What’s the best policy for a float center that wants to add massage? Do they hire on the Licensed Massage Therapist (LMT) as an employee, or do they bring them on as an independent contractor? Or what about just letting them rent a room in their business and not having to worry about it.

Dylan Calm of The Art of the Float podcast is in the studio with Ashkahn and Graham to discuss this issue, since his float center, The Float Shoppe, offers massage as well as other services, unlike Float On.

Art of the Float

FTS Blog – Employees vs. Independent Contractors. Which is better when offering additional services?

Wage and Hour Division Fact Sheet on IC vs employee

Memorandum Of Understanding Agreement Facts

IRS Independent Contractor Facts

Listen to Just the Audio

Transcription of this episode… (in case you prefer reading)

Graham: Okey-dokey.

Ashkahn: Hey everybody, welcome.

Graham: Welcome to a special episode-

Ashkahn: That’s right, special-

Graham: Of the Daily Solutions Podcast.

Ashkahn: Because I’m here-

Graham: That’s right, because this time we have Ashkhan.

Ashkahn: It’s Ashkahn. Hey everybody.

Graham: And we have me, I’m Graham. And we have-

Dylan: I’m Dylan!

Graham: Whoa-

Ashkahn: Oh my god. Yeah, it’s a special episode-

Graham: Podcast crossover.

Dylan: Hey everybody.

Ashkahn: It’s like mixed meets The Simpsons and Futurama or something.

Dylan: Or Simpsons and Family Guy.

Ashkahn: Yeah, there you go. Same thing. So yeah, we got Dylan over here from the Float Shoppe across town from us and from the Art of the Float podcast that probably many of you out there listen to.

Graham: And we have a question for all of us.

Ashkahn: Yeah.

Graham: And we thought we’d pull in Dylan, because this one is a hard one for us to answer on our own. Which is-

Dylan: They did not give me the question beforehand FYI.

Graham: Yeah. I didn’t even give it to Ashkhan either, so-

Ashkahn: Yeah, I actually have no idea what we’re about to talk about.

Graham: The-

Dylan: That’s perfect.

Graham: So the question is, “for practitioners like massage therapists and acupuncturists. Is it better to have an independent contractor or an employee or a mix of both?”

Dylan: Oh, you guys are just staring at me. You want me to answer-

Graham: But we don’t know, so this is a-

Ashkahn: Yeah, we don’t really know.

Graham: I mean-

Dylan: What about all your LMTs and-

Ashkahn: We don’t have that, we don’t have any of those things.

Graham: Yeah-

Ashkahn: We do have one person who cuts hair in the back, but-

Graham: That is not true, we don’t have that.

Dylan: Well, is he a contractor or employed or does he rent space?

Graham: So here’s what I’m gonna guess knowing nothing about this. I’m-

Ashkahn: Like how most of our episodes go.

Graham: It’s actually very similar. I’m gonna guess that it depends on the situation.

Dylan: Yeah.

Ashkahn: That this is not a black and white thing, and there’s nuance to the world-

Dylan: I think the number one this is where you live, basically, is kinda gonna decide on what the best answer is for you. Like in Portland-

Ashkahn: I didn’t expect you to say that.

Dylan: Oh, okay. Yeah. So in Portland, you do not want to mess around with the city and contractors. That’s a very scary thing. And there are, I won’t name names, but there are massage spas or centers. I’m only used to referring to float centers, what do you call a massage place?

Ashkahn: I don’t even know. Massage facility place?

Dylan: Massage automatron of sorts. They-

Ashkahn: Human float tanks.

