Small business: Employee issues - Wages, legal requirements and benefits

Small Business Basics Balancing the cost of hired help against the dollar amount of the business they will bring in -- or that you would bring in with the extra time having help affords -- is the key to deciding whether you need employees and how many you might need.

Your cash flow and operating budget should show how much money you have to work with, keeping in mind you will probably have to comply with minimum wage laws.

To determine a wage range, compare the job description with similar professions in the Bureau of Labor Statistics' Occupational Outlook Handbook, and check on the minimum wage in your state as listed by the U.S. Department of Labor.

Regulatory requirements
According to a 1995 report by the Small Business Administration, the average annual cost to a small business for complying with regulations, paperwork and tax requirements is about $5,400 per employee.

Many questions about federal requirements with respect to employees can be answered on the Department of Labor's e-laws Adviser Web site. State laws can be researched on each state's home page.

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As a business owner and employer, you must be familiar with these areas:

Health and safety -- The federal Occupational Safety and Health Administration has a Web site section titled Small Business Forums that offers A Handbook for Small Business and Help for New Business, both pertaining to OSHA requirements and record keeping.

Workers' compensation -- If you carry three or more employees, you need insurance to protect anyone injured on the job. Contact your state board of workers' compensation.

Wages -- The Fair Labor Standards Act sets minimum wage, overtime pay, record-keeping and child labor standards. Some employees -- such as farm workers and certain seasonal employees -- are exempt from overtime and minimum wage rules. Specifics can be found at the Department of Labor's Employment Standards Administration Web site.

Withholding -- As an employer, you are obligated to withhold federal income taxes from employee wages and pay these to the IRS. How much you withhold depends on your payroll frequency, size of the wage payments, number of exemptions claimed by the employee and their marital status. You must issue each employee a W-4 form for determining withholding exemptions. Details on your tax liabilities can be found in the IRS Tax Guide for Small Business.

Immigration Act -- In keeping with the Immigration and Nationality Act of 1986, all employers must verify the eligibility of every new employee by filing a Form I-9 with the Immigration and Naturalization Service. For forms and information, go to the INS Web site.

Identification for employees -- If you are an employer, you are also expected to keep records that identify each employee, the hours worked and wages earned. You will need:

The employee's full name and Social Security number
Address, with ZIP code
Birth date, if under 19
Sex and occupation
Time and day of the week employee's work week begins
Total daily hours
Total weekly hours
Basis on which employee's wages are paid, for example, hourly or by the job
Regular hourly pay rate
Total daily or weekly straight-time earnings
Total weekly overtime earnings
All additions to or deductions from wages
Total wages each pay period
Date of payment and the pay period covered

Benefits and their costs
Offering benefits outside of wages is up to the generosity of an employer. You are required to meet only Social Security, federal and state unemployment insurance and workers' compensation requirements. Those benefits alone cost employers in 1999 an average of $1.65 per hour each employee worked, according to the Bureau of Labor Statistics.

Of course, to attract quality employees you may have to throw in some sweeteners. Below are some of the common benefits offered full-time employees and the average cost per worker, according to the bureau: