Since we make no secret about the rates we charge our clients and the rates we pay our team members, many times we are asked to explain the delta between the two. Now, for those unfamiliar with those rates (which you can find here), I don’t think those asking thing the difference is unreasonable. The conversation is more about justifying what is often mistaken as profit. In fact, the cost of labor, especially in states with strict definitions regarding contractors, can be stifling. And the indirect costs of labor can get so out of control, that many clients and contractors are overwhelmed by the challenges the average crewing company must face.
So we decided to publish an article the fully describes the cost of labor, from the direct costs such as payroll, payroll tax, benefits and insurance to indirect costs such as payroll processing, operating costs, invoice exceptions and time theft. The sections to follow will not only explain the rationale behind our rate system, but can be useful for companies requiring a contingent workforce to analyze their own investment into their workforce and determine if a staffing or crewing company is a better model for them to pursue.
Keep in mind, companies can have subtle differences in business model, have a higher tolerance for risk or work in states with less impactful regulations - but for the most part, this article is applicable to a broad range of employers in countless industries. This does not pertain strictly to the live event industry, but frankly, it applies to just about any industry and company requiring an employee - and in many cases applies to freelancers also.
The Real Cost of Circumventing
Written by @justdontcallmeeddie
Circumvention: No, it's NOT a tradition practiced on male infants NOR is it a witty name for an adult film convention.
Circumvention [Circumventing] is the act of bypassing your client and going direct to his end-client; and allowing that end-client to hire you directly, thereby "circumventing the individual or company that originally made the connection for you to begin with.
so what does that mean?
When a stagehand is introduced to the employer by a labor company, who then purposefully and deceptively solicits the employer, with the intention of soliciting jobs unknown to the labor company; or
When the employer or hiring company uses contact info provided by the labor company or solicits the stagehand directly, with the purposeful and deceitful intention of offering the stagehand to work as a freelancer without the labor company's knowledge,
We’ve noticed that this trend has grown recently and it actually has a negative impact for all stakeholders involved. We wanted to share a little insight about how and why this behavior has a long term negative influence.
so what's wrong with that?
It's widely accepted as unethical (although some companies see no malpractice). And certainly there are reasons to go around or go direct some times. But those legitimate reasons are specific and do not lend to the negative impact on morale or quality of service that direct circumvention can have - and I'm faced with two cases of it right now.
For the most part, the overall stagehand community, and the companies that hire crew through crewing companies, understand and respect the industry ethics surrounding their relationship with each other and their union brothers. Sadly, sometimes an innocent stagehand can be adversely affected if the hiring company puts pressure on them, while they are trying to be noble. The crewperson may actually run the risk of losing the client either way [thru the labor company and direct].
In short, it’s understood that stagehands are expected to protect the relationship between the end-client [the hiring company known as employers] and the stagehand's actual client [the labor company, labor broker or independent labor coordinator]. The end client is not the stagehands client to begin with.
still don't get it?
Imagine when we were kids, and we're all out on the playground, and you just happen to be an amazing friend that was generous ands selfless in giving. You liked to see your friends happy, so ever day you brought some brand new toy, never been touched, nothing broken off, everything perfect. And there was this one kid that every day, he would take the toy, push you down, and walk away laughing. But you being the amazing you that you are, keep bringing a new toy, every day, believing that he must have learned his lesson by now. He must see the folly of his ways now. This time, maybe he'll bring some of his toys, and we'll build a toy empire...
But every day is much like the last one. The new toy is stripped away, you are pushed to the ground, your friends won't help you out and instead just laugh at you while astonishingly enough, asking if they can play with your toys, but with the other kid. You think this sounds far fetched or not aligned. Well consider, just our company spent thousands on recruiting and double that on marketing last year. All that investment into marketing, the time, the resources, the money - and we earned the right to monetize them. So how fair is it if Jeff started hiring me just long enough for me to put on other hands, in essence, strangling myself. Just another story of a school yard bully.
IRS Rule on "Expensing Your Image"
Taxpayers in the entertainment industry sometimes may incur expenses to maintain an image. These expenses are frequently related to the individual's appearance in the form of clothing, make-up, and physical fitness. Other expenses in this area include bodyguards and limousines. These are generally found to be personal expenses as the inherently personal nature of the expense and the personal benefit far outweigh any potential business benefit.
No deduction is allowed for wardrobe, general make-up, or hair styles for auditions, job interviews, or "to maintain an image".
Excerpt from IRS Website on Business Expenses in the Entertainment Industry
(Page Last Reviewed or Updated: 02-Aug-2018)