For those individuals that have gone off and started their own business, be it a while back or recently, there comes a point and time when the question of when to hire employees surfaces. In some cases, hiring an employee or employees makes sense in that one’s business is growing and they need assistance. In other cases, money is tight and bringing on someone with a salary and potential health benefits and workers comp coverage can be detrimental to the company’s cash flow.
So, do you pull the trigger and hire one or more people, or do you continue to go it alone and hope that the workload does not overtake you?
In looking at hiring one or more employees, keep some of these matters in mind:
- Prior to hiring employees, you need to obtain an employment identification number (EIN) form the U.S. Internal Revenue Service. The EIN is often referred to as an Employer Tax ID or as Form SS-4. The EIN is required for reporting taxes and other documents to the IRS. Also, the EIN is necessary when reporting information about your employees to state agencies. To obtain an EIN, reach out to the IRS directly or apply online;
- Employers must maintain records of employment taxes for a minimum of four years. Also, keep good records for your business to help you oversee the progress of your business, prepare your financial statements, note the source of receipts, keep track of deductible expenses, prepare your tax returns, and be able to back up items reported on tax returns;
- Employers annually are required to report to the federal government wages paid and taxes withheld for all employees. This report is filed using Form W-2 Wage and Tax Statement. Employers are required to complete a W-2 Form for each employee to whom they pay a salary, wage or other compensation.Depending on the state where your employees are situated, you mighthave to withhold state income taxes;
- Employers must also carry workers comp insurance coverage through a commercial carrier, on a self-insured basis or through their respective state’s comp program;
- Employers must prominently display a number of posters in the workplace that inform employees of their rights and employer responsibilities under labor laws. The posters are available for free from federal and state labor agencies;
- Along with salary and benefits, employers need to remember that the expense of hiring includes the time necessary to train a new employee. During training, employers will have less time to devote to other areas of the business;
- Remember to steer clear of excluding any candidates from consideration on the basis of race, religion, gender, national origin, age, or disability. It is also important to maintain records of all phases of the hiring process, from the advertisements placed on job boards, newspapers, etc. to the reasons why you made the choices you did;
- Lastly, remember that when you switch from the model of independent contractors to employees, you’re business model changes. You now become a company that is fixed-cost, largely regulated, and to a degree inflexible.
Adding employees to your small business can be both frightening and exciting at the same time.
Take the time to weigh pros and cons of such a move so that you’re not caught short-handed in more ways than one.
About the Author: Dave Thomas writes extensively for B2B lead generation online resource Resource Nation that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs. He is an expert writer on items like credit card processing companies and is based in San Diego, California.
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