Is your small business finally taking off to the point where you need to hire employees? While this can be an exciting next step for any entrepreneur, it can also be a nerve-wracking change. After all, you’ll be delegating some business tasks you normally do. Plus, you’ll now being taking on the role of employer.
However, before you rush off on a hiring spree, you need to have a solid understanding of the costs and liabilities you’ll incur along the way. Therefore, to prevent costly mistakes and wasted time, you should consider these four things to make sure you’re ready, willing and able to become someone’s boss.
Consider the Costs
When you hire employees, your costs involve more than just their salary. You’ll be responsible for withholding and submitting your employees’ share of federal, state, and local income taxes. You must also pay contributions for Social Security and Medicare taxes for each employee. Plus, you may have to pay unemployment taxes, worker’s compensation fees, and more, too. Additionally, your employees may have other deductions that are required by federal or state law.
While it’s not required, you may offer your employees benefits that can cost your business money, such as paid time off, health insurance, and retirement plans. Additionally, you’ll have other expenses you’ll be responsible for, like office furniture, computers, phones, office supplies, uniforms, and more, so your employees will have what they need to perform their jobs.
Furthermore, new employees require added human resources time to prepare and process administrative paperwork like W-2s, W-4s, I-9s, and state income tax forms that your new employees will be required to complete. And, your new hires may need to be trained to perform their jobs, which will require additional time to do, too.
When you consider hiring employees, all the above needs to be calculated into your budget. Plus, you need to consider the ROI needed to cover your new employees. Ideally, your new employees will generate revenue either directly or indirectly. But, if a new hire isn’t working out, you may need to fire them before your business suffers.
Understand Your Legal Obligations
When you hire employees, you need to know your requirements as an employer. Some things you need to educate yourself about include employment laws, employment contracts, tax obligations, minimum hour and wage requirements, overtime stipulations, discrimination and labor laws, health and safety requirements, and more. If you don’t understand these different laws and restrictions, you could set yourself up for costly legal mistakes.
Even if you’re only hiring one person, you must retain written employment documents. Some documents are government and legally mandated while others are suggested by Human Resources best practices. These documents help you obtain the legal information you need as an employer, communicate company information to your employees, detail your employees’ job performance, and record employer/employee interactions. These documents can include company policies and procedures, employment applications, background checks, employment contracts, performance plans, and more.
Set Up a Payroll System
A payroll system helps you calculate your payroll more accurately and in compliance with the federal regulations. While some companies prepare their payroll manually, others may use payroll software. A payroll system helps ensure you pay your employees on time while calculating your payroll taxes properly.
Managing your company’s payroll can be a complex and time-consuming process. It’s a task many consultants recommend businesses outsource. Outsourcing your payroll to a company like The Payroll Department can help you free up your time, so you can focus more on your actual business. You’ll also receive access to our many years of knowledge and expertise in the payroll field. Plus, we’ll stay on top of and keep you informed about any payroll regulation changes while reducing your risks of a payroll error. Many companies have found outsourcing their payroll to be a more cost-effective option for their business. To learn more about the benefits you can receive by hiring The Payroll Department to handle your company’s payroll, call Teresa Ray at 317-852-2568.
When considering your business’s personnel needs, this article isn’t meant to scare you or convince you not to hire employees. However, you do need to consider everything involved with hiring workers. Plus, you need to look at how it can affect your business, so you can avoid costly missteps.
– Ariane of The Payroll Department Blog Team