New Tax Benefits for Independent Contractors

By John Mark Warren
Jan. 31, 2018 11:45a.m. C.S.T.

Recently passed tax reform could mean more money in your pocket. The Tax Cuts and Jobs Act, passed by Congress and signed by President Trump in December, may significantly reduce the taxes paid by independent contractors, starting in 2018. Specifically, one of the provisions of the new law was to provide a 20% tax deduction to small business owners. This includes many of the independent contractors that use RigUp, both as sole proprietors or as LLCs.

The savings can be very significant. As an example, if you make $150,000 in 2018, 20% of this, or $30,000, could be tax deductible. That means, instead of paying taxes on $150,000, you only have to pay taxes on $120,000. At a 24% tax rate (the tax rate for a single individual making $150,000 in 2018) this could save you $7,200 ($150,000 x 20% x 24%).

In most cases, this benefit is phased out gradually as income rises and there are limitations for certain types of services. As with any tax matter, the devil is in the details and everyone’s tax situation is unique. We recommend you seek advice from a qualified tax professional, but we wanted to highlight how significant this benefit could be for a lot of the folks in the RigUp contractor community.

RigUp empowers the men and women who power the world, and we are excited to learn that many of you can keep more of your hard-earned money because of this new law.

 

Oilfield Consulting Firm Transparency : Take Rate vs Billing Rate

We often find that contractors and consultants are NOT fully aware of the ‘take rate’ that they are being charged by their oilfield consulting firm, nor the benefits (if any) they are receiving in return.

While there are plenty of reputable oilfield consulting firms, there are also many questionable ones.  These non-transparent firms have created an environment where hard working people are consistently taken advantage of.  An informed contractor is the best contractor.  So, whether or not RigUp is the best option for you right now, make sure you are asking the right questions, and making an informed decision.

What is my Take Rate?

We define ‘take rate’ as the difference between how much an oilfield consulting firm invoices to their client (gross billable rate), and the amount the firm pays the contractor (net pay). Very simply, if a consultant’s gross billable rate is $1,000 per day, and the consultant takes home $900, then the ‘take rate’ is 10%.

RigUp offers the lowest take rates in the industry, on average 10% lower than competition.  You will take home an extra $30,000 per year

What is my Billing Rate?

Discovering your billable rate should be as easy as asking your oilfield consulting firm. However, RigUp has learned it’s not always as simple as that. And without your billable rate, it can be difficult to calculate what you’re actually being charged. RigUp has come across multiple cases of firms lying to consultants about their billable rate, making the consultant believe they had a lower take rate than they were actually receiving.  In one such case, we found a consultant that believed he was at 5% for almost a year before discovering a firm had actually been pocketing 17%.

The best way to actually confirm your billable rate is to see a signed invoice from the client.  It shouldn’t be a tough ask, but as you can imagine, sometimes firms don’t want to provide this.

At RigUp, we are happy to offer billable rate verification at any time.  What we bill and what you receive is 100% transparent.  As an independent business owner, this is your right.

About RigUp

RigUp empowers the men and women of oil and gas, leveraging software to provide the best experience in the industry. RigUp gives service providers exactly what they deserve.  The lowest rates, the guaranteed fastest pay, best in class insurance and benefit options, easy to use mobile and desktop app, and the friendliest 24/7 support team in the world. With a customer satisfaction score 55% above the industry average, having RigUp as an oilfield consulting firm option sells itself to contractors. To learn more about RigUp’s consulting program visit rigup.com/contractors.

Legal challenges related to oilfield contract labor and RigUp’s solution to mitigate risk

With labor misclassification lawsuits mounting for operators and oilfield services companies alike, it’s important that management teams identify a better solution for managing labor related risk.

The purpose of this post is to provide you with greater insight around labor misclassification for Oil & Gas related companies while also introducing RigUp’s solution to help you reduce misclassification risk.

The Profile of an Oilfield Independent Contractor

Many of the reasons for using independent contractors are well-understood by most Oil & Gas Companies. They include the following:

  • The cyclical nature of a commodity based industry requires O&G companies to quickly  and easily expand or contract their workforces to accommodate workload fluctuations.
  • Oilfield independent contractors have specialized technical expertise and certifications acquired through formal training and on-location experience which makes them highly sought after.
  • Specialized oilfield independent contractors insist on and indicate a strong preference that they be retained on a competitive, independent contractor basis.
  • Service pricing has traditionally billed according to time “on-location” making Independent contractors billable based on day rates while on location.
Current Economic Landscape

The considerable economic challenges of the last 24 months in the oil patch has caused great strife among industry professionals. Reduction in billable work and decreases in market rates have created income shortages compared to earnings during the good ol’ days of 2010 thru 2014 when weekly, domestic land rig counts consistently exceeded 1,800 and nearly eclipsed the elusive 2,000 mark on several occasions.

With rig counts hovering around 30% of the peak through the latest downturn, an environment has been created that encourages opportunistic legal activity related to labor misclassification, as out-of-work independent contractors seek income to cover daily expenses and back taxes owed to the IRS.

Classifying Independent Contractors

The US Department of Labor (“DOL”), the IRS, and each state have their own unique factors in determining whether an individual is an employee or an independent contractor. As an example, the DOL has a 6 point guide: webapps.dol.gov/elaws/whd/flsa/docs/contractors.asp

(1) Does the worker play an integral role in the business by performing the primary type of work that the employer performs for his customers or clients? Does the worker perform a discrete job that is one part of the business’ overall process of production? Does the worker supervise any of the company’s employees?

(2) How long has the worker worked for the same company?

(3) Is the worker reimbursed for any purchases of materials, supplies, etc.? Does the worker use his or her own tools or equipment?

(4) Who decides on what hours to be worked? Who is responsible for quality control? Does the worker work for any other company(s)? Who sets the pay rate?

(5) Did the worker make any investments such as insurance or bonding? Can the worker earn a profit by performing the job more efficiently or exercising managerial skill or suffer a loss of capital investment?

(6) Does the worker perform routine tasks requiring little training? Does the worker advertise independently via yellow pages, business cards, etc? Does the worker have a separate business site?

Here’s a more simplified summary: Independent Contractors must be treated as the competitive, professional business owners with the opportunity to win work in a competitive marketplace with the ability to invest in their own operation and growth.

Current Challenges

Innocent decisions made consistently over the course of peak business have created havoc for operators and oilfield services companies alike. Examples include:

  • Providing  non-cash incentives such as shared office space and company owned trucks to retain independent contractors.
  • Providing employee eligible benefits to independent contractors.
  • Stipulating and controlling independent contractor work hours.
  • Non-negotiable day rates.
  • Failing to provide defined project scopes.
  • Lacking documentation as to the professional, nature of the two entities.
What solutions does RigUp provide?

RigUp has brought to the Oil & Gas vertical the only free online marketplace with the same efficiency and transparency being realized in other verticals.

Legal Labor

Let’s talk about how we can help you today. Contact us at support@rigup.com or 512-501-5452.

www.rigup.com