The question, “Should Demo Reps and Brand Ambassadors be W-2 employees or 1099 contractors?” comes up often in the experiential marketing world. The answer to this question depends on who you ask. If you ask the state of California, it’s almost always W-2. If you ask a demo rep who doesn’t want to have taxes taken out of their check, it’s 1099.
It’s more costly for employers to categorize their workers as employees – the payroll taxes, unemployment taxes, and required workers compensation policies add up quickly! For this reason, many employers will categorize their workers as 1099, sometimes incorrectly. So, how do you know if your reps should be 1099 or W-2?
The answer is…complicated. And with a new proposal from the Biden Administration, the rules may change again. Under the new proposal, there are 6 things to consider:
1. Opportunity for profit or loss depending on managerial skill
Does the worker set their pricing for the work provided? Can they accept some jobs and refuse others? Can they outsource their work to another individual? If the answers are yes, that leans toward a 1099 classification.
Most CPG brands and experiential marketing agencies offer their demo reps a set hourly or project rate and most are not ok with outsourcing the demo to another rep they have not vetted. Speaking for ourselves, we count this one as one point for a W-2 classification.
2. Investments by the worker and the employer
Does the worker make purchases that help them advance their own business? This doesn’t include things they need to perform their job, like demo tables and cups. The purchases that would help indicate the worker is a 1099 contractor are things to help them grow their own business – like business cards they can hand out during their shifts to try to expand their network.
While this is harder to measure, at Health and Fitness Activations, we don’t see a lot of demo reps or brand ambassadors spending their personal capital on things that would grow their business. For us, this is another point for a W-2 classification.
3. Degree of permanence of the work relationship
Does the worker have an ongoing relationship with the employer? Is the work relationship exclusive? Is the work relationship indefinite in length (i.e. the worker isn’t signing up for a particular length of time)? If yes, these would point to a W-2 classification.
We have a little on each side here. While most of our demo reps work with us on ongoing retail demo programs, we schedule the shifts around the demo rep’s availability (and the store traffic). Most have more than one job. And our brand ambassadors who work events have finite positions that may be just a few days commitment. This is a point for a 1099 classification.
4. Nature and degree of control
Does the employer supervise the worker? Do they control the rates for the worker’s services? Do they control how the worker performs their work to comply with legal obligations or contractual client agreements? Does the employer set the schedule for the worker? Yeses here indicate the worker is a W-2 employee.
At Health and Fitness Activations, we have high standards for our demo reps and brand ambassadors including sales goals, reporting guidelines, and demo table set-up standards. It’s safe to say we have a lot of control over how the work is performed. So, for us this would be a point for the W-2 classification.
5. Extent to which the work performed is an integral part of the employer’s business
Is the role the worker performs integral to the business? This isn’t a particular worker, but is their overall role critical to the profitability of the company? If yes, this would indicate they are a W-2 employee.
If we didn’t have demo reps to complete demos and brand ambassadors for our experiential marketing campaigns, this would obviously shut down our business. So, for us this is a clear point for W-2. For CPG companies that hire demo reps directly, demo reps may or may not be considered essential to the company, depending on the company’s go-to market strategy.
6. Skill and initiative
Does the worker rely on training from your company to complete their demo or event? Can the worker perform their role without specialized skill training? If the employee isn’t bringing specialized skills to the role, or if they are dependent on your company for training, that would indicate the worker is an employee.
Our brand ambassadors and demo reps do not bring specialized skills, and do need training on the product and brand, as well as training on how to complete the reports in a way that’s the most helpful to the client. So, this is another point for W-2.
If you’ve been keeping score, you’ll see we have 5 points for W-2 and only 1 for 1099 workers. That’s why we hire all our brand ambassadors and demo reps as W-2 employees. It is more expensive, but it keeps us compliant in states like California who have stricter employment laws, and we’re ahead of the game with this pending proposal from the Biden Administration.
Looking for an agency with W-2 employees to help you stay compliant with labor laws? Give us a shout!