Recruiting selecting i

Recruiting and Selecting
Employees
For the Small Business
SCC Recruiting Employees
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Have any of you been involved in
Recruiting or Selecting Employees?
o

What was your first Problem?

 Who
Job description?
Personality
Wages required
Skills needed

How
Referral
Walk on
How to recruit
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Self- Employment has
Advantages… and Disadvantages
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A disadvantage of being self-employed is you may not have

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You ARE #1 in your business.

anyone to help out.

The problem is you might be the
only one.

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If you ARE the business, you undoubtedly have a lot of
responsibilities, and very little time to “take a break”, let alone a
vacation!

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Self-Employment: Limited Capacity
How does a self-employed person spend their time?
25 hours per week producing the product or “billable hours.”
10 hours marketing.
5+ hours on administrative- management activities.
At $50 per billable hour, that is:
$1,250 per week, $5,416 per month, or $65,000 per
year, before expenses AND before a vacation!

SCC Recruiting Employees
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Limited Capacity and Life
(of a sole proprietor)
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The business is reliant on you.

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Does the business retire with you?

Without you, there isn’t any revenue coming in.
If you get sick, you don’t have back-up.
If you go on vacation…it’s “un-paid.”
After 10, 15, or 20 years, when you want to retire, what do you
have to sell?

SCC Recruiting Employees

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Advantages to Hiring Employees
• They can be trained to run the
business in your absence.
• You are setting up an
infrastructure that perhaps you
can pass on or sell to someone.
• You can delegate the admin
jobs (or the stuff you least enjoy).
• You can expand your business
beyond the single-person
capacity!

SCC Recruiting Employees
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Making the Decision to Expand
or Not?
Like starting a business, the decision to expand
and take on employees, should not be taken
lightly!
Ask yourself these questions:

1. Are you ready to expand?
2. Can you afford it? (do a proforma
projection!)
3. Are you ready to take on more
management responsibilities?
4. Are you ready to give up control?
5. Can you take on more risk?

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SCC Recruiting Employees
Bus 207, courtesy of s

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The Rising Cost of Hiring an
Employee
Before taking on an employee, consider the overall impact and cost to hire-

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The salary or wages
The state and federal payroll taxes
Mandatory insurances
Increased Insurance
Benefits
Changing the “environment” of the business to ensure safety.

SCC Recruiting Employees
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Hiring New Employees: The
Paperwork- Federal Requirements
Federal Law requires you, the employer to withhold,
report and pay over to the federal government
certain deduction from your employees’ wagesYou must report•Employee’s federal income tax- FIT (use tables)
•Employee’s contribution to Social Security-FICA 6.2%

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!

•Employee’s Contribution to Medicare – Medicare 1.45%
•Federal Unemployment- FUTA 1.45%

An employer is required to file for a FEIN- (also called
EIN) federal employee identification number Form SS-4
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Federal Tax EIN Form SS-4
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Go on-line to www.irs.gov
Click on business related topics- Employer ID Numbers
Click on How to Apply for an EIN
Fill out form and submit
You will get a number on the spot
Or Fill Out Form SS-4 and Mail

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State Employment Tax Filing

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State laws require you to register with the EDD as soon as you pay wages

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You must report and pay or withhold the following to the state:

over $100. Give the EDD your FEIN number (state calls it the EIN)

Unemployment Insurance-

SUTA 3.4%

Employment Training Tax-

ETT .1%

State Disability Insurance

SDI 1.18%

California Personal Income Tax SIT (use tables)

SCC Recruiting Employees
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Employees Vs Non- Employees
B
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Six categories of workers

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IND soc ma s
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N T E ND s
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OR
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Common-law employees
Statutory employees
Statutory non-employees
Independent contractors

Individuals referred by a Temporary or
Staffing Agency
– Leased Employees

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Common-Law Employee
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Under IRS Guidelines, individuals are
considered “common-law” employees
when they meet the common-law test.
This test determines whether the
employer exercises control over the
employee in the following areas

COMMON-LAW TEST

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Who performs the work
What will be done
How will it be done
Where will it be done
When will it be done

Workers who meet the common-law test are
considered employees even if the
relationship lasts for only 1 hour

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Statutory VS. Non Statutory
Employees
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“Statutory” do not fit the example of
“common-law” employees, but are still
employees-

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Statutory Non-Employees are
compensated based on sales and other
achievements, not by the hour.

