How To Pay Your On-Site Manager
Whether managing a property for themselves, or having a property management company manage it for them, property owners often decide to employ a resident manager (also called on-site managers) to handle the errands of running an apartment complex, such as dealing with repairs, showing and renting vacant units, and collecting rent. In either case, it is important that whomever is hiring the on-site manager actually complies with state and federal labor laws.
In some cases, it is actually required by law to have a resident manager. Depending on your state, there is a maximum amount of units a development is allowed to have without hiring an on-site manager. For example, in New York City it is required to have an on-site manager for any property with nine units or more while the state of California requires an on-site manager for 16 units or more. More information on restrictions and regulations on California commercial properties can be found in the California Code of Regulations.
stablishing the correct title of your on-site manager is the first step to paying your on-site manager correctly. Knowing the type of employee you have is very crucial when it comes to taxes, the wrong handling could result in a lawsuit from the on-site manager or liability on the landlord for unpaid taxes due to governmental agencies. The on-site manager could be considered an independent contractor or an employee. Choosing which one is decided on a case by case basis. The main delegating factor between the two is whether the person is required to work a certain amount of hours at specified times and specified locations. If the on-site manager is given a certain amount of hours that they need to be available/work, then the on-site manager is considered an employee. If the on-site manager has the freedom to choose his/her own hours and the times at which to perform a job, then the on-site manager may be considered an independent contractor. However, under California State Labor Laws, on-site managers are always considered employees and cannot be deemed independent contractors. As such, an owner must comply with the labor laws of the state.
he second step is establishing wages for the on-site manager. Many times an on-site manager is compensated with a discount in their rent, or just given “free rent”. Although seemingly easy at first, an owner can easily find their way into trouble if not done correctly. The lease should not be tied to the person’s title as an on-site manager in any way. This means the manager should sign a standard lease at the market rate (the amount of rent that other residents in the same complex pay). Then you should create a seperate agreement to represent the person’s duties as a resident manager. This document will show the manager’s compensation at an amount that meets or exceeds the prevailing minimum wage, and can show the amount of offset of rent. The separation between the two contracts allows the owner to sever the employment relationship without necessarily terminating the lease.
In the cases where the resident manager is deemed an “employee,” minimum wage requirements must always be met regardless of offset rent. In the situation where the apartment complex is at its legal limit for a required on-site manager (16 units for California, 9 units for New York City, etc.), a landlord is limited to the amount of the rent they can offset against the cash obligations of the manager. In the state of California, apartment developments with 16 units or more are also regulated by the California Industrial Welfare Commission. They dictate the amount of rent that an on-site manager is allowed to pay, and how much free rent may be credited to the manager. In the event that free rent is offered as a form of compensation, the commission also dictates the amount of free rent that can be allowed to meet minimum wage requirements. Under California state labor laws, the owner can trade off apartment value up to $451.89 for one manager living in a unit and up to $668.46 for two managers living in the same unit. However, in any case the amount of rent that is offset cannot exceed 2/3rd of the actual market value rent. If the amount of hours worked by the resident manager exceeds the amount of compensated rent, it is necessary to compensate them with a salary or hourly wage equivalent to or higher than the minimum wage.
To keep track of the hours the resident manager works each week, there should be some type of time sheet or written log implemented. The time sheet should consist of when they started, what they did, and when they finished. It’s very important to make sure the employee dates and signs each time sheet turned in. As an owner, you should protect yourself from falsified documents, so having your resident manager sign each timesheet says that the hours are true and not fabricated. If falsification occurs, you have proof you can use in court.
he compensation of every employee is subject to employment taxes. This is no different when it comes to on-site managers. If you decide to use rent credit solely as a means of compensation, you are required to pay California State Disability taxes and California State Unemployment Taxes. Also, as an employer, a landlord is legally required to withhold federal and state income taxes, as well as make their contribution, if they do not, they may be held liable for all of the taxes, plus fines and damages. It is also the owner’s responsibility for any injuries a manager may incur while conducting their duties as the manager, and it is highly recommended that an owner (or management company) has the appropriate worker’s compensation insurance in place. If the manager becomes injured while on the job and you didn’t take out worker’s insurance, you may be liable for their medical expenses and all lost wages for the period of time the worker is unable to work.
arland, Lucinda. "COMPENSATING THE ON-SITE MANAGER." Berkeley Property Owners Association . N.p., 01 Dec 2006. Web. 4 Sep 2014.
.Requirements for On-Site Property Manager. N.p., n. d. Web. 4 Sep. 2014.
.Fishman, Stephen. "Tax Rules for Hiring Resident Property Managers." Find out special tax rules that apply when you hire a resident manager of your rental property.. .