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Hiring first employee? Expect big challenges
Dear Small Biz Adviser
My company is about to expand after winning
a larger contract. This means hiring our first full-time employees
and thus requiring us to find affordable retirement and health care
benefits. Do you have any recommendations for a very small company?
Thank you.
Alan
Dear Alan:
I congratulate you for winning the contract.
But growth brings with it the need to hire people, and that can be
one of the most challenging and often expensive propositions a small
business can face.
It takes a lot to find, hire and keep good people.
You have to identify the right candidates, and at the same time,
research and then put in place health care and other benefits that
are good enough to prevent your carefully chosen new hire from defecting
to another company.
I cannot overemphasize the need to develop a
human resources program that adequately protects you legally and
provides a benefits program that encourages employee retention.
Begin by developing an employee handbook. Assuming you will not
institute a union shop, the handbook will be the foundation that
governs employee relations, personnel policies, benefits packages
and all related issues. HrVillage.com
offers a how-to process that provides assistance in 28 different
topics. A more simplified format is the 12-page
handbook offered up by Texas Osteopathic Medical Association.
It can be adapted to your needs.
Remember, though, that no matter how carefully
you craft it, your employee handbook won't be the last word in employee
relations. You will also need to be familiar with local, state and
federal laws that govern employer-employee relations. You may want
to seek the assistance of a lawyer who specializes in labor law
or a local human resources association to maximize your protection
and lower any liability in the case of labor-related lawsuits.
Before seeking employees you will also want
to develop job descriptions. You'll find that carefully thinking
through a formal job description will help you establish the employee
policies of your company. In addition to describing the job tasks,
you will also want to note supervisory issues -- who the person
works for, and who works for that person.
Job descriptions dictate the requirements and
expectations related to a specific job. The employee handbook addresses
all employment issues not related to the specific demands of the
specific job.
Hiring your first employees mean your taxes
and paperwork get trickier, too. You will have to provide for employees'
Social Security and Medicare deductions, and make a matching contribution.
The state in which the company resides will require periodic payments
to an unemployment compensation and workers' compensation fund pool.
Locate and contact your
state's department of labor and employment security for further
details.
Paperwork you now inherit includes the quarterly
filing of IRS Form
941. Bankrate's story, Lesson
1 in filling out Form 941, is a good starting point to understanding
this quarterly report. The bank where your operating account is
located will also be a good source to learn more about the tax requirements
and related accounts you will now have to open to fulfill those
obligations. And if you haven't already done so, don't forget to
file for an Employer
Identification Number.
Finally, there is the matter of benefits regarding
health care, vision, dental, 401(k)s and more. You will determine
the level of benefits offered, balancing the high cost of such programs
against the need to retain good employees by offering good benefits.
Costs for benefits packages are high, and apparently
continue to rise. You will need to conduct extensive research into
your options. I would suggest the following alternatives:
- Contact local chambers of commerce and other
business associations in the area to learn what group packages
are offered to their members. The annual membership fee, at the
very minimum, may be worth the benefits packages offered.
- Contact local insurance agents specializing
in employee benefits programs.
- Research the Web. There are several organizations
that promote employee benefits packages designed specifically
for small businesses with limited budgets.
If all of this seems overbearing and more than
you want to encounter, there is the alternative of contracting as
opposed to employment. But read the IRS
guidelines defining contract vs. employee labor.
I wish you well.
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