Should You Hire an Employee?
Employees are an asset to any company because they help manage and grow your business. Ideally, as your business expands, your staff will too. Taking on a first employee (or second!) can be daunting, but we’re here to help. Keep reading to learn more about hiring employees.
1099 vs. W2
When you hire someone, you have a couple of options: you can hire them as an independent contractor or part-time or full-time employee.
Part-Time & Full-Time Employees
If you go the traditional route of hiring as a part-time or full-time employee, you will withhold the employee’s Social Security and Medicare taxes, and you be required to pay payroll taxes. W2 employees also often participate in employee benefit programs and work according to your business’s schedule. It’s important to note that the Fair Labor Standards Act does not define full-time or part-time employment; however, the IRS defines full-time as an employee “employed on average at least 30 hours of service per week, or 130 hours of service per month.”
In comparison, an independent contractor is independent; they can work on their own time and receive payments according to a signed contract between the business and the worker. The contractor is also responsible for paying their taxes, and they are not entitled to employee benefits like W2 workers.
Which should I choose?
Deciding in what capacity to hire a new employee depends on your needs and the available resources. Let’s discuss needs first. The key to efficient hiring is to employ just enough help to receive as much from your employees as you’re giving them. If you only have a couple of tasks here and there, it might be a good idea to hire just one person on a part-time basis or as an independent contractor. The more help you need, the more important it might be to hire a full-time worker.
“…employees are assets to a company, an investment.”
Now, let’s talk resources. As we mentioned earlier, employees are assets to a company, an investment. Hopefully, by spending money on hiring an employee or two, your business will flourish and grow. That said, you should be careful not to over–hire. Assess and adjust your budgets before hiring. The last thing you want to do is hire someone and not be able to pay them.
Employees vs. Contractors
Lastly, it is essential to classify a worker correctly between an employee and a contractor. The IRS has criteria that it uses in determining the proper classification. As we mentioned above, the employer is responsible for withholding payroll taxes from employees but not contractors. Misclassifying a worker as a contractor when the IRS considers them an employee leads to significant taxes and penalties – so make sure you are working with a payroll professional that can assist you in correctly classifying your workers.
Are you thinking of hiring an employee? Give us a call today to learn how we can help you!
-Kelly & Stanley