To Hire or Not To Hire? That Is A Very Good Question!

When there are not enough hours in the day, and you find yourself overloaded with your business operation’s mundane tasks, it appears it’s time to grow and delegate. You have no choice but to hire help. The payroll system is complex; and making the wrong choice can be costly or put you in hot water with the governing agencies.  

This blog will help you to increase your knowledge and help you decide the best place to start.

Should I hire an employee or an independent contractor?

Check out these critical factors before you make a decision.

1. Know specifically what work needs to be done

Are there tasks that get in the way of productivity? Do you have to focus on one priority over another? If so, then you can hire an employee or freelancer to help you free up some time. 

However, you will still need to determine the nature of the task you need help with. If you are looking to accomplish short term goals like writing an e-book or starting a video marketing campaign, a freelancer working for a definite period should suffice. For long-term activities, you can hire a professional and form an in-house team.

2. Determine the costs

It’s important to know that getting extra help costs money. You will want to spend your resources on people who can bring added value to your business, whether they work full-time or part-time.

Again, you need to determine the nature of the task before you start scouting for the right talents. This should help you avoid spending money on recruiting employees, for example, who can help you in the short term.

3. Ensure proper documentation

You will need to classify individuals appropriately to avoid unnecessary costs. For sure, mixing up your employees for independent contractors puts you in the prying eyes of the IRS. 

Hiring an independent contractor has some advantages and is less expensive for you as the employer. However, it is not always the correct legal choice for your newly hired help.  Both of you must understand the difference and conduct your business appropriately.

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

If you hire someone as a 1099 contractor, you must follow the guidelines outlined by these lessons to ensure you stay compliant.  Non-compliance in this area can be costly for you if a governing agency audits you.

Make sure when you hire someone as a 1099 contractor, they will often get excited about their larger paycheck with no taxes taken out.  Many will be surprised at tax-time and become disgruntled; if you want to keep them around, that is not a good thing. Make sure at hiring time; your new contractor understands that they have self-employment tax obligations and should consult their tax advisor.

Is Hiring An Employee Easier? 

Hiring an employee is generally more costly.  Hiring is likely a good business decision when the production of this new employee out ways the full cost.

In your considerations, remember, payroll filings have frequent deadlines and can be complicated.  Payroll management is an excellent task to delegate to a low cost but efficient payroll company. If anything is missed, they are on the hook to get it straight with the tax agency and pay any fees incurred.

Obviously, you will need to be careful with the definition of employee and independent contractor. If you exercise control and supervision over the work of the individual, that individual is classified as an employee. On the other hand, the individual is an independent contractor if the tools and labor they utilize are beyond your control. 

Most of all, don’t be overwhelmed.  For more support on this often complex decision – 

• Review IRS publication 15 https://www.irs.gov/forms-pubs/about-publication-15 and federal and state laws. 

• For an inexpensive and convenient payroll service, visit https://businessuntangled.com/payroll-service/

• Business Untangled has lots of simple solutions for the compliance issues of running a business – Contact us today!