxes, benefits the candidate gets/selects, etc.).

The above said, we can do limited W2 for those that don't need health, 401k etc. Here is our definition of that:

* - Limited W2 in our model is defined by LEVERAGEncy covering the mandatory W2 items only (professional insurances, state/fed filings, employer/employee for taxes) and you handle the rest (medical, leave, etc.).

Beyond the default definition of limited W2 by LEVERAGEncy, we can handle expenses for a contractor (as a W2 or 1099). This is talked about here --> Expense Accrual
Mentioned 'no leave' above ... that means no paid off time (vacations, holidays, sick, etc.) is included in a limited w2 structure.
No FMLA as LEVERAGEncy is less than 50 employees as of 6/15/11.
No COBRA as by default we don't provide the benefits that COBRA typically covers (so nothing for COBRA to extend for you).

What are the implications of being a 1099 by default?

If you want to work as a 1099, there are some implications you should be aware of. Most are based on the State and Federal laws around employment and self-employment. That said, here are some notables:

* Witholding Tax. You pay both sides of taxes (employer and employee).
* Social Security Tax. You are expected to pay that 100%.
* Medicare Tax. You are expected to pay that 100%.
* Unemployment Tax. Waived. If you are 1099 you DO NOT qualify for unemployment benefits (you wouldn't list us as an employer). So factor that in.

In addition, 1099's are expected to provide the following insurances. If they don't have them we can add them to our policy for the period of the contract for a $/hr fee (so that we can met end-client expectations).

* Workers Compensation.. You are expected to pay that 100%.
* Professional Insurances.. You are expected to pay that 100%. This means E&O, Business Auto., General Commercial, etc. Levels and specifics may vary by job.

If you still want to be 1099 given the above, LEVERAGEncy will review the state requirements for the state you will be working in as a 1099. For example in WI you have to hit seven out of 10 items off this list (A.2 section):

If you can't hit 7 items on the A.2 list safely, LEVERAGEncy may have to convert you to w2 and reduce your rate accordingly. This may occur prior to or during a given job. Keep in mind our w2 rate is the same as 1099 rates minus the taxes we pay and w2 filing cost. So it really isn't that bad of a deal (we prefer w2 over 1099 as it has less risk or employee reclassification from 1099 to w2).

What are the criteria for being a 1099?

To be a 1099 you have to prove its a valid classification for you. If you can't decisively show you qualify most employers will force you to be limited w2 as they are liable for back taxes if the state ever audits their usage of you (and the associated 1099 status). Used to not be a big concern for employers, but given the downturn in the economy states are auditing aggressively in an effort to meet the wave of unemployment claims (1099's don't pay in unemployment tax).

In addition to the above, in the state of WI, the criteria for qualifying as a 1099 changed in 2011. Used to be you needed to prove 7 of these 10:

    The individual filed a business or self-employment tax return for the previous year.
    The contractor had or had applied for the federal employer identification number that is used for federal tax purposes.
    The individual maintained a separate business with an office, equipment, materials and other facilities.
    The individual operated under contracts to perform specific services or work for specific amounts of money and under these contracts controlled the means and methods of performing the services or work.
    The individual incurred the main expenses related to the services or work that he or she performed under contract.
    The individual was responsible for the satisfactory completion of work or services that he or she contracted to perform and was liable for failure to complete the work or services.
    He or she received compensation for work or services performed under a contract on a commission or per job or competitive bid basis and not on any other basis.
    The individual had an opportunity to realize a profit or suffer a loss under contracts to perform work or services.
    The individual had continuing or recurring business liabilities or obligations.
    The success or failure of the individual's business depended on the relationship between business receipts and expenditures.

Now it requires you to do two things. One, that you control how you do the work. These are the questions used to define that:

    Whether the individual was required to comply with instructions concerning how to perform the work;
    Whether the individual was required personally to perform the services;
    Whether the services of the individual were required to be performed at times or in a particular order or sequence established by the employing unit;
    Whether the individual was required to make oral or written reports to the employing unit on a regular basis.
    Whether the individual receives training from the employing unit.

