A huge step for the owner of any small business who has gone it alone since startup is the decision to take the leap from doing it all him or herself to becoming an employer.
This means sharing their vision and parceling out responsibility to some unknown person who probably doesn’t have the owner’s motivation, and certainly not their knowledge of the business.
Whoever you hire isn’t going to be you. But that’s not necessarily a bad thing. Do you want another you? Or would your business be better served by adding others who can fill in on the skills, aptitudes or time you don’t have? No one, not even you, has or can do it all.
So, OK, you’ve made the decision to hire employees, but what is that all about? You’ve heard horror stories about the expense of employees and about bad hires and what happened to other businesses because of them and that’s the last thing you want.
You’re turning the corner toward profitability and hiring people should help you nudge that process along, not hinder it. Employees do cost money, and they can indeed be your worst nightmare, but they can also be your best brand ambassadors and can provide the support you need to take your business to that next level. As is true with so many things in life, it’s all in the details.
The first detail is deciding what you have here: an employee or an independent contractor.
An employee is someone you direct, you schedule, and you engage to work on a long-term basis. An independent contractor provides you with a completed job, perhaps only for a limited time before the next assignment.
Business owners like independent contractors; they’re less work and potentially cheaper than employees. But most businesses engage workers in employment situations, not independent contractor situations, no matter how much business owners try to make them the latter. If you’re like most businesses, you need someone who will be trained and directed by you in all the numerous details of the job for the long term: that’s an employee.
Your next step is figuring out how much employees will cost. You’ll need to offer a competitive salary to attract and retain employees in our tight labor market, and you’ll need to provide benefits, and this is where many business owners experience sticker shock.
You’ll need to pay the employer share of payroll taxes, offer health insurance if you employ the person 20 hours or more per week, and provide temporary disability (TDI) and workers’ compensation insurance. Health insurance is not cheap, but the silver lining to that cloud is that once you have an employee on a health plan you can join that plan yourself, which will generally save you money over the individual coverage you now have. TDI is quite reasonable, but workers’ compensation can be a shock if you are in a high-risk occupation, like roofing or tree trimming. If your business doesn’t engage in high-risk work though, relax, it shouldn’t be that bad.
You also need to utilize a payroll system — one you do manually yourself or one that is automated online, or you can outsource that to a bookkeeper. Payroll has deadlines, and these can be a headache to track, but once you’ve got a system in place, it’ll become second nature. It’s definitely much more regimented, though, than taking owner draws from your business as you do now, so that is something you’ll have to get used to.
An alternative to hiring employees yourself can be outsourcing through a professional employment organization (PEO), which becomes the employer of record and takes on the responsibility of deadlines and benefits. This does take away those headaches, but you’ll pay for that. It’s up to you to do the analysis to decide if a PEO will save you time and money.
OK, however you did it, now you’ve got employees and it’s up to you to utilize them to your best advantage. That means supervising them to do what you want and how you want, and providing training, a work situation that will motivate them, and feedback so they can correct or refine how they interact with your customers. That all takes a lot of time, but it’s what you need to do if you want this bold new step to succeed.
Most of all you want your employees to be on the same page with you in representing your brand and what makes your company different, so the customer wants to buy their widgets from you and not from the widget store down the street. They not only have to talk the talk, but walk the walk, and in doing so they can be the best thing that ever happened to your company. Now really, what could go wrong?
Dennis Boyd is the director of the West Hawaii Small Business Development Center, which is funded in part with the U.S. Small Business Administration and the University of Hawaii at Hilo.