Dylan: Have gotten in trouble with the city because they said “all of our people are contractors.” And there is a list of things that you have to say that are true to be a contract employee. And the city can say “well, you meet some of these but you don’t meet all of them. Or you can make a case, you can make an argument.” You can have to make that argument three years after you received a paycheck, I think it’s up to three years you’ve received a paycheck. It might even be five, it’s been awhile since I’ve had to look into this. And they can go “no, you checked a lot of those boxes of being a contractor, but actually you’re an employee. Therefore you owe the city x number of dollars in unpaid taxes.” Now I’m not saying that the city has it out for anybody to make money or anything like that, but it does seem to make sense to me that a city might want to make money. And so why would I ever wanna put it in their hands to make that choice to have to pay?

Oh, oh, sorry. Actually, I think I went a little bit out of order here. It wouldn’t be the employee that would need to pay the tax, it’s the employer that would need to pay both their employer tax and the employee’s tax. So as the employer, you get boned basically-

Ashkahn: And the government gets more tax than they would have-

Graham: Or the same amount? Just because –

Ashkahn: The independent contractor already paid the taxes, right? They’re not giving-

Graham: Oh, interesting.

Ashkahn: The independent contractor back their tax money, are they?

Graham: Yeah, that’s true.

Dylan: I don’t know. I don’t know how that part works, and I don’t know if there were any fines that go into it, but I do know that it scared the heck out of a lot of LMT automatron centers, and we all switched to the employee style. And honestly I wish Sandra was on this episode, because she’s the one who really technically understands all of this information. She’s the one who schooled me on this, and was the one even before the crackdown happened that she was looking at the list. Online they provide you this “must meet these and can’t be this”, and she’s like this is vague as hell. We can’t make an argument and know that this is gonna go through with this. And then it was just a year later we really started hearing about the crackdown in Portland. So, sorry, guys. So I will try to step away from that aspect of it.

The other I think, so the one that you didn’t bring up is just renting a room as well. And that comes with-

This is a big question, you guys. This is gonna be one of your-

Ashkahn: We have 14 seconds-

Graham: 12 minute left.

Ashkahn: Left, so good luck guys.

Dylan: Good. Call me.

Graham: So for renting a room though, I guess that’s just income you have coming in and they’re not considered even related to you in a contractor sense?

Ashkahn: Yeah.

Dylan: Room rental business.

Graham: Tenant.

Dylan: So with a tenant, with a room rental, that can actually be really good for a float center that’s just starting out. So you don’t have guaranteed revenue coming in, here’s an extra $400 that’s gonna be in your pocket, and you don’t need to advertise for them or anything. You know that person is coming in. The other thing is you know that they’re hungry. The LMT wants to get people in and fill up their room which is good for a few reasons. One is just they’re gonna be bringing people into your center, and they’re more likely to float. But the inverse of that is if they are an employee or a contractor, they might not really care about their job or making money that much. And they like living just a very modest, chill lifestyle, and they don’t need to make a lot of money. And if that’s the case, you want them to be pulling people in. You might be spending advertising money on getting people in the door, and if they’re not hustling, then it’s like “gosh darn it.”

Now again, invert that. They’re paying rent. You just have $400 cash, you’re already profiting. And the other way just requires a lot more effort, work, and over time it’s a relationship. I mean, there’s a lot that goes into having human beings instead float tanks, and float tanks require a lot of work as well. But it’s just a different kind of work. And you tend not to cycle out of float tanks that often. LMTs tend to have more turnover than float tanks, I would say. And we’ve had some really good long-term relationships with LMTs, but still, they move on eventually is the tendency. And so-

Graham: And-

Dylan: Oh sorry, go ahead.

Graham: So in this scenario where you’re renting a room to someone, does anything get tricky if-

Dylan: Yes.

Graham: Well-

Dylan: I know where you’re going, I know where you’re going. Yes, it does.

Graham: Okay. Well, my question’s was gonna be about-

Dylan: I meant to go there too.

Graham: How integrated they are into your business-

Dylan: Yeah, exactly.

Graham: If you’re booking their appointments through your software and taking phone calls.

Dylan: Yep.

