HIRING & EMPLOYEES
Here's a chart making it super easy to differentiate the two!
No! That’s not how it works! Seems like this would be the easy way to “try someone out” - the law dictates whether they are an employee or contractor, not you. This can get you into trouble (large penalties and lots of hassle) down the road if you misclassify someone so use the chart above & talk with your financial & HR teams to determine which you need to hire.
Accounting Support typically covers the systems for employees such as hours submission/ approval, paying the employees on an ongoing basis, bonuses or benefits tracking and making sure your cash flow stays on track to pay everyone. Sometimes they also support you in staying in compliance with your payroll tax requirements along with your payroll service. Empowered Profit does!
Payroll Service is the software that you use to facilitate all of the things above. There are a lot out there, but we recommend Gusto. They will work with you to make sure you have the correct W4 and I9 forms, send the direct deposit payments to your employee's bank accounts, transmit the payroll taxes & file the payroll tax returns that will be due.
Human Resources Support covers all of the rules about how you pay your employees, what benefits are required, and how you manage them ongoing & termination (if necessary).
An Employment Law Attorney sometimes goes hand in hand with HR, but can also be a great resource to make sure you have it all covered if you have any tricky situations unique to your business/location. You should also have an attorney review any employment agreements, non-compete, or privacy agreements that you will have new team members sign.
Business/Contracts Attorney you’ll want to be sure your client agreements also speak to having your team members perform the work on the account and that the necessary clauses are included to cover not just your work, but your company’s work.
Insurance Agent when you expand your team, you will want to be sure that your current insurance policies include any work your employees might also do.
Workers Compensation Insurance Agent/Provider can help you obtain Workers Compensation Insurance for any employees (which you are required to have).
Please don’t feel you have to do this alone! There are a few people we recommend working with or talking to before hiring your first (or next) team member. Hiring doesn’t have to be scary- you just need to be clear on what you are responsible for as the business owner.
There are a few people we recommend working with or talking to before hiring your first (or next) team member.
Yes! If you are hiring, you’ll need to get a Tax ID/EIN. This is your Employer Identification Number from the IRS. If you don’t have one yet, you can go here to obtain one. Some states also require a state ID #, so be sure to check that as well. This is essentially a social security number for your business.
The payroll accounts you are required to set up are based on the state where your employees live. (And you, CEO, if you are the employee we are putting onto payroll.) Every state requires an Unemployment Account, this is an additional payroll cost you will incur when hiring employees, it’s paid directly by the business to the state.
Most states also require a withholding account, if their state has state taxes. You (your payroll service) will withhold state taxes from your employee’s checks and then transmit them to the state on their behalf.
Empowered Profit helps you take care of this as part of our services with our clients, or as part of our payroll intensive. It’s not recommended that you set these up yourself - there are some complicated questions asked on the applications and an incorrect response can leave you responsible for possible penalties.
We love Gusto! They are really easy to use from the accounting perspective, employee and employer. They automatically deal with a lot of the payroll taxes that other places may not, and really streamline things for everyone.
Each state is a little different so you want to make sure you know the law where your employee is located. For example, Texas is an employment "at will" state. This means an employer can terminate an employee for any reason, or no reason at all, with or without notice. Some states require notice. There are also laws about when the employee is to receive their last check. We recommend knowing this and documenting it upon hiring the employee as part of their personnel file - or at least looking it up and thinking about this before you terminate the employee.
Resources
Additional
Payroll
Human Resources
