Help! I Need Help! What You Need to Know Before You Hire

By Brona Pinnolis, Esq. c. 2009 All Rights Reserved.

Sometimes the only thing stopping you from growing your business is lack of time. As small business owners, many of us serve as sales manager, bookkeeper, administrative assistant, head of research and development and everything else that goes into making a business run. Even in a down economy, forward-thinking entrepreneurs may consider hiring help to create a competitive advantage. For those considering this move, there are some important things to consider before moving into the role of employer.

First, defining the role of a new person in the company is critical. Nothing creates more difficulty in working with an employee than confusion about job responsibilities. This is a great opportunity to find someone who is good at something that’s not your strong suit. We all have things we do better than others; using another person’s talents in this fashion makes for a good working relationship. You may want to consider that a family member may be a great resource for your needs; then again, he or she may not. Make sure you hire the right person for the job. If you hire a relative and they are not working out, you have put yourself in a difficult situation. So, make these critical judgments about fit before you bring your brother or niece in as your employee.

Second, it’s important to make a realistic assessment of how much time you can finance for another person’s work. Once you commit to hiring someone, you are committed to paying them for that work. Do you know how you are going to finance your payroll and over a sustained time period?

Perhaps one of the most important decisions is whether to hire employees or independent contractors. Many business owners are tempted to claim their workers as contractors to avoid paying taxes while, in reality, the worker should be classified as an employee. How do you know the difference? Form SS-8 from the IRS, used generally to justify a worker’s status as an independent contractor, takes you through a long series of questions to help determine if you must classify you worker as an employee. No one factor is determinative. The totality of circumstances is reviewed to make this classification. However, an employer must use extreme caution to avoid audits and reclassifications. Some factors considered include whether you set the hours for the worker, whether the worker is required to use your facilities and your equipment, whether you allow the worker discretion in determining how to complete an assigned task and the length of time the person works for you. Follow this link to IRS Form SS-8: http://www.irs.gov/pub/irs-pdf/fss8.pdf

Know the forms you will need. Once you start working with employees or independent contractors, human resources is a great area to outsource. Payroll services generally deal with all of these forms and make sure your obligations to the government are properly met, including the preparation of all quarterly or other IRS forms, in addition to cutting and issuing payroll checks. Even with a small business, this is a cost-effective method of avoiding big headaches, big interruptions in doing the actual work of the business and, potentially, big fines as well.

Finally, having employees creates responsibility to act in a lawful manner. Although employees in Tennessee are generally considered “at-will,” meaning you can hire or fire for any or no reason—so long as it is not an unlawful reason, be aware that those exceptions can consume the rule. Federal laws such as Title VII of the Civil Rights Act of 1964 guarantee equal access to employment regardless of race, color, religion, sex or national origin in any company with 15 or more employees. However, Tennessee’s Human Rights Act extends these same protections to companies with eight or more employees and extends protected status to the additional categories of age and creed. Additional protections are offered to employees with disabilities through the Americans with Disabilities Act of 1990, providing that employers with 15 or more employees must make reasonable accommodations for the disabled. Disabilities may be physical or mental.

This article reviews just a tiny portion of the laws impacting companies with employees. A great resource for anyone seeking more information on employment practices is the website for the Equal Employment Opportunity Commission, www.eeoc.gov.

This article will be published in the upcoming online edition of Memphis Minority Business Magazine, www.mmbmagazine.com.