Second you have a revised set of 9 criteria (replaces the 10 used prior to 2011):

    The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual, and uses his or her own equipment or materials in performing the services.
    The individual operates under multiple contracts with one or more employing units to perform specific services.
    The individual incurs the main expenses related to the services that he or she performs under contract.
    The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.
    The services performed by the individual do not directly relate to the activities conducted by the employing unit retaining the services.
    The individual may realize a profit or suffer a loss under contracts to perform such services.
    The individual has recurring business liabilities or obligations.
    The individual is not economically dependent on a particular employing unit with respect to the services being performed.
    The individual advertises or otherwise holds himself or herself out as being in business.


Face-to-Face Cost Coverage - Why so much?

If a candidate wants LEVERAGEncy to cover face-to-face costs for an interview the rate will need to be adjusted (either increasing the quote to the client and/or reducing the quote to the candidate). Typically the factors taken into account when calculating face-to-face cost coverage:

- Estimated cost
- Odds of winning final placement
- Duration of contract
- Markup for providing the service

Given the above the cost for LEVERAGEncy to cover f2f costs typically ranges from $3 to $8/hr. As your agent about it if you need it on your specific opportunity.

When we quote compensation - what are we assuming?

When we quote compensation there are assumptions we are making (which can be changed) that enable a number to be shared. In case we don't discuss it, here are the typical assumptions:

DIRECT HIRE: ($/year)
- If we communicate a number that isn't clearly tagged as base salary assume it is TOTAL COMPENSATION (base + bonus) as clients tend to think that way around roles to some degree. Typically we will indicate which type of compensation (base, total compensation, bonus, etc.) we are talking about.

----- PAYMENT FREQUENCY: By default our rate quotes are NET 10 of payment from the client to us. So if a client is a historically slow payer (i.e. NET 60+) to us you might not see payment till NET 70 or more. If this is an issue, you can request to be paid NET 10, NET 30 or NET 45 of approved time but the rate quoted would decrease the quoted rate accordingly to cover the cost of drawing down on our line of credit to pay you before we are paid (it adds up).
----- PAYMENT METHOD: By default our rate quotes assume you get paid via mailed check which takes 5-7 business days to arrive. Direct deposit is possible but there is a small fee (that reduces the quoted rate) to cover bank costs for direct deposit processing.
----- INSURANCE: As outlined in this viewtopic.php?f=8&t=163, the rates we quote assume you will provide the necessary coverages. If not, we can step in but the rate would be reduced to cover that cost.
----- FACE TO FACE COST: By default, if the client wants a face-to-face interview at some point in the process, it is assumed in our standard rate quote that the candidate will cover face-to-face cost (if any). LEVERAGEncy can cover face-to-face costs but it would reduce the rate quoted accordingly. It is discussed more in this thread --> viewtopic.php?f=8&t=164
----- EXPENSES: Default is expenses are not billable (part of rate quoted). Typically we call this out in the master post. So would need to formally state 'Expenses: Billable' to imply otherwise.

LIMITED W2: ($/hr)
----- PAYMENT FREQUENCY: Same as 1099/c2c
----- PAYMENT METHOD: Same as 1099/c2c
----- INSURANCE: W2 gets the professional insurances outlined above in 1099/c2c covered by LEVERAGEncy by default
----- FACE-TO-FACE COST: Same as 1099 or Corp-to-Corp.
----- EMPLOYER TAXES, UNEMPLOYMENT, STATE/FED FILINGS: The costs specifically associated to running a limited W2 on the employer side will reduce the quoted rate. Ask your agent for a detailed break down of all the line items if you want.
----- EXPENSES: Default is expenses are not billable (part of rate quoted). Typically we call this out in the master post. So would need to formally state 'Expenses: Billable' to imply otherwise.
----- See this thread for a discussion of what Limited W2 means in more detail --> viewtopic.php?f=8&t=112

Payment Options

I short, we pay by default NET10 of client payment via check mailed. Example:

    We invoice a client (we invoice based on client request but typically monthly or twice monthly)
    Client pays us (average lag is 45 days after we invoice for most clients)
    We typically cut payment to you 3-4 business days after that via physical check
    Check processing (we used a central processor) typically takes 5-7 business days form when we request a check (cut it) to when it shows up in your mailbox

Now, we can do NET X of approved time instead. The two options we typically do are either (1) NET10 of approved time or (2) NET30 of approved time but each has an additional fee of (5% and 3.5% of rate respectively) as we have to draw down on our operating line of credit to pay it coupled with the complexities of getting $ back if client demands it.

