The Most Important Business Decision You'll Ever Make

Employees are expensive.  The general rule is, don't hire employees as help.  Hire employees to earn cash flow for your business.  Justifying an employee expense requires the repeated performance of a critical yet simple task at a specific time and manner.

If the task is complex, can you afford an individual with sufficient skills?  If not, then anticipate constant management and oversight.  In the end, will you spend as much time managing the person as you would to complete the task yourself?  Good examples are cashiers and bookkeepers.  For a retail establishment, both positions are crucial.  In certain ways both are even simple, but one requires substantial education and discipline the other does not.  A cashier must work during hours your business is open.  A bookkeeper doesn't.  If your business model won't allow you to be your own cashier, you've got no choice but hiring an employee.  But bookkeeping is a task an owner can perform after-hours or hire an outside professional.

Employees are so expensive, you might be tempted to hire "independent contractors" instead.  Avoiding worker's compensation issues, unemployment taxes, FICA contributions as well as hiring and firing constraints by using independent contractors is not allowed.  If a small business is caught, the consequences can be devastating.  Think back-taxes at a minimum.  Criminal liability at a maximum!

It's really pretty simple.  The old walks like quacks like test works.  But in short, independent contractors usually work on specific projects, for limited duration, applying special skills not regularly and continuously employed by businesses similar to your own.  If those conditions don't fit, then you've likely got an employee and had better follow the employer rules.

Finally, employment litigation is the number one legal issue facing businesses today.  Like it or not, our world has changed in a generation.  Not that long ago, people were thankful to be employed and appreciated their employers whom they repaid with loyalty.  Now, employees feel entitled to a job.  Just watch the change of attitude from interview to the second week on the job for the typical hire.

Employees are expensive!

© William Hudnall 2011

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