Employees add another layer of complexity to your small business that requires careful consideration and planning. It is important to hire the right people, train them well, keep them happy so they will stay, and meet your tax obligations and other legal requirements.
Hiring and managing employees requires good recordkeeping systems, careful compliance and a formal training plan to assure consistency and quality in performance. We encourage the following best practices:
- Prepare a written job description that indicates exactly what is expected of each employee. Make sure to set measurable metrics you can use to conduct performance reviews for each job.
- Develop at least a simple employment handbook that outlines the following:
- The mission and vision of the business
- Employment policies such as work periods, time-keeping, holidays, etc.
- Standards of employment.
After accomplishing the bullet items above, you’ll want to establish a hiring process. A resume is a good way to get a first impression of a candidate. From there, selected candidates should complete an application form and schedule an interview. Ask each candidate for the same position the same questions and document the interview. There are many good sample sets of structured interview questions and application forms on the internet. Depending on the skill required for the position, many employers ask candidates to perform a trial assignment or take an aptitude test.
It can also be helpful to have a stated 30- or 90-day introductory period during which the employer and employee can evaluate skills and compatibility with the organization and the position. Be sure to have a written declaration (handbook, application form or otherwise) that employment is “at will,” meaning the employer or employee may terminate the employment relationship at any time with or without cause or prior notice.
Many small business owners are wary about the cost of hiring professional consultants. The expense of using skilled professional consultants can be insignificant compared to the gains you could make by putting your time to revenue producing activity — or the costly consequences you could avoid if you don’t make the mistakes of failing to adhere to regulations, failing to submit documents or making uninformed decisions.
There is no substitute for professional services to keep a small business operating within financial and legal parameters. Professionals can assist with every aspect of a small business, and they may be a good bridge as you grow from where you are now to hiring more full-time staff.
Listed below are some of the most important professional services most businesses need, especially early on:
- Financial consultants can help you handle accounting, bookkeeping, tax prep, and cash flow analysis and projections.
- Legal consultants can help you with your business organization, contracts, agreements and other general consulting.
- Bankers can help with loans, billing and credit.
- Information technology specialists can help you set up, manage, and monitor hardware, software and internet connectivity.
- Insurance brokers can help you get the coverage you need at a competitive price.
- Marketing consultants or agencies can help you create your brand, build a website, manage your social media and develop positive public relations.
If you don’t have much experience in a particular area of your small business, talking to a professional consultant can make your life a lot easier!
But what if I don’t have enough work for a full-time employee, but I still need help? If this is you, hiring outside contractors or temporary help is also an option! However, important distinctions exist between employees and contractors. No matter who is helping you get the work done, their employment status will affect your tax burden, liability and benefit costs.
The question of employee vs.contractor is a critical issue that does not have a simple answer and can have significant consequences. For example, if you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes and penalties.
The IRS can apply many different tests to determine whether an individual is an employee or contractor. If you are considering using contractors instead of employees for your business, be sure to consult with a competent tax advisor before making a decision.
Hiring your first employee is a big step. If you have any questions or concerns about hiring, or if you desire additional information about team building, please connect with us here!