Jeremy Streten, a lawyer and best-selling author of “The Business Legal Lifecycle” walks through some key things to know before you bring on new staff.
Are you turning away clients because you don’t have the capacity to get work done? Nervous about taking on new staff to help you out? Have you had a bad experience with staff in the past? If the answer is yes to any of these questions then you are not alone. There are a number of considerations that you need to have before bringing in staff.
What do you need to know about bringing on staff?
The difference between employees and contractors. One of the biggest mistakes that business owners make is failing to understand the legal distinction between employee and a contractor. There are specific rules and criteria for determining this. There is no set-in stone distinction between the two but generally an employee works exclusively for your business while a contractor has no guarantee of work.
Important factors include:
a. 80/20 rule – if the person spends more than 80% of their working hours in your business then they are an employee
b. Is there a guarantee of work – if there is then that person is generally an employee
c. Who supplies the tools needed to do the work – if it is the person doing to work then it could be considered to be a contractor
What does this mean for your business?
There are other factors that may be taken into consideration but these are the major factors for a professional service business. Whether you bring on employees or contractors you will need to go back to what you are trying to achieve in your business. Contractors can be great to help out in particular times of need but you have no guarantee that they can do the work for you. For example if you have a lot of work coming up in a month or two then you may want to engage a contractor to help out for a short period of time. If you know that you are going to be doing a lot of consistent work then an employee will be a better option for your business.
The legal obligations of hiring employees are more onerous than hiring contractors. When you employ a contractor you are employing someone on a temporary basis, out of what you pay them they pay their own tax and superannuation. If you bring on an employee then you need to collect all of their tax and pay their superannuation obligations that relate to their work with you. Whether you bring on an employee or a contractor they are generally both brought under the workcover insurance requirements so you will need to include their wages in any amount that you pay for insurance.
There are important considerations when bringing on staff and expanding your business. You need to be in the right mindset, know that there will be some hurdles that you will have to get through but know that you are not alone. All business owners that have sort to expand have gone through similar experiences, there is a way out of it and your business will be better for it in the long term.
Jeremy Streten is a lawyer and the author of the amazon best seller “The Business Legal Lifecycle” (www.businesslegallifecycle.com) which is a guidebook designed to help business owners understand what they are doing in their business from a legal perspective and give them a plan for the future.