and one should not view them as an expense.”
Cwiklinski also says that in the beginning, she wasn’t knowledgeable about what the law requires of employers. She encourages entrepreneurs to learn about benefits, worker’s compensation and vacation time. As an employer, you have rights too, and you’ll need to know what those are. If you are in violation of employment laws, you could be fined by the Department of Labor, which could ruin your business. And don’t forget about the IRS. It has its own requirements. For counseling and assistance, new business owners can call the Small Business Administration (SBA) (800-8-ASK-SBA or www.sba.gov), which has Small Business Development Centers across the country where this information is readily available.
According to Diamond, an accountant is also one of the most important professionals needed by any business owner because “you must have someone to help you work through the money management.”
Show me the money! This sentiment is sometimes echoed by employers seeking a return on their investment in an employee. But, more likely than not, you’ll hear those words from potential employees looking to secure a paycheck. Salaries can be a bone of contention in any segment of the workforce. Small businesses certainly aren’t exempt. Experts suggest paying what the position is worth. Surf the net (see the American Compensation Association’s Website at www.acaonline.org, 877-951-9191, or visit www.bls
.gov, the U.S. Bureau of Labor Statistics’ site) and consult with headhunters and other professionals in your field to determine current salaries for administrative and field-specific positions.
Clarke offers further advice. “When you’re hiring someone, they pretty much have an expectation of how much they want to get paid,” he says. “You have to balance that against what you know of the open marketplace. Is it too high or too low?” Clarke had to be especially aware of this since he began contracting workers early on.
Diamond says it’s important to know the strings attached to contracting outside help. “A subcontractor has to be someone who really has his or her own business, is filing a 1040 Schedule C and is contracted for work by several people. If that’s not the case, then that person might be considered your employee” (see “Making Sense of Money Matters,” February 2000).
Thayer warns that entrepreneurs should make themselves aware of all payroll tax contributions that must be made to Social Security, Medicare and unemployment. When you hire employees, you will be responsible for withholding taxes from each worker’s pay and you will be obligated to pay certain taxes on the compensation you pay your employees. Currently, the Social Security tax rate is 6.2% for wages up to $68,400. The Medicare tax rate is 1.45% and has no dollar limit. You can obtain the IRS employer’s tax guide, which includes easy-to-use tables that indicate the amount you need to collect, by calling 800-829-3676 or visiting your local office for the rates that apply to your business.
Thayer says business owners should consider the expenses that come with hiring employees. “In many instances,” he