24-hours. That's it.
That is all the time we have each day to work, play, eat, sleep, laugh, cry, and love.
As entrepreneurs who are starting, maintaining, or growing our own businesses, we all will reach a point when we simply can't get any more work done in a day. We plateau. When that happens, if we want to grow further we need to hire help.
The IRS deems someone is an employee if "you can control what will be done and how it will be done".
The person is generally considered an employee by the IRS if you control any of the following (this is not a complete list):
- What tools or equipment to use;
- Where to purchase supplies and service;
- What work must be performed by a specified individual;
- What order or sequence to follow when performing work;
- You give highly detailed instruction as to how the work is completed; or
- If you have an evaluation system in place to measure the details of the work performed.
If the person is an employee, you will need to (at a minimum) withhold employee federal and state income taxes, Social Security and Medicare taxes from the employees pay, and you pay a matching amount of Social Security and Medicare taxes yourself. There may be additional state withholding and filing requirements, depending on where you operate your business.
Other employee expenses which may be required by law are unemployment insurance and workman's comp insurance.
It is tempting to hire "under the table", because employee expenses can get add-up quickly. Please, for your own sake, don't consider this a viable option. If you hire someone this way, it could be an absolute disaster if you have to fire that person later. S/he may report you to the state or to the IRS. If that happens, you could end up paying back employee taxes plus penalties.
One way to get help without the expense of payroll is to hire unpaid interns. This can be a great way to find someone who would be a good fit for your business without expense, while you mentor this person so s/he can learn valuable work skills that can be taken to new jobs after graduation.
The U.S. Department of Labor laid out very strict guidelines on what is allowed for an unpaid internship. You must meet all six of the following tests:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to waged for the time spent in the internship.
A note on #6. While they are not entitled to wages, you can reimburse the intern for expenses related to their internship, such as transit passes or providing lunches. A nice "thank you" gift at the end (gift card?) is also very appropriate.
When I started to grow my business, I brought on interns. At the end of the semester they liked the job so much, and I was very impressed with how well they were doing, that I was able to offer them both a formal paid position (with all the expenses and taxes that go along with it). This was a win-win, because when they were converted to paid employees, they were completely trained and I got a great ROI (return on investment) in their salaries immediately. Over a year later, these same two ladies work with me today!
Some colleges have work-for-credit programs, so the students earn college credits while working for you.
Bringing on to work with you for the first time can be daunting. Consult a CPA or small business attorney to make sure you are in compliance with all local and federal employment laws.
