Michelle Loretta is a consultant for wedding and event professionals and writes daily for the Sage Wedding Pros’ business blog. She blends her past as an accounting nerd, sales vixen, and stationery entrepreneur to help entertainers better their businesses.
Here are 3 things to consider before hiring an employee or contractor:
1 - Can you afford to hire someone?
In addition to accounting for reasonable wages for the job and the market, you’ll want to consider taxes and any other state and federal compensations. (Plan on adding 20-35% to the pay rate for taxes, etc.) You’ll also need to consider how these additional expenses affect your cash flow. Can you afford the new hire AND still pay yourself AND all your business expenses?
2 - Will a contractor suffice? Or will you be required to classify the new hire as an employee?
Classifying your new hire as a contractor has its benefits. The most important of these is not paying payroll taxes. (The contractor will still have to pay taxes based on 1099 income; you would be exempt from employee taxes.)
The IRS wants to make sure that the contractor has complete control over his or her work. “Control” is the determinant in whether you have an employee or a contractor. Here are the rules from the IRS.
“Facts that provide evidence of the degree of control and independence fall into three categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?”
3 - How will I train this individual to not only do the job but also project my company’s image?
The new employee is going to have to be able to do the “tasks” of the job AND he or she is going to have to promote your company’s culture. In the entertainment business, personality is equally important than whether someone can get the job done - if not more so. Consider hiring someone that possesses the values of your organization. Training a person on the “tasks” of the job is much easier than teaching someone to be fun, outgoing, and personable.