Hiring Employees For Your Home-Based Business
By Cliff Ennico*
One of the major #147;rites of passage#148; for any small business, whether home-based or not, is the hiring of the first employee. It#146;s a sign of growth, an indication that your venture is something more than a personal hobby, a chance to delegate some of the mind-numbing business chores that take you away from what you do best, a feeling that you are #147;managing#148; as opposed to #147;doing#148;, and . . . a major legal headache.
Your legal risks multiply by a factor of 10 once you begin hiring employees, to the point that many attorneys will advise you not to hire employees at all #150; deal with all of your helpers as #147;independent contractors#148; or 1099s #150; until the business is generating substantial cash flow and it is absolutely necessary to hire employees. Of course, the Internal Revenue Service and others are likely to treat your #147;independent contractors#148; as your employees anyway if you don#146;t follow the rules. If your #147;independent contractor#148; is working for you 50 or more hours a week, doesn#146;t work for anyone else, lives in your home office and gets medical insurance and other benefits from you, you won#146;t get away with it. It#146;s time to hire them and put them on a payroll.
Assuming you have reached this stage, and can no longer put off hiring employees, the legal issues for employers and employees are particularly acute for a home-based business. Here#146;s a quick overview.
Trust.
While it is important to any business to make sure you are hiring only honest, trustworthy individuals, it is critical to a home-based business that you do so. I would recommend spending at least twice the amount of time #147;getting to know#148; a prospective employee that you would if you were in a commercial setting. Why? Because your employees will have access to your home, either on a daily or periodic basis. They will see where you keep your belongings, they will know how foolproof your security system is, and how tiny your dog with the big bark really is. They will be in a position to steal you blind, or perhaps physically harm you in your home office, and no one will be the wiser for a long time. They will also be witness to the intimate details of your personal life, and will be tempted to tell everyone they know about your #147;dirty laundry#148;.
If you are not completely sure that a prospective employee is trustworthy, DO NOT GIVE THEM ACCESS TO YOUR HOME AT ANY TIME. PERIOD. Meet them in their homes, or at a convenient local diner, until they have proven their worth over a substantial period of time. Just because they are employees does not mean that they actually have to work on your premises.
Zoning.
Most communities have strict zoning laws that prohibit you from operating a business in a residential area. Because there are no #147;zoning police#148; that enforce these laws, however, you can usually get away with running a home-based business as long as your business doesn#146;t get your neighbors so upset that they complain to the local authorities. The likelihood that your business will #147;change the character of your neighborhood#148; and make you visible to the local Zoning Board increases dramatically once you hire employees. They will have to park somewhere, after all #150; probably in your driveway or on the street outside your home. They will come and go at various hours of the day and night, for lunch breaks, cigarette breaks, and so forth. Your house will not be the peaceful, quiet place it once was.
When operating a home-based business in a residential area that is not zoned for #147;mixed use#148; premises, it is essential to keep a low profile. Hiring employees makes it more difficult to keep your business under wraps.
Taxes.
Once you hire employees, you will have to withhold Social Security from their paychecks (FICA), pay federal unemployment taxes (FUTA), and make contributions to your state unemployment system, among other requirements. You will need a good accountant, and perhaps also a payroll service, to help you make sure you meet these requirements. The federal government, especially, will become positively insane when they do not receive their FICA and FUTA payments on time, and, in most states, you will be personally liable for unpaid employment taxes even if you use a corporation or limited liability company (LLC) for your business. An excellent payroll service for small businesses is PayMaxx Inc. at
www.powerpayroll.com
.
Legal Requirements.
Unfortunately for many employers, slavery was abolished in the United States in 1865. Employees today have legal rights, lots of them, and you have to educate yourself about the federal and state rules that will apply to your business. What is more, you will have to educate your employees about their rights. Even a home-based business with only one part-time employee must comply with several federal and state rules designed to protect employees against unfair treatment. If this sounds unfair and burdensome, think about it for a moment . . . some of the worst sweatshops on Earth are home-based businesses!
So how do you find out which rules apply to your business? The easiest and cheapest way is through G. Neil Company at
www.gneil.com
. This company is the leading nationwide provider of #147;rules charts#148; #150; essentially, posters that describing the federal and state laws (of all 50 states) to which employees anywhere are subject, and which employers are required to post conspicuously in the workplace (such as on an employee bulletin board or lunchroom wall). For a price that is usually under $100, you can obtain a poster from G. Neil that is tailored to your location, industry, and number of workers. Make sure you read the poster before hanging it up on your office wall #150; it will teach you volumes about what you can and cannot do with your employees.
Get a New Lawyer.
A mere poster, however, will not help you deal with the many complex, subtle and emotional situations that having employees will cause. Many attorneys, even specialists in business law, are often unfamiliar with the complex federal and state rules governing employees. You will need to find a specialist in #147;labor and employment law#148; to help you deal with the tough ones, such as:
I want to fire an employee who#146;s not competent, but she#146;s just informed me she#146;s pregnant #150; will I be sued for discrimination if I fire her?
I think one of my employees is abusing drugs or alcohol #150; how can I confront them about it without getting sued?
I#146;m really attracted to this new employee #150; how can I let my feelings be known without being guilty of #147;sexual harassment in the workplace?#148;
They Are Only Employees.
Finally, remember that employees are just that . . . employees. They are not members of your family or household. They merely work there. They can be fired at will. They can be downsized if your business suffers a downturn. If an employee is taking up too much of your valuable time with his or her problems, or if you are spending so much time managing the employee that your own work isn#146;t getting done, it#146;s time to sever the cord so you can both get on with your lives. Sometimes you are faced with a difficult choice #150; you can either be kind to a difficult employee (overlooking their faults in the hopes they will improve), or you can be kind to your business (firing the employee who is draining your time, assets and energy). While it is important to maintain a positive and healthy working environment for your employees, being too kind to the wrong people at the wrong times will take years off of your life, and ultimately destroy your business.
CLIFF ENNICO, best known as the host of the PBS television series #147;MoneyHunt#148;, is the author of ten books on small business law and management. You can find out more about him at
www.protectingyourbusiness.com
. Permission granted for use on DrLaura.com
