Hire Your First Employee. Rhonda Abrams

Independent contractors. Before you ever hire an employee, it’s likely you’ll get help by engaging an independent contractor. Independent contractors are individuals who perform specific tasks, generally for a limited period of time. Most often they’re used for professional tasks, such as accounting, marketing, or tech help. Using an independent contractor offers many advantages—most notably, you’re not responsible for payroll taxes and they’re not covered by labor laws. You also control costs because you only pay for the time you actually use them. And you can cut back on their services rapidly if they’re no longer needed. But the government carefully limits the use of independent contractors, and you can get in big trouble if you don’t follow the law (see Chapter 3 on Employee Status).

      

Interns. Interns are usually students or other individuals just starting out in a profession who are eager to learn the ropes and are willing to work for minimum wage (or even for free—but only if they receive college credit and are doing meaningful work) to gain much-needed experience. Working with interns is a great way to get inexpensive help in your business while also getting fresh ideas from a younger audience. However, interns are very inexperienced, require significant supervision time, and leave quickly.

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       A Part-Timer in Your Future?

       Small businesses with 1 to 24 employees hire a quarter of their employees on a part-time basis. In businesses with more than 100 employees, part-timers make up only about 14 percent of the workforce.

       —Small Business Administration

worksheet: Employee Tasks

      Use this worksheet to capture the tasks you need to accomplish to run your business, the skills required, then add up the amount of time each will take.

      Also, consider whether the employee will be:

      

Permanent. Most employees are hired on a permanent basis. This doesn’t mean that they have life-time employment (you want to make certain they know they’re hired on an “at will basis”—see Chapter 3 on Employee Status). But it does mean that the length of time of their employment is open-ended; you both expect it to continue.

      

Temporary. Many companies are seasonal, and you may only need employees during your busy times. You can hire full or part-time employees on a temporary basis. You are still responsible for payroll taxes, and your temporary employees are still covered by federal and state employment laws. If you have a short-term project (perhaps for a few months) that you must staff up for, you can hire temporary employees or use consultants.

      With a clear understanding of the tasks and responsibilities you have in mind for your new employee, you can decide what level of support you need. Stay open to evaluating your needs and options. You might be convinced you need a full-time person, only to find that you’d be better off with a part-time person and a consultant.

      If you’re growing fast or opening a company that needs a lot of help from the starting gate, it’s likely you’ll need a mix of full-time and part-time people. If you’re launching a new software company, for example, you might decide you can do sales while you hire a full-time engineer, a part-time administrative assistant, and some additional contractors for writing code. You might even get an intern to do some research for you.

       Deciding How Much Help You Need

worksheet: Who Do I Need on My Team?

      List the job titles needed in each area. Some suggestions are in parentheses, but you should hire only those your company really needs as it grows.

KEY PERSONNEL	RESPONSIBILITIES	DESIRED EXPERIENCE/BACKGROUND
Top Management (President/CEO)
Administrative (Office Manager, Administrative Assistants)
Financial (Controller, bookkeeper, etc.)
Marketing/Sales/PR (VP Marketing, Salesperson, PR Director)
Operations/Production (Production Manager)
Technology (Chief Technology Officer, Website developer, tech support staff)
Human Resources (Personnel Director)
Logistics Staff (Shipping clerk, janitor)
Other

      Hiring an employee helps you grow your business, especially if you’ve carefully considered what type of employee you need and how much you can afford. Having another person onboard gives you more time to focus on growth—to develop innovative new products, reach out to your customers, spend less time on administrative tasks, or simply focus more energy on your work.

How Much Can You Afford?

      One of the biggest hurdles to overcome when deciding to hire is figuring out how much you can afford. You’re probably, naturally, worried about how you’ll afford to pay an employee and still have enough income for yourself. After all, if you don’t make enough money in a month, you still have to pay your employees—it’s the law. That means you might not have enough money to pay for other things—your rent, your suppliers, yourself.

      Fear over making enough money is probably the biggest obstacle to becoming an employer. But employees are an investment in your business—not just a cost—and the goal is greater growth. As with every investment, you can address your concerns with some careful planning.

      When figuring out how much you can pay an employee, take the following steps:

      1. Review your current monthly cash flow. How much money goes through your business each month? Remember, even if your business is profitable at the end of the year, you have to make payroll every two weeks or so. That means you need cash in the bank. So be sure to first take a realistic look at your monthly dollars in and dollars out.

      2. Estimate your current monthly profit. Have you consistently been generating enough income to support the type of employee you need, as well as yourself?

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