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Hiring part time sales person. Any add'l costs?

by Goalie35
11 replies
I'm looking to hire my 1st part time sales person for my IM business. 20 hours per week to start.

This person won't be full-time, so I don't have to worry about payments for benefits or anything like that. Aside from the base salary & commissions, are there any additional costs associated with employing a part time person that I should be putting aside?

Thanks
#addl #costs #hiring #part #person #sales #time
  • Profile picture of the author bob ross
    Just your normal HR costs like workers comp insurance, unemployment insurance, compliance paperwork, and processing of payroll (payroll taxes, etc.).

    I'm guessing that's not something you're ready to get into.
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    • Profile picture of the author MichaelWinicki
      Bob hit it.

      I would consider taking them on as a "contractor" which would eliminate some of the additional costs BUT what you can and can't mandate (as far as days/times worked and the start/ending times) are fairly stringent. You mandate too much and they become "employees" with all the additional costs.

      It's a touchy situation.
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    • Profile picture of the author Goalie35
      Originally Posted by bob ross View Post

      Just your normal HR costs like workers comp insurance, unemployment insurance, compliance paperwork, and processing of payroll (payroll taxes, etc.).

      I'm guessing that's not something you're ready to get into.
      Thanks for your replies.

      Possibly, but it depends on the costs associated with "normal HR costs". I do have some revenue put aside for this. Where or who would I speak to about finding total costs for the hr stuff?
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      • Profile picture of the author bob ross
        Originally Posted by Goalie35 View Post

        Thanks for your replies.

        Possibly, but it depends on the costs associated with "normal HR costs". I do have some revenue put aside for this. Where or who would I speak to about finding total costs for the hr stuff?
        You should speak with an accountant to make sure you've got everything setup properly for payroll, but here's some information to start off with:

        1. You'll need to buy a workers compensation insurance policy. I'm not sure how it works in your state but in mine (NY) I have a state fund that I buy it directly from. Because your employee won't likely be classed in a "high risk" category, it shouldn't cost too much but expect to pay $300-$600 or so for a one year premium depending on how much payroll you plan to run through for the year.

        2. You'll likely need to buy unemployment or state disability insurance as well which are pretty cheap, maybe a couple hundred for a yearly premium.

        3. You'll need to have all your compliance stuff together like W4's, I9's, policies and some form of operations manual preferably. This would detail all the job expectations and procedures as well as rules of misconduct and how disciplinary actions will be taken. This stuff will cover your butt down the road.

        You'll also need to setup a way to track their hours so that both you and they have a clear record of what hours were worked. If you don't, and later on your employee tells the labor board they worked 40 hours per week but you only paid them for 20, you could be in serious trouble if you have nothing to prove that. I'm fighting a claim like that right now with an employee who's making up wild stories and even though I still have all my ducks in a row it looks like I may lose an unemployment claim against me.

        4. You'll need to setup payroll, which involves calculating the correct amount of state and federal taxes to withhold and pay on each pay period, and filing them quarterly. Most accountants offer this service, but many only offer it every two weeks so keep that in mind. Expect to pay $30-$70 per pay period to simply have them run payroll. I've used payroll services like paychex as well as accountant services in the past but now I strictly use zenpayroll.com which should only cost you about $30/month or so for their service.
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  • Profile picture of the author bob ross
    Bringing them on as a 1099 contractor is easy but do this at your own risk. 99.9% of the time if an authority scrutinizes your relationship you'll be f***ed. I've been through this and have experienced it first hand.

    You essentially cannot bring someone on as a 1099 and pass scrutinization unless they're unmistakably working for themselves in the same capacity and only contracting you for their service. For example, if you come across a guy who sells the same thing you sell for other people full time in his own business and you just buy some time from him, you might be OK.
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    • Profile picture of the author Joe Stewart
      Originally Posted by bob ross View Post

      Bringing them on as a 1099 contractor is easy but do this at your own risk. 99.9% of the time if an authority scrutinizes your relationship you'll be f***ed. I've been through this and have experienced it first hand.

      You essentially cannot bring someone on as a 1099 and pass scrutinization unless they're unmistakably working for themselves in the same capacity and only contracting you for their service. For example, if you come across a guy who sells the same thing you sell for other people full time in his own business and you just buy some time from him, you might be OK.
      This. It depends on your state, but in mine you can't specify work hours or provide any type of training materials for contractors. You can't keep them exclusive to your business either.

      Sucks.
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  • Profile picture of the author iAmNameLess
    Unemployment insurance sometimes is just an extra tax paid to your state, you will want to check your state requirements for hiring an employee.

    I'd recommend against the contractor route if you're having them come into your office.

    I think everything has already been covered but what about general liability? E&O insurance? You should make sure you have that before hiring anyone.

    One more thing.... the real unexpected cost in relation to hiring is the cost of hiring the wrong person. It will not only cost you money, it will cost you in time. Make sure you don't settle for someone that you're iffy on.
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  • Profile picture of the author Peter Lessard
    Hidden costs can sometimes include:
    1. Decrease in sales conversion
    2. Loss of sanity
    :-)
    Just my way of saying that you can often quickly burn through many duds before finding a star and you should be VERY prepared for that reality.
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  • Profile picture of the author Talltom1
    There's two quick thoughts I wanted to contribute here that I didn't see anybody bring up.

    First, the financial costs of hiring an employee is very tangible, you have the insurance, taxes, etc. But the unspoken cost, is the cost of your time to manage this person. Odd thing is, it requires about as much of your time to manage 1 person as it does to manage 3-5 people. So I can tell you from personal experience, that hiring a 'first' employee, can be a huge time suck for you.

    The other point I wanted to make is about a type of business known as a 'PEO', or Professional Employer Organization. These are businesses that literally are in the HR business for little businesses like you. For example, you do the interviewing, but the PEO actually - legally - hires them, pays them, handles every part of the ongoing HR needs. You merely write them a check periodically for $x amount to cover the payroll, taxes and fees. It eliminates all of the backroom management headaches for you.

    Also, if you do hire an employee....you are required to do the typical payroll taxes withholding. Be absolutely certain that those funds get passed on to Uncle Sam. He has absolutely NO sense of humor with business owners who decide they have more useful needs for those funds, and you will find yourself in very very deep kimshee.

    TallTom
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    • Profile picture of the author ewenmack
      There is the hidden costs, however very real,
      by employing the wrong employee.

      There are many numbers being thrown around
      the Internet.

      There is pre-screening new employee services
      that can help minimize the risk.

      Best,
      Doctor E. Vile
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      • Profile picture of the author savidge4
        IF there ever was a thread that stated DONT grow beyond a "Self Proprietor" business this is the one! hahaha.

        All in all I think? everything was covered... I am sure there is some tax or extra insurance left out somewhere, but hey all this red tape who can see anything right?

        Bottom line is this, after all the above, you want to consider your budget. Generally speaking a "employee" will cost you 2x what you pay them. If you pay them $10 an hour it will cost you $20 an hour once its all said and done. If you are paying $40 an hour, they are going to cost you $80. If you are paying Salary + Commission and the guy goes gangbuster and in the month works 80 hours at $10 and hour and rakes $5000 in commission... be prepared for the $10,000 a month expense.

        At the end of the day, it may cost less once it is all said and done, but 2X is a good solid number to work from.

        I know many a business owner that walked into business and sold say a $5000 service, paid some sales guy 50% + salary to close it, and was wondering why they are loosing money. Taxes / Insurance straight up chewed them up.

        Consult an accountant.. get the overall solid numbers in place and see if you truly are in a place to make this happen for yourself. Regardless of the price for their consult, it will be worth it in the end.
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