Graham: Okay, so-

Ashkahn: Yeah. You’re not going under the same name-

Graham: You know where I was going-

Ashkahn: Saying come to the Float Shoppe, which means if they provide a crappy service, maybe it reflects poorly on you, but you don’t really have control cause they’re just renting a room.

Dylan: Yep. All of the things that you said are true. Those are confusing and difficult things. I will say we’ve built a really beautiful relationship with our LMT. Scuse me, I’m sorry, our acupuncturist, she does rent space. She’s also on our website, and you can also purchase through our purchasing system through our online point of sale. Everything. We process that for her, and then checks are written back and forth that the city and state say are good. I’m sorry, I don’t remember down to that minutia how it works-

Graham: No, no, no. It’s alright.

Dylan: But yes, it is possible. But this is also somebody we know is hungry to have business, to grow this, and loves what we do. And so there’s this really nice reciprocal relationship that we have that I wouldn’t necessarily think everybody can have. Especially somebody who’s just opening up with a float center, or just adding massage. Unless you really know this person, you don’t know how invested they’re going to be. And if you’re putting them under your brand umbrella, that’s a scary thing to do. So I would definitely out of the gate, recommend be very conscious about how you’re going forward with that, and the easiest thing would be “not under our brand”. You take money separately. And sorry, in the same breath I’ll say I love packages, right? That’s a great reason to come to the float shop is you get a massage and a float. Or massage, float, acupuncture. You can have these big things together and that’s a really nice selling point, especially when you want to diversify from your competition à la Float On.

That was one thing where we will have something that separates us and makes us different. And so to that end, it is nice if nothing else on the backend to have some agreement where money needs to go, or discounts need to be applied to rent. Whatever again works legally in your state, and is appropriate. There’s one other thing I wanted to say about that. Oh, and just know that that takes up more of your time and your attention. And that is very limited within probably your first three years of your business. You don’t have a lot of time to do that, right? So if you’re gonna do marketing on float tanks, you can devote 100% of your attention on floating, but if you need to also devote it towards this person’s massage, then that’s how much of a percentage do you want to devote to that versus revenue coming in? And that can also influence whether they’re paying rent or if they’re an employee or a contractor.

But I haven’t answered your question, which was employee or contractor, right?

Graham: And you-

Ashkahn: Yeah, we didn’t even know room rental was an option, so.

Dylan: Oh, right. We’ve done it all at the shop, it’s ridiculous.

Graham: What do you have right now? What’s your current setup, just for the record, for the layman-

Dylan: I think you could infer based off of what I described previously in Portland is they’re all employees now. So our-

Graham: Or/and room rentals there. You have some room rentals and some-

Dylan: Yeah. Our acupuncturist is a room rental, and then all of our LMTs are employees. We don’t have any contractors.

Graham: Do you notice that, do the LMTs themselves have a preference?

Dylan: I think they do. I’m sorry, I can’t answer for them at the moment. I know –

Graham: Dammit, Dylan!

Dylan: Understand though-

Graham: I want you to talk for other people!

Dylan: I hate impromptu questions. I think everybody is very happy with being employees, but I think the contract LMTs do make a little bit more money as contractors. It might be all on the backend, and by backend I mean the float center. They might be the ones making the true financial decisions.

Graham: Sure, yeah. And at least for us too in things like float tank solutions, we don’t use really independent contractors for our main work in the shop obviously, cause we tell people when to show up and what they have to do, and how they should do their job. Which by the way if you don’t know the basic differences between independent contractors and employees, it’s some of those. But look it up, just Google it is what I was gonna say. We could go into it, but it’s such a well-documented thing. And also so nebulous. Like Dylan says, it can come down to basically just arguing in court. That’s part of the process. It’s a gray enough area where there are no total certainties. But generally that, if you’re telling someone when to be somewhere, what to do, it’s more a staff member.

