Underestimating All Costs Involved:
Make sure you consider all costs involved. The employee’s salary is just one portion of this expense. To this, add another 15-30% of that for the employer portion of Social Security, Medicare, Worker’s Compensation, Unemployment taxes, and for Health and welfare benefits. Everything has to be considered, otherwise, you will underestimate this expense.
Improvised Interview Process:
Going solely by gut feelings when hiring almost never works. As well as hiring the first person that comes along. These tactics are not only tiring but can also be very costly for the business. It’s best to have a consistent interview and hiring process instead.
Hiring Friends or Family, With No Experience:
Hiring people who are closest to you, like friends and relatives, can work. However, if you are not sure whether the person has what it takes or if you don’t know if you can work together but want to give it a try, then consider hiring them for a short-term one-time project. If it goes wrong, you will be off the hook after it ends. Always consider the risks of longer-term employment with a family member or a friend: if it doesn’t work out, it may impact your bottom-line and your relationship. The recommendation here is to approach the process as though you were hiring someone you didn’t know.
Paying Employees Incorrectly & Other:
Sadly, this is another situation that I see way too frequently. Paying employees below the required minimum or not paying overtime when its due can be devastating for a small business. The penalties for failing to pay overtime can be as high as double the total amount owed and the IRS and the Department of Labor will likely issue additional penalties which can be extremely high. Keep in mind that these, and other employment-related, agencies can audit businesses at any time for different reasons.
There’s also the temptation of classifying workers as independent contractors rather than employees to avoid paying payroll taxes. If the answer to most of this non-inclusive list of questions is yes, then it’s likely that the worker is an employee; not an independent contractor: Do you have control over their work hours? Do you supply the equipment they use? Do you give specific direction on how to do the work?
The good news is that these, and other common, landmines can be avoided. We can help you disarm them. Contact us for a free consultation.