For any successful business, there will come a time when you think that you could do with an extra pair of hands. It may be simply to help you keep the administration side of things in order or it could be to work directly alongside you, allowing you to effectively take on twice as many customers as before.
If you’re currently in this position and are considering taking on a member or staff, there are 7 points that you should think about before you start looking to expand.
1. Do you actually need someone else?
So your workload is increasing and you’re finding it difficult to keep on top of all of the work that you’ve got coming in, without even thinking about incorporating some type of social life. Having someone working with you to help you out seems like the perfect solution.
However, whilst it may seem like the ideal answer, there is one other perfectly feasible option – better time management.
Being able to manage your working time and priortise your workload is one of the key traits of any successful business owner and you might be surprised at how much free time you actually have – and how little you really need a helping hand – once you take a long, hard look at your work and the way that you carry everything out.
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2. Can you afford to take someone on?
If you have gone through the processes and realised that you really do need to take someone else on, then it’s important that you are fully aware of the costs involved as unfortunately, you don’t just pay for the person’s wage.
For example, you have to pay contributions towards the employee’s Social Security tax (12.4% of the gross salary), State and Federal Unemployment Taxes (up to 6.2% of the gross salary, but the exact amount can vary due to most employers being able to benefit from credits) and Medicare taxes (equivalent to 2.9% of the gross salary).
Using those 3 taxes alone, you are looking at over 20% more on top of the employee’s salary – and that’s before you take into consideration the additional insurances you need as a company, as well as increased utility bill expenses and any working materials and utensils that the employee will need.
3. Do you have the space?
You may be able to run your business from your home office or a small rented office, but if you’re going to take someone on, you’re going to need, in theory, twice as much space as you’re currently using.
Of course, you won’t need two of everything – filing cabinets, fax machines or even kitchen equipment, for example – but even if it’s most basic form, you’re going to need the space for a desk and computer.
4. Is it actually a member of staff you need?
Although it may be clear that you need help, you may be able to benefit more from working with a freelancer or an agency.
As mentioned above, when you’re taking on a member of staff, you have a whole host of different costs that you need factor into your budget, all of which are necessary to ensure that you are working within the law. Take on a freelancer or an agency worker, however and many of these are not needed.
Costs such as insurance and initial costs to ensure that the welfare of the worker are still required, but you don’t need to think about Social Security taxes as the freelancer or agency will take care of these for you.
The negative side comes in the fact that freelancers and agency workers often charge higher rates than what you would pay a salaried member of staff, so it really is a decision of which is better for your individual circumstances.
5. You really can’t discriminate
It may sound obvious, but if you’re deciding to take on a member of staff, you have to be so careful when recruiting to ensure that you do not do or say something that could be deemed discriminatory – the problem is, you might not even know you’re doing it.
It’s common knowledge (unless you’ve been stuck in a cave for the past 50 years) that you can’t discriminate on the basis of religion, ethnicity or sex. But did you know that you can’t place an advert and ask for a mature member of staff or not hire someone because of their family responsibilities?
According to the United States Constitution, you cannot discriminate based on age for anyone over the age of 40 (younger in some state laws) and even if someone had a large family that they cared for regularly and you felt it would impact on the job, if they said that they could work, you would more than likely face legal proceedings if you did not take on the person based on those grounds alone.
6. Are you planning on offering benefits?
We’ve already gone through the necessary additional costs that you have to pay by law if you’re taking on an employee, but have you taken into consideration any benefits that most would consider to be commonplace from an employer?
A pension, medical, dental and life insurance are all considered to be relatively standard benefits offered by an employer, with these 4 accounting for around a minimum of $3,000 a year alone.
You may decide that you don’t want to offer any benefits – and you have no legal obligation to – but keep in mind that the more benefits you offer, the greater the likelihood of your employee being satisfied within their role and therefore having a greater work output.
7. Don’t forget the legalities
You’ve decided that you definitely need a full time member of staff and a freelancer won’t suit your needs. You’ve got your budget setup and can afford all of the additional costs, as well as some benefits. You’ve bought all of the necessary equipment, organised the office and are ready to advertise, interview and hopefully recruit.
Once you get to this point, there are three things that you have to.
Firstly, you need to keep #5 in mind and don’t discriminate in any part of the job recruitment process. There are some exceptions, but generally speaking, make sure that you don’t discriminate in any sense.
Secondly, you need to draw up a legal contract of employment. Whether you write this yourself or have someone else do it for you, always make sure you have your lawyer look through it. It may cost you an hour of their time, but it will be well worth it should they find a problem that could stop a potentially costly legal case.
Thirdly, don’t forget to speak to IRS. There are several things that you need to do in relation to the IRS when deciding to become an employer, primarily applying for Federal Employer Identification Number, registering for the necessary taxes and completing the relevant form for the employee. However, it is strongly advised to speak to your local IRS office as there are some differences between states.
Taking on a member of staff could be the best thing that you ever did and help you progress your business further than you could by yourself. Make sure that you keep these 7 points in mind, always abide by the relevant laws and you should be able to find your perfect employee problem free.
This post was originally featured on May 10, 2010.