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What changes when you hire your first employee?

Discussion in 'Managing Your Business' started by parkerolsen007, Feb 10, 2015.

  1. parkerolsen007

    parkerolsen007 Member

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    I have a subcontractor that I know does good work, but who is not licensed so I can't use him. He is willing to be an employee (at least on paper), but I don't know what that would mean to my business to hire an employee. In your experience, when is the right time to hire your first employee? What changes when you hire your first employee?
     
  2. got2fsh

    got2fsh New Member

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    You have to start somewhere. Why not with someone you know, and trust?


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  3. crash1big

    crash1big Active Member Premium Member

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    What changes? Your liability for one. Whatever your employee does is on you. Not to mention the added expense having an employee brings. Work comp, taxes, unemployment ins, etc.
    As a sub; they have to have their own insurance and demonstrate that. An employee also needs to make a minimum hourly rate. They also need to be more productive for you to justify the added expense.
    My subs work at their own pace because there is an allotted amount of labor on any given job. If they want to work slower; that's fine. They can make minimum wage if they want. Or they can crank out some work and make real money.
    My employees understand this concept and are very productive because of the bonus (s) I give. Doesn't work that way with all employees though.
    If an employee quits, they can get unemployment still (sometimes) which usually means your unemployment rate goes up.
    As far as the right time. I would say as soon as there is enough work to justify the expense. And having an employee vs a sub; gives you more control over the job itself. IMO :).
     
  4. Laura Ray

    Laura Ray Member Premium Member

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    It is very important to keep in mind that the rules for subcontractors are very specific and can come back at you if you aren't knowledgeable about them and careful with both the subcontract agreement and the management of the subcontractor. There have been times when, even with a strong agreement, an independent contractor went to the IRS and stated that while he was paid as an independent contractor & had an independent contract agreement, he was treated like an employee and should have had taxes taken out. The company them had to pay ALL taxes, penalties, fines, and interest. Now, you might think that since a mutual agreement was made and it was in writing that you wouldn't be responsible. Unfortunately, the IRS views business owners as responsible enough to know the law. The business owner will always be held accountable when the law isn't followed. Be very clear and careful in this very gray area. When someone finds out how much taxes they have to pay and do not have the money, things seem to change to change quickly and agreements go away. I am an IRS Enrolled Agent.
    IRS: Employee or Independent Contractor
     
  5. 1ST CHOICE CLEANING

    1ST CHOICE CLEANING Moderator Staff Member Moderator Premium Member

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    I have made this mistake and if you have known them for awhile there is a chance they will forget about the employee/employer relationship over time and think it is a friendship.
     
  6. got2fsh

    got2fsh New Member

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    I have run into this situation a few times with subs, where they just can't keep up with running a business and doing the work, and have decided they need to work hourly as an employee. This has left me with the choice of hiring them or loosing them to someone else. Having hired them, I have found ex-subs to have much more drive, sense of responsibility, and dedication than people that have had an hourly job all there lives....just my two cents


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  7. Clean Way

    Clean Way New Member

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    How do you structure your bonuses and what is there job duties?
     
  8. crash1big

    crash1big Active Member Premium Member

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    SOrry just saw this.

    I figure a given amount of labor on a given job and only pay out that amount maximum. That is where the bonus is. If i figure 3 hours on a job and it gets done in 2; I go ahead and pay for 3 hours.
     

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