Recruiting amd selecting employees for small business

BUS 207 Session #1 Spring 2006 copyright, sjh.Recruiting and Selecting Employees For the Small Business... Making the Decision: Expand or Not!?Like starting a business, the decision to

BUS 207 Session #1 Spring 2006 copyright, sjh.

Recruiting and Selecting

Employees

For the Small Business

Self- Employment has Advantages… and Disadvantages

 A disadvantage of being self-employed

is you may not have anyone to help

out.

 You ARE #1 in your business.

 The problem is you might be the

only one.

 If you ARE the business, you

undoubtedly have a lot of

responsibilities, and very little time to

“take a break”, let alone a vacation!

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:

$1250 per week, $5416 per month,

or $65,000 per year, before

expenses AND before a vacation!

Limited Capacity and Life

(of a sole proprietor)

 The business is reliant on you.

 Without you, there isn’t any revenue coming in.

 If you get sick, you don’t have a

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?

 Does the business retire with you?

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 don’t enjoy)

 You can expand your business

past the single-person capacity!

Making the Decision: 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 Pro-forma

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?

Other Considerations Before Starting the Hiring Process

What do I really Need the Employee

to do? Do a Job Analysis and then

establish a Preliminary Job

Description

Establish the future-employee’s

“wage rates.” Are you competitive?

Will this employee get benefits or be

an “exempt” employee?

Develop a typical work schedule

Revise the Organizational Chart

Employment Legal Issues

Before You Recruit Understand the Legal Guidelines

Fair Labor Standards Act

 Workers must be identified as

non-exempt or exempt.

 Business that make less than

$500,000 MAY HAVE

EXEMPTIONS ( BUT CHECK!!!)

 Non-exempt must be paid at

least the minimum wage and

receive over-time pay after

40hours at 1.5 times ( see state

law)

 Equal Pay for Equal Work!

Stiff Penalties for Abusing Wage Laws

• Ignorance is not an excuse.

• Many small businesses have

received stiff penalties and fines for violating state wage laws and the FSLA.

• Fines of $1,000 per employee if

classification of exempt is incorrect.

exempt-non-• Exempt employee must be

executive, administrative or professional employee with min salary of $250 per week.

MORE Employment Laws to

Review

• Title VII of Civil Rights Act - companies

with 15 or more employees: Prohibits

discrimination.

• Equal Pay Act - Amended Title VII

• American Disabilities Act- ADA -

prevents discrimination due to

disabilities

• National Labor Relations Act- Right to

Form Union

• Age Discrimination in Employment Act -

companies with 20 or more employees

And MORE Employment Laws

• Family & Medical Leave Act-

Companies with 50+

employees.

• Occupational Safety &

Health ACT- OSHA- ALL Businesses

• Worker’s Compensation-

mandatory “insurance”

• Immigration Reform &

Control Act & Immigration Act- All businesses

Immigration Law Acts and How that Impacts Your Hiring Procedures

The Immigration Acts of 1990s

were enacted to prevent illegal

aliens form working in the U.S

You are required to have new

employees fill out an I-9 or

Employment Eligibility Verification

Form

The Company must retained the

form at the business location

Fines are imposed if you do not

have proper documentation

OSHA: Occupational Safety &

Health Act

• Law designed to reduce

workplace hazards &

improve health & safety

programs for workers.

• OSHA does not apply if:

- your self-employed

- your business is a farm

that employs your family

- mining business (has

other regulations)

OSHA Posting & Reporting

• You must post a notice

called “Job Safety &

Health Protection.”

• Many specific industries

(restaurants) have other notices that must be

posted

• Keep records of safety if

you have ten or more employees, for over 10 years.

Alternatives to Hiring an Employee

• Source out work to other small

• 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

Options for Recruiting Quality

Using a Staffing Agency

• The person who they

send to you is technically

an employee of the

Staffing Agency.

• The Staffing Agency

deals with payroll,

checks, tax forms.

• You pay a hire amount to

the Staffing Agency and

they pay the employee.

Pro’s and Con’s of Hiring Staffing

o Less control on who

they send to you.

o Many temporary firms

will not have the employee that has technical experience you may need.

Independent Contractor vs.

Employee

The use of an Independent Contractor or IC

has been a critical issue in the last 2 decades

The IRS and the EDD enforce a social policy

that states people should be employees

(whenever possible)

The policy is to protect employees (not to

punish small businesses)

BE AWARE of the differences between an IC

and an Employee

The IRS has developed “Twenty Common

Law Factors” TEST to determine the status

 IC’s have other work

 IC’s determine job location

 IC’s pay business expenses

 IC’s have own tools

 IC’s can make profit

or loss

 IC’s cannot be fired

at will

Independent Contractor vs

Employee…the risk

• If the Independent Contractor works and acts

more like an employee…the government is going

to say they are an employee.

• The RISK often comes after the IC leaves and

tries to collect unemployment compensation.

• You would pay ALL back payroll taxes & other

penalties.

• The lesson here is to make sure you have the

necessary documentation that shows they are a true Independent Contractor

 Form with Twenty Factor

Checklist that they have

signed

 Current and past

contacts

What about “under-the-table?”

 It’s true, many small business owners will pay people “under-the- table” for services

rendered.

 Funny thing is the government doesn’t have statistics.

 Remember it's your business, so it is your risk!

EDD Services

• The EDD does more than help you file for

unemployment insurance or fill out an EIN.

• The EDD has the largest on-line Job Bank,

where you can post your vacancy or look for qualified candidates: caljobs.org

• The EDD can help you find qualified workers

and in the past have offered on the Job

Training Programs (where they may pay half

of the salary)

Using Government “One-Stop” Shops:

Workforce Investment Board

• Few Small Business are aware of

or take advantage of the local

services that are available to

them through the Workforce

Investment Board (WIB).

• The WIB is the one-stop

government agency that includes

the Employment Development

Department, and locally the SEC-

Solano Employment Connections

More “One-Stop” EDD Services

 Worker Skills -Training for Small & Larger Businesses

 Labor Market Information: wage information, employee issues, ADA and EEO compliance plans

 Payroll Tax Information

 California Tax Information

 Downsizing assistance

 Job Service Information including recruiting