By guest blogger, Sherry Griffin, SPHR, Elucidate Inc
One of the decisions facing many small business owners is how to bring on extra help at a reasonable cost. Business is on the uptick, but the economy isn’t making anyone feel overly confident about hiring employees on a permanent basis. Added to this, is that employer rules and regulations must still be followed and they are subject to change on a frequent basis. Still, the wheels of industry must keep turning and the first step in making any type of decision to bring on workers is to understand the options that are available:
A) Hire them internally. Every state and federal agency prefers businesses to hire employees. It ensures that their funds are received in a timely manner and employment provides workers with a vast number of protections. The down side is that hiring employees requires recruitment, training, supervising, paperwork, and an increase in the number of regulations that need to be followed.
B) Engage an independent contractor. If the worker engaged is truly an independent contractor, the benefits to a business that engages one include professional, ready-to-work help with no need of training, plus payment on successful completion on the project with no obligation to renew the relationship. However, the potential liability for misusing this option is significant and can sink a small business. Penalties range from back pay, interest, fines of up to 35% of the total amount, plus extensive legal fees – often taking years to resolve.
C) Utilize a staffing agency. Staffing agencies recruit and employ the workers for you, paying employment related taxes and insurances. Of course, you pay a higher dollar amount for the workers you loan from them, which can be costly in the long run. Another potential downside to using a staffing agency is that if the agency fails to pay the worker correctly, or neglects to file or pay the employment taxes and insurances, your company will likely be held responsible. It is extremely important to vet staffing agencies to ensure that you are working with a reputable company.
D) Utilize an Employer of Record service. Employer of record services take on employer responsibilities for workers, such as W-2 processing, tax remittance, Workers’ Comp and EPLI insurance. Some even provide HR assistance and offer workers access to health benefits. Employer of record services are typically a lot less expensive than using staffing agencies, but they usually require you to recruit your own workers. Again, ensuring you work with a reputable company is key.
All 4 options have their place in business, but understanding the pros and cons of each will allow you to make the best decision for your company.
As a business owner, you probably don’t have time to become an expert in employment law – you just need to get the job done. Fortunately, there are people who can help. If you have questions regarding whether you can use a contractor for a particular job, you can contact me at email@example.com or 775-826-9933. If you want to outsource the employment of your contractors and temps to an employer of record, contact Emergent firstname.lastname@example.org or 855 250 5000.