HR for Small Business
by Julie Waters, PHR
Entrepreneurs know to surround themselves with people who have expertise that is different from their own. Having an HR person in that mix is no exception. Whether you are a solopreneur or you work for a company that hires freelancers, you should have the HR needs of a small business in mind before you begin your engagement.
There are obvious reasons to use a freelancer to supplement your small business, particularly if you do not have the obvious expertise for a project on your staff. A freelancer can also give you a larger frame of reference to fix problems, and they have made their mistakes on someone else's dime. Use freelancers to make a short-term jump for a larger effect.
An entrepreneur does need to know the differences between employees and independent contractors. There is litigation surrounding accusations of unpaid wages, including overtime and violations of the National Labor Relations Act. There are also tax issues and statutory benefits like worker's comp and paying for unemployment to be concerned with as well as the benefits that come with regular employment like insurance and retirement plans.
Some basics on determining the difference between employees and independent contractors is who has control of the HOW the work is done, the work environment, and if the work is outside the normal course of business. If you hire someone that works on your equipment, on your schedule, with your rules, in your office; then you have an employee and need to treat them as such. If you hire someone to complete a project, on their own computers, at any time within the deadline you set, and at any place they feel is appropriate to do the work; then you have an agreement with an independent contractor. For example, if I run an accounting office, and I hire someone to design my webpage, then it is likely a contractor relationship. If I hire a bookkeeper to handle some clients, then it is likely I have an employee.
If you hire an independent contractor, you should probably issue a Form 1099 to them and file it with the IRS the next January. Make sure you get the information to be able to complete the Form 1099 when you make the hire. This will be a Tax ID number or a Social Security number.
For an employee, they would complete a W-4 form and you will issue them a W-2 each January. Aside from those annual tax forms, you will also be required to file quarterly 941 forms and you will need to pay payroll taxes each quarter. Those payroll taxes include the employer portion of Social Security and MediCare, the employees' portion of the same, as well as the withholding that the employee elects to have taken out of their check. PLEASE CONSULT YOUR ACCOUNTANT FOR MORE INFORMATION IF YOU PLAN TO HIRE EMPLOYEES!!!
No matter what side of the freelancer relationship you are one, a good contract is the most important protection for your business. Be sure that timelines for both deliverables and for payment are clearly laid out. That way everyone's expectations are met.
Julie was lucky enough to choose a career that easily transfers between employers as her husband's assignments moved them from city to city. She holds a special interest in career building for military spouses as she feels it is important to have something personal outside of our military lifestyle.
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