Hiring Your First Employee or Subcontractor

Do you need help, or do you need a system?

Before you hire, write down what you spend your week on. Many owners find a big share goes to tasks that do not need them: answering the same questions, scheduling, chasing invoices, driving to pick up supplies. Sometimes software or a clearer process fixes the problem for a fraction of the cost of a person.

If the bottleneck really is hands on the work, the next question is whether it is steady or seasonal. Steady work usually calls for an employee. A busy season, or a specialty you need a few times a year, often calls for a subcontractor or a seasonal worker.

Employee or subcontractor is not your choice alone

Owners often treat this as a preference. It is a legal classification. Tax agencies and state labor departments look at how the working relationship actually operates: who controls how, when and where the work is done, who supplies the tools, whether the worker serves other clients and whether they can profit or lose from their own business decisions. Calling someone a contractor on paper does not make them one.

Misclassifying an employee as a contractor can lead to back taxes, penalties and unpaid benefits, and the rules differ by state. Ask your accountant or an employment attorney before you hire, and set it up correctly from the start. It is far cheaper to do it right than to fix it later.

What an employee really costs

An employee costs more than the hourly wage. Add the employer share of payroll taxes, workers’ compensation insurance, unemployment insurance, any benefits you offer, training time, tools and the cost of your own time managing them. Many owners find the total comes out well above what they expected, so price your services with it in mind.

Set up payroll properly, either through a payroll service or with your accountant. It handles withholding, filings and year-end forms, and it keeps you out of trouble with agencies that do not forgive late deposits.

Onboard like you want them to stay

Write down how you do the job, even roughly. A one-page checklist for the standard visit, the way you talk to customers and the way you handle problems saves hours of repeating yourself. Pair a new hire with you for the first jobs, then let them go alone on the simple ones and check the results.

Pay fairly and say so. The cost of losing a trained person and starting over is much larger than the difference in wage, and in many trades good people are hard to find. Give feedback early and often, in private, and thank people in front of others.

• Describe the role and the hours in writing
• Confirm employee or contractor status with your accountant
• Set up payroll and workers’ compensation before day one
• Prepare a simple checklist for the core job
• Check in after the first week, the first month and the first quarter