A few weeks ago I wrote about how I caution my small business clients against hiring employees. It’s not that I say “don’t do it,” it’s more that I say “be careful and know what you’re getting into.”
The way I see it is, there are five steps to look at when a business owner is considering hiring employees.
ONE: Look at internal procedures
Here’s an unpleasant truth when you own a small business: YOU the business owner will need to do most of the work, especially in the beginning. As I wrote in my “caution” post a few weeks ago, the first question I ask when a business is struggling with payroll is: why do you need employees at all?
Are there things you can do internally to be more efficient? Are there things you can pick up yourself? Are there things you’re currently doing that waste your time, and that you could drop, thus freeing up more of your time to get more work done?
TWO: Look at technology
Technology is not the be-all and end-all. However, it might help you run your business better in some cases. For example, in my practice, I say seriously that my practice-management software and document-management software are basically an employee. The software helps me run my business better, and while it costs a lot of money, it’s less than having an employee on payroll.
THREE: Look at contractors
You have to be careful with this one. If you need occasional help for specific tasks, it may be better to look at outsourcing those tasks to a contractor.
Now, you have to be careful with this because even someone working occasionally could be considered an employee rather than a contractor. But as long as you structure it properly, you could plausibly say the person helping you is a contractor. An example would be hiring a bookkeeper. Outsourcing that task to a contractor frees up more of your time, without the commitment involved in having an employee.
FOUR: Look at temp workers
One of my clients has had a temp worker as his office assistant for many years now. The arrangement works well. If the client finds he doesn’t need the assistant, he simply tells the temp agency and they send the worker someplace else. The agency handles all the payroll taxes. There is, of course, a cost associated with this, and other clients have told me that temp workers are not necessarily a cheap alternative. But it might be something to consider.
FIVE: Look at hiring employees
At this point, if you still find that you need employees, then certainly you should — as long as you know what you’re getting into.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”