The day your business grows busy enough to consider hiring someone to help you is an exciting time.
But it is also a time that can be fraught with worry and traps for the unwary. It’s a big step that can land you in a shadowy forest of employment law, wage and hour laws, insurance requirements, and tax implications. It can seem overwhelming, but let’s break it down.
What we’re not talking about
If you are a dog trainer, and you hire a book-keeper or a virtual assistant, that person is likely an independent contractor: they have their own business, they have other clients, they tell you what services they provide, they provide their own tools, they arrange for their own taxes, etc.
These are easy examples — they are clearly independent contractors. You hire them to perform services for you, and you pay them. You may need to send them a 1099 form at the end of the year for their taxes, but otherwise it’s simple.
Where it gets complicated
Say you get to the point where there is too much for you to do by yourself, and you want to hire someone to help you. You may think that having someone come in and take over some of the work and just pay them as an independent contractor is the best way to go about it, because you don’t have to do withholding of income tax, Social Security and Medicare, or comply with a lot of laws that apply to employees. But, you do need to be a little careful, because the IRS or the government might disagree with you and you could be subject to fines.
To determine whether a person is an employee or an independent contractor, the law weighs different factors to identify the degree of control you have in the relationship, like whether the work is “key aspect” of your business, and whether you have the right to control what the worker does and how they do it. Some states consider whether the worker is “economically dependent” upon the business.
The danger to your business is that the IRS could decide after the fact that the person you hired should have been treated as an employee, and you should have been withholding taxes and submitting them to the IRS, that you should have had workers’ compensation insurance coverage for them, etc. It could end up being more expensive in the long run. If you are a dog trainer and you are hiring another trainer to help you, it’s time to try on the “employer” hat.
What about not paying them at all?
As a business owner, you have a certain amount of power of the people who work for you, as they are depending on you for at least a portion of their income. To even out that power imbalance, the law places some limits on what employers can require. For example, an employer cannot ask their employees to volunteer to perform the same type of services for their employer that they are normally employed to perform. This has come up in the shelter environment, where shelter employees who cared for dogs would volunteer to care for dogs at home. Those would be considered hours worked.
You should also be thoughtful about offering internships or apprenticeships. While young trainers may be eager to volunteer to get experience, some states have rules against unpaid internships, where the intern is performing work that the employer would otherwise pay someone perform. Allowing someone to watch you work is fine, but unless you have a formal training program, offers of free labor should be approached with care.
In the end
Ultimately, if you are busy enough to need help, then hiring an employee is the right thing to do. Countless others have made the leap, and you can too. Payroll companies can be a big help in finding your way through the maze of requirements. And of course, checking in with a lawyer is always recommended.
DISCLAIMER: This article does not constitute professional tax advice or legal advice. Consult with a tax adviser or legal professional if you have specific questions about employment law or any other aspect of hiring others to work for you.