We also can do direct deposit, which gets payments to suppliers quicker. Fee for that is $0.25/hr to cover bank charges and associated effort.
Update direct deposit is now $2/deposit (less)

NET 10 / NET 30 Services - Why so much?

By default LEVERAGEncy pays NET 10 AFTER we are paid by our client. So, when a vendor/resource gets paid by US on each assignment varies depending on who the end client is and how long they usually wait before paying us. Looking across our clients they range from payment to us 15-30 days after approval of time (the fast ones) to 50-60 days after approved time (the slow ones).

To help resources with that lag in payment we offer to pay them BEFORE we get paid. Two options are offered -- NET 10 of approved time and NET 30 of approved time. The fee is 5.5% of rate for NET10 off approved time and 3.5% for NET 30 off approved time.

Why so much?

First off the NET10/NET30 services need to be a % of rate as the cost to us is linear with rate (we draw more from the line of credit). The %'s themselves are that the levels they are for two reasons. First, the NET 10 / NET 30 services shift the risk of client no pay due to unforeseen issues to us primarily. Second, the cost of the interest on our line of credit to carry the resources wages till we are paid. The latter interest cost adds up when you do the math on the net $ we have to carry for a typical resource. As an example, on the high end a $134/hr resource on a client with a NET 48 lag would require us to carry ~ $45k ( 7wks*$134*40hrs/wk) on our line of credit if they wanted NET 10 off approved time from us.

Hope that helps.

Note, you could also do ACH for a $0.50/hr fee. All this does is get you the $ the day after we get it (speeds it up by 5-7 days as its isn't going by default method -- check). Some resources also elect that.


Expense Accrual

If you are incurring expenses while working on a LEVERAGEncy assignment we provide the option, at no cost currently, to accrue some of your wages pre-tax to help you pay for some of those expenses. Currently the types of expense we limit this to by default are:

* Mileage
* Lodging
* Per Diem (M&IE)

The way it works is you decide how much of your hourly rate you want to be accrued pre-tax and we will withhold that each pay period. Then, on each time sheet submission, you also share your expenses for that period that you want reimbursed from your accrual with appropriate supporting documentation. We then pay you those expenses from the accrual account. If the accrual balance is less than the expenses for the period we will short pay the expenses (and let you know). If the accrual is over the the expenses for the period we roll the excess amount to the next period and let you know what the positive balance is. You can adjust the amount of hourly rate you set aside each pay period at any time. In addition, you can request a full or partial payout of the positive balance in the accrual at any time as a one-time bonus (which is taxed).
We can do paid time off. Doing via the expense accrual account / process above.

In short, we accrue part of a candidates rate into an expense account, and then pay from it for PTO. As usual, at any time, the candidate can request a lump sum payout of the $ in the accrual (it's always 100% their $).
You can use your expense accrual on relocation costs provided you (1) provide receipts and (2) have the funds in your accrual account. So there might be a delay on this type of re-reimbursement as its typically incurred at the start of the engagement before you have billed (accrued) many hours.


Insurance requirements for 1099's or Corp-to-Corp resources

If you are a 1099 or corp-to-corp entity, you are expected (by default) to carry certain insurances:

* Workers compensation
* Professional Insurance (a.k.a. Errors & Omissions)
* General Commercial
* Business Auto (except owned)

If you don't have 1 or more of the above at the levels required in the MSA we can provide it for you but the rate paid to you would be reduced to cover that cost. Depending on client some of the above may be waived or allowed to be sufficient at lower level of coverage. Ask your agent about the specific job at hand. However, by default, assume you have to carry these AND list LEVERAGEncy as an additional named insured on your policy.
Note, typically the coverage levels of the above are:

(a) 'Commercial General Liability' insurance with limits of not less than $2,000,000 per occurrence and $2,000,000 general aggregate,
(b) 'Business Automobile Liability' insurance (including coverage for all owned, non-owned and hired autos, and no fault coverage where applicable) with limits of not less than $1,000,000 per occurrence for bodily injury and property damage combined, unless Contractor only uses private passenger automobiles on LEVERAGEncy's premises, in which case not less than $500,000 per occurrence is acceptable,
(c) 'Workers' Compensation' insurance, including but not limited to coverage for all costs, benefits and liabilities under workers' compensation and similar laws that may accrue in favor of any person employed by Contractor in all states where Contractor performs Services, and 'Employer's Liability' insurance with limits of liability of not less than $1,000,000, with a waiver of subrogation in each case in favor of LEVERAGEncy (where permitted by law), and
(d) 'Professional Liability' or 'Errors and Omissions' insurance with limits of not less than $1,000,000 per claim.