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Examples:

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They include-

– A driver who is an
employee’s agent or paid
commission
– A full-time life insurance
agent selling for one carrier
– Payments are NOT subject
to FIT (federal income tax),
but are subject to FICA,
FUTU and SUTA.

• Direct Sellers, Licensed
Real Estate Agents
• Payments are exempt
from employment taxes
• Operate like an
Independent Contractor
• Your obligation is to send
1099 at Year-end.

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Independent Contractor vs.
Employee
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The use of an Independent Contractor or IC has undergone scrutiny in the

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The IRS and the EDD enforce a social policy that states people should be

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This policy is to protect employees not to punish employers.

past decade.
employees- (whenever possible)

BEWARE of the differences between IC’s and Employees!

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Exempt VS. Non-Exempt

NON-Exempt

EXEMPT

Employees covered by the overtime
provisions of federal/state laws are called
Non-Exempt

To have exempt status your employee must
fall into a certain “salaried” category

Duties not titles determine exempt
status!

Executives

Incorrect filing of status leads to penalties

Professional Outside Sales

Examples includeAdministrative
Normally paid salary…NO Overtime

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 IC Checklist
The IRS 20 point list…

 No instructions
 IC’s have other work
 No training
 IC’s determine job location
 Services to not have to be delivered  IC’s pay business expenses
personally
 IC’s have own tools
 Work NOT essential to firm
 IC’s can make a profit or a loss
 IC sets hours
 IC’s cannot be fired “at will.”
 No on-going relationship

SCC Recruiting Employees
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Independent Contractor
vs.Employee…the risk
If the IC works and “acts” more like
an employee, the government is
going to “label” them an employee.
The real problems often come after
the IC leaves the organization and
tries to collect unemployment
compensation.
Your organization could be liable
for all back payroll expenses AND
penalties.
SCC Recruiting Employees
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Always
consider
your risk
bringing on
Independent
Contractors
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Necessary Documentation for IC’s
To minimize your risk, make sure you have the necessary

documentation on your ICs.

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Copy of their business license and possibly their
insurance

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Hold harmless agreement in the contract (with conflict
of interest clause if needed)

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Signed form of IRS IC Checklist
Current & past contracts (hold for 7 years after the
contract completion)

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What about “under-the-table?”
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It’s true many small business owners
will pay people “under the table” for

services rendered

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The government doesn’t have “stats”
on this market.

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Remember, it is your business…and
your risk!

SCC Recruiting Employees
Bus 207, courtesy of s

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Alternatives to Hiring an Employee
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Source out work to other small businesses.

This works well for certain administrative
jobs likepayroll, bookkeeping, security, cleaning

•

Use a Staffing Agency
This works well for part-time help or seasonal help & when

you don’t want to deal with the paperwork.

•

Take on Independent Contractors

SCC Recruiting Employees
Bus 207, courtesy of s

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Options for Recruiting Quality
Employees
Places or Postings

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Newspaper Ads
Internet Sites
Bulletin Boards- internal & external
Employment Agencies
Postings at Universities or colleges

People, Organizations Referrals

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Internal Recruiting
Staffing Agencies
“Head-hunters”
College Campus
Through referrals
Government Employment Agencies
(EDD)

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Using a Staffing Agency
•The person sent to you is
technically an employee of
the staffing or temp agency.

Te
m
Pe p to
rm

•The Staffing Agency deals
with payroll, checks and all
taxes.
•You pay an ”hire amount” to
the staffing agency and they
pay the employee.
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Pro’s & Con’s of Using a Staffing
Agency
Pros

Con’s

 Often quicker than recruiting
yourself

 Staffer is screened through the
Agency

 No employment paperwork
 Can use for limited time without

 Hourly rate is much higher
 Less control on who they send you

 Many temp firms will not have the
person with the right technical
background

hiring

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The Fine Art of Recruiting
Employers recruit job applicants through a
number of sources. If an business is large
enough they will have their own established
recruiting division (staff), and a recruiting
strategy and policy.
Recruiting sources are normally 1) Places 2)
People

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