But yeah, float tank solutions employees I was going to say definitely prefer being employees as opposed to independent contractors for no other reason than the tax kind of benefits. All of a sudden the business is paying a portion of those taxes as opposed to them having to cover 100% of it themselves, so. Yeah, at least in our experience that actually seems to be favorable. I mean, it’s kind of like a harder thing for the business to have all employees in a certain sense. So you deciding to go that route is deciding to be responsible and in your case probably just do what is actually right and take a little bit of a tax hit for doing that, which-

Dylan: You know, it’s weird. For me it doesn’t really feel like a moral right or wrong. There’s weird stuff like-

Graham: Well, it’s a legal right and wrong, yeah.

Dylan: Well, we’re talking about these check boxes for there’s employee and then there’s LMT employee. We have to provide their oils, but if we’re providing the sheets, they’re an employee, or if we tell them how to give a massage, they cannot be a contractor. They have to be able to give their own massage style. And it’s like well, “you can’t do that here. I need you to give this, we need to be able to tell you how to give a massage if a customer says it was bad or you weren’t giving relaxation, and you were doing shiatsu” or whatever. We have to be able to say that.

Graham: Yeah, totally. Cool. Let’s see. I was trying to think, the room rental thing is interesting because I do actually find a lot of people who go that route. And I think previously I sort of had it in my mind that they were kind of taking a contractor route. But you’re right, it is a totally different kind of financial relationship there-

Dylan: It’s completely different.

Ashkahn: I got a question-

Graham: I’m not finished, I was in a sentence-

Ashkahn: Gonna jump in here with the question here-

Graham: What? I was gonna say something.

Ashkahn: Yeah, how much does it affect the people who are room rentals when they leave? Are they really taking their customer base with them? Or do those people kind of stick with you as customers?

Dylan: I don’t think we’ve had that scenario aside from yoga, which is a completely different beast altogether. So the only person we have rented rooms to are therapists and yeah, our acupuncturists, and they have not left. We’re pretty good at that. I can pat myself on the back about it I think. We’re pretty good with our retention. We treat people really well. We really prioritize, I include in our LMTs, we give them a very nice percentage split and all that stuff. And we want people to be happy, and we really feel like it starts from the source. The people who work in your business have to be treated well and feel like they’re in a nice community and that will emanate outwards. And so far that’s worked really well for us.

Graham: Nice. So back to what I was saying though.

Ashkahn: That was a good question though, I think we can all appreciate that it’s a good question-.

Graham: Even from a place of hostility here, I appreciated the question. Yeah.

Dylan: Even better answer, I’d say.

Graham: Great answer. So what I was gonna say, cause we get this question too and you probably do the consulting that you do. Which by the way, little plug, Dylan also does consulting in addition to his podcast. You should definitely think about hitting him up or hitting us up for consulting or hitting anyone up for consulting if you’re listening to this and opening a float center-

Dylan: Yeah, that’s what I usually say. “Find me, that’s great, but just find somebody. You need a consultant. You need somebody”-

Graham: Oh my god-

Dylan: For this process.

Graham: I love when you say that on your podcast. Every time. I’m just clapping in the background just like “yes, find someone. You can’t go it alone”.

Dylan: Even better, pay all of us. Let us all join in on one call, and let us see what each other’s answers are. Let us take notes and all that. I think that’d be fun.

Graham: That would be amazing.

Dylan: Plus one more excuse to talk to you guys, so.

Graham: So-

Ashkahn: Well, that’s about all the time we have, so-

Graham: Oh my god. Get outta here. Jordan, could you just cut Ashkhan out of the podcast this time around?

Ashkahn: Alright, what’s your question? What’s your question?

Dylan: He’s gonna hear his name and cut-

Graham: It’s not a question. I have a statement. I just wanted to talk for a while. So I was gonna say, I get this question.

Dylan: Please.

Dylan: Is this one episode still? This is one episode.