Could vary by client a bit ... but the above is a good baseline.
As of this date LEVERAGEncy can provide workers comp for $0.40/hr and the other insurances for $0.60/hr. See MSA for current quotes.


Can State of WI employees submit for State of WI contract positions?

State employees are strictly prohibited from having contract positions while they are still working for the State. Also, they cannot bid on contract positions while still employed by the State (even if they intend to resign). They must resign first and be off the State job in order to be eligible to bid (and be considered) for a contract position. I am not aware of any kind of 'waiting period.' The VMS is not involved (to the extent of enforcement) of these rules as they do not have records of whether an individual is a regular employee of the State or not. It is up to the Vendors to 'self-police' these rules. State employees found to be in violation of these rules can be terminated and blacklisted from future contract positions. Vendors may also be subject to penalties (not specified).

Can State of WI contractors submit to State of WI contracts while still at the state?

Here is the process the state VMS follows:

1. The VMS checks submissions to see if submitted candidates are currently working (as contractors) at the state.
2. If so, they call the candidates current manager at the state (the one they report to now) and ask if they are aware of the submission and if it is o.k. to consider them for the slot.
3. If the current hiring manager is o.k., they will let the candidate go through. If not, the candidate is tabled.
4. Having the reference the State of WI requires of the candidate be the candidate's current manager at the State helps as it shows (somewhat) that the manager has been informed of the submission. However, VMS will still contact the current manager to confirm.

Keep that in mind.


Ratings (A, B, C). What do they mean?

All of our opportunities at LEVERAGEncy (as of 04/2011) are rated A, B, C. That letter grade is based on the average of three aspects:

    * Rate/Duration. Is the rate above (A) at (B) or below (C) market? Is the duration greater than 6 months (A) 3 months (B) or less than 3 months (C)? We ponder those two for a rate/duration rating.
    * Competition. What are the odds of a candidate getting reviewed by the actual hiring manager? Primarily this is influenced by how many vendors are chasing this (in our estimation) besides us. In short, if its sole sourced to us (A) if its limited to 2-3 vendors (B) and if its broadcast (C).
    * Influence. To what degree does can the agent of LEVERAGEncy influence the buyer. We measure this by doe they have people on the floor currently (A) just people historically (B) none (C).

So as an example you might have an A in rate/duration, a B in competition and a B in influence ... netting to a B overall. We just share the overall letter grade on the forums. LEVERAGEncy partners get the full breakdown in broadcast emails we send.

You will see the letter grade in two places on any opportunity:

    * Title - Suffixed at end. We put the rating at the end of each posting in parenthesis (i.e. (B)).
    * Post Body - Listed in header. We put it in the post body header as well. Sometimes we will provide some commentary of the 3 factors above.

Hopefully the above helps candidates decide if they want to apply to jobs and sourcing partners if they want to work them.

Layers, Direct -- Our Definition

Many of our sourcing partners are interested in how many layers are between LEVERAGEncy and the end-client. We share that information on our broadcast emails but here is how we define it currently:

0 Layers - No-one between LEVERAGEncy and end-client. We also allow two exceptions to be categorized as '0 Layers'. One, LEVERAGEncy is outsourced recruiting arm of the prime (candidate would talk w/ LEVERAGEncy during sourcing but run paper with prime). Two, LEVERAGEncy is working with a prime under a agreement relative to markup that insures LEVERAGEncy's markup + the prime's is NOT greater that ~ 20% (similar to other typical directs).
1 Layer - This would be where there is a prime that LEVERAGEncy will run paper with and there are no controls / caps on margin. In this situation, we typically will only pursue if its (1) sole source or project work (2) 1+ years in duration or (3) really high rates.
2+ Layers - We don't pursue.

Hope this helps. We also have a broadcast list that only notifies partners of 'O Layer' opportunities. We call that list 'direct to prime'. Feel free to be asked to be put on that.