Tuesday, October 19, 2010

The Dangers Small Businesses Face When Hiring Employees

Employees are essential to the success of most small businesses and yet they are also one of the greatest sources of difficulties for small business owners. I wish the was some law requiring business owners to get proper training before they hire employees because there are so many things to know and so many problems can arise if you don’t handle employment issues correctly.

The IRS has a whole area dedicated to small business http://www.irs.gov/businesses/small/index.html and the State of Wisconsin has its own site http://dwd.wisconsin.gov/dwd/employers.htm We recommend all business owners read the information on these sites BEFORE they even begin the hiring process. There are rules about what you can ask potential hires, there are guidelines to help you determine if the worker you are thinking of using is a subcontractor or an employee. The majority of situations will result in an employee, not a contractor and business owners will save themselves a great deal of trouble if they make this determination ahead of time. Even part time, occasional or temporary help usually fits the description of employee. Your accountant, attorney, marketing advisor are all contractors for your small business. The people answering your phone, sorting your mail, staffing your events are almost always going to be categorized as employees by the IRS.

There are rules about what employment related signs you must post at your business, paperwork your employees must file out and you must retain and file with the appropriate agencies (federal and state). There are schedules to meet as far as filing and paying payroll taxes which if you fail to follow will create large penalties and interest for your business and possibly for the owner personally.

There are many choices for processing payroll: online vendors such as Paychex, local payroll processors, and local accounting firms. Business owners should do their research and determine if it makes more sense for them to outsource this task or learn to do it themselves. Whatever the decision, education and training are essential to insure that all the rules are followed and all the schedules met.

Don’t lose money because you did not do your homework ahead of your hiring!

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