*The following information was taken from East Bay SCORE’s manual, “How to Start and Manage Your Small Business”. All references lead to the full copy of the guide which is free to download.
In almost all businesses, people (including you) will be a key factor in the success of the business. Not only will people do the work of organizing and operating the business, people will normally interface, or set up the interface, with your customers. It will be the customers and their level of satisfaction, which will determine the success of the business.
At start-up, you may be the only person actually in your business, but you will be dealing with many people to get it started – Regulators, Planners, Accountants, perhaps Lawyers, and of course, customers.
As you progress, your business may need more people. In this Chapter, we will deal with obtaining more good people involved in your business, in these categories:
Finding and keeping excellent employees is one of the most important things an owner must do. This involves:
Doing all these things well is difficult, if not impossible, for a small business. Some of these steps require the services of a trained HR specialist. So many risks exist of becoming a defendant in a lawsuit that knowledge of employment law is also desirable. For these reasons, small and newly started businesses can evaluate several other ways of employing persons:
If the law allows, a small business can obtain its people by using Independent Contractors (IC’s). Using IC’s allows the business owner to avoid the time and money spent complying with labor laws.
It is important for the business owner to correctly categorize the person. If a person who has been providing services as an IC is later ruled to be an Employee, the business owner may be liable for back taxes, benefits, costs, and penalties.
Several Government Agencies have an interest in determining whether a person is an employee or an IC, especially the IRS, EDD, US Labor Dept, and the Workers Compensation Commission. Although no exact laws exist, IRS has developed Common Law Rules (Refer to IRS Publ. 15-A, rev. January, 2005) to determine if a person is truly an IC. The following comparison should help you make the distinction:
|1||Get detailed instructions on how to do the work||Get specifications on the required outcome|
|2||Are told when and where to work||Set their own schedule and location|
|3||Are provided tools and equipment and told what to use||Use their own tools and equipment at their discretion|
|4||Are told what workers to hire or assist with the work||Choose their workers, hire, and fire them as they see fit.|
|5||Are told where to purchase supplies and services||Select their sources as they see fit|
|6||Are told what work it to be done by a specific individual||Handle their own work assignments, can delegate to others|
|7||Are told what order or sequence to follow||Set their own order or sequence|
|8||Are controlled in the performance of their work||Their actual outcome is controlled|
|9||Are trained to perform services in a particular manner||Use their own methods of training|
|10||Are generally reimbursed for their expenses||Are responsible for their own expenses|
|11||Are not investing in their business operation||Have a significant investment in their business operation|
|12||Have a fixed relationship with generally one employer||Seek out business opportunities, advertise, available to work for others in the relevant market|
|13||Are paid a regular wage for hourly, weekly, monthly, or other time period||Are paid a fixed amount by the job or contract; some professions may be paid by the hour (lawyers, consultants)|
|14||Are not subject to profit and loss||Can make a profit or loss|
|Type of Relationship|
|15||Have agreements defining hours of work, duties, reporting relationships, etc.||Have contracts defining the required outcome|
|16||Are provided employee-type benefits, e.g. vacation pay, sick pay, insurance, pension plan||Do not have such benefits|
|17||Are hired for indefinite period of time||Are retained for a specific job or period of time|
|18||Perform key aspects of the regular business activity, with direction and control by the company||Are retained for aspects of the business not performed routinely by other employees of the company|
Other people that will influence the success of a business are the outside advisors that the business owner uses. These might include:
It takes time and effort to choose the persons who will become your outside advisors. Here are some generalizations that might be helpful in the process of choosing:
Resources and links:
|HR||Insperity (formerly Administaff)||Insperity.com||Extensive HR Power Tools Library $$|
|Professional Employer Services||National Association of Professional Employer Organizations||Napeo.org||Find local PEOs|
|Job Postings||Monster Worldwide, Inc.||Monster.com||Job Postings, Job searches, $$ for higher service level|
|Craig Newmark||Craigslist.com||Job Postings ($$), otherwise free community information|
950 Parker St.
Berkeley, CA 94710
|Self-help books, free information about legal matters of small businesses|
|Your State’s EDD|
This was extracted from East Bay SCORE’s "How to Start and Manage Your Small Business." The full reference manual can be downloaded by clicking here.
*This blog is intended to provide information to support startups and existing small businesses. A sincere effort is made to ensure accuracy, but no warranty, express or implied, is provided in that regard and East Bay SCORE and the author will not be liable for any errors or omissions in this blog.