4 Things You Need to Consider Before Hiring Employees for Your Business
For many business owners, the goal is to expand to a point where it becomes necessary to hire additional employees. Even though I have no interest in growing my business in terms of people in my employ, I did hire a virtual assistant to help me with some tasks.
Hiring employees for your business requires that you think about some of the changes you might have to make. Here are four things you need to consider if you decide to hire additional employees:
1. W-2 vs. 1099
One of the first things you have to determine is whether you are hiring an actual employee, or whether you are hiring a contractor. A W-2 employee comes with more regulations than a 1099 contractor. You also have more control over how a W-2 employee does his or her job. When making this decision, you need to consider things like payroll taxes, whether or not you want to control hours that the person works, and other issues.
It’s also important that you understand the distinction in terms of what the government thinks. If you classify a worker wrong, it can mean penalties and expense.
Once you start expanding and hiring employees for your business, you need to think about the types of benefits you offer. Are there ways to encourage talented people to stick around? Providing benefits is one way to attract talented people to work for you and help you grow your business. However, providing benefits also means that you have to be ready to set up the proper health care plans and retirement accounts.
Expanding your operation might mean payroll changes. Right now, my payroll is simple. I don’t have to worry about paying myself a salary because of my business organization. Because I have one independent contractor, I don’t really need to worry about payroll for her, either. I just pay her what I owe, and keep records so I can deduct the expense against my business income.
However, if you hire W-2 employees or if you hire more people, you might need to make changes to your payroll. Depending on your business organization, you might also need to start designating a salary for yourself, rather than just taking distributions. Review your business organization so that you understand how you should be managing payroll before you start hiring employees for your business.
4. New Premises
When you start a business out of your home, you might not think about needing something offsite. Once decide to hire people to help you out, though, the situation might change. In my case, even I decided to expand my operation, I probably wouldn’t need to move to a “real” office. I’d have a remote team, so it wouldn’t matter. If you are creating items, or have some other type of business, you might not want workers having access to your house. As a result, you might need to spend money for a new location.
Expansion can be exciting for a business, but it comes with extra challenges and expenses. Make sure you are prepared for them.