Graham: Sometimes we go long when we have fun. It’s this, which is “I’m opening up, should I rent a room, or should I have an actual massage therapist who I bring on staff?” You know they want to offer massage, and they’re not sure which direction to go. How would you say, how would you answer that question if someone’s like “what should I do in this case?”

Dylan: Yeah.

Ashkahn: That was a question by the way, it wasn’t a statement.

Dylan: Can you phrase that in the form of a statement? So I can answer that question?

Graham: My statement’s coming after the question. I realized I wanted someone else’s opinion before I just launched into it. Cause I know what I say, but I don’t wanna flavor your statement-

Dylan: Oh, okay. Well now, hm. I’m interested how you’re gonna flavor my meal here. So I think, almost like your answer just out of the gate has to be is “case-by-case”, right? You can’t just give a universal answer, but I would say for the most part, for somebody opening up a float center, I think it is generally safer to do a room rental than have another LMT there, because it’s just so much freaking work. It’s just so much work to bring people in. The marketing, everything. Like I said earlier, you’re either giving 100% of your attention towards floats, or you’re cutting up that percentage. And a fraction of it is going to massage. And you don’t know, most likely your massage is gonna be a much smaller financial percentage.

But you’re gonna have to devote more attention to even get that percentage. The floating numbers are much easier than the massage numbers. Also, they sorry for the buzzword, they do synergize together though, so there is something nice about that as well. It’s a tough one. But if I just had to give a universal answer for really basic somebody starting out kind of grassroots style, bootstraps, I would say room rental.

Graham: And so what I say. My personal opinion is, and I might have even gotten this from you too after one of our chats over beers. But I pretty much tell people “you have to really care about the service you’re offering if you want to have employees there for it. If you’ve been an LMT in the past, if that’s your world is massage or if you just really want to get into that world and also have a couple float tanks, sure. Staff it, do the whole shebang”, but just like you said, it’s gonna be a ton of work. And if what you want is to have a practitioner in your building, maybe rent a room and don’t put yourself through all of that kind of crazy rigamarole that you’ll have to go to if you actually want to be managing every single employee.

Dylan: So it’s possible somebody just doesn’t wanna deal with the cash stuff anymore. Some LMTs love it’s one person, they’re coming into their house or their flex space or whatever it is. And they wanna do all of that stuff. But there are people who have a large clientele base already, they’re just sick of doing the cash transactions part. They just wanna do the massage. Bring that person on. That is most likely gonna be better than just a rental. That is the person who is perfect to move in. So that also kind of leads into the case-by-case basis of who that person is, your relationship with them, your level of passion, where you’re at with your business. There are all these different kind of metrics to put together to be like “yeah, this is right for you”. That’s tough.

Graham: For sure.

Dylan: But the passion is definitely a good place to start.

Graham: Cool. So, I have a few more things that I’d like-

Ashkahn: That’s alright. So this has been a great episode-

Dylan: Well I also had-

Ashkahn: Thank you so much Dylan for-

Graham: Yeah, thanks for helping out, man-

Ashkahn: Hopping on-

Dylan: Thanks for having me on.

Graham: It’s been a pleasure.

Ashkahn: And if you have other questions for us that you want us to pass along to Dylan, you can-

Graham: Go to artofthefloat.com.

Ashkahn: Yeah, floattanksolutions.com/podcast, that’s where you can go.

Graham: Yep. And that is where they find you too, is it artofthefloat.com?

Dylan: That’s correct.

Graham: Did they say that too?

Dylan: Be sure to check out the Family Guy crossover episode too if you wanna hear more from these guys.

Ashkahn: We were just on that podcast-

Graham: I’m sure if you’re listening to this, you’re well-aware of Dylan’s podcast. But if you haven’t binged listened, definitely go back and listen to all 900 episodes or whatever he has on there.

Dylan: At least 900 hours, that’s for sure.

Graham: Yeah.

Dylan: It’s tough.

Graham: Alright, thanks so much everyone.

Dylan: Thank you guys. Thank you.

Graham: Bye.

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