The conversation surrounding small business development tends to focus on issues related to the initial steps involved in starting a business.

     A lot of time is spent encouraging potential and current small business owners to make sure they have a comprehensive business plan, the correct business structure, registered their business, obtained the necessary licenses and permits, opened a business bank account, and purchased insurance.

     What happens after all those tasks are fulfilled?

     Well, the business owner must start making money.

     With that comes the task of hiring employees.

     The Small Business Administration (SBA) has some tips that could be useful for a business owner contending with employee considerations.

Hire and Pay Employees

     According to the SBA, a business owner needs to create a plan for paying employees and here are steps that can be used to set up payroll:

1. Get an Employer Identification Number (EIN)
2. Find out whether you need state or local tax IDs
3. Decide if you want an independent contractor or an employee
4. Ensure new employees return a completed W-4 form
5. Schedule pay periods to coordinate tax withholding for IRS
6. Create a compensation plan for holiday, vacation and leave
7. Choose an in-house or external service for administering payroll
8. Decide who will manage your payroll system
9. Know which records must stay on file and for how long
10. Report payroll taxes as needed on quarterly and annual basis

Employees or Independent Contractors

          The SBA notes “Distinguishing between employees and independent contractors can impact your bottom line, or your total revenue once expenses have been deducted. Your bottom line ultimately impacts how you withhold taxes and helps you stay legally compliant during tax season. Learn the differences before hiring your first employee.

     “An independent contractor operates under a separate business name from your company and invoices for the work they’ve completed. Independent contractors can sometimes qualify as employees in a legal sense. The Equal Employment Opportunity Commission guide breaks things down so you can make a more informed decision.

     “If your contractor is discovered to meet the legal definition of employee, you may need to pay back taxes and penalties, provide benefits, and reimburse for wages stipulated under the Fair Labor Standards Act.”

Required Employee Benefits

1. Social Security taxes: Employers must pay Social Security taxes at the same rate as their employees.
2. Workers’ Compensation: Required through a commercial carrier, self-insured basis, or  state Workers’ Compensation Program.
3. Disability Insurance: Disability pay is required in California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico.
4. Leave benefits: Most leave benefits are optional outside those stipulated in the Family and Medical Leave Act (FMLA).
5. Unemployment insurance: Varies by state, and you may need to register with your state workforce agency.

Employee Incentive Programs

     According to the SBA “Protect workers’ rights and your business by adhering to labor laws, which means you must ensure that business practices align with industry regulations.

     “This includes learning applicable laws for hiring veterans, foreign workers, household employees, child labor and people with disabilities, among other groups. You must also comply when terminating an employee, laying off workers, or downsizing the company.”

     If you need assistance with business related issues, please contact the SEED Center at 33-433-3632. The facility is home to the Alliance/Chamber SWLA Business Incubator and Small Business Development Center at McNeese State University.

     Our team is here to help.

Eric Cormier is Senior Vice President of Entrepreneurship and Strategic Initiatives at the Southwest Louisiana Economic Development Alliance/Chamber SWLA. He can be contacted at 337-433-0977 at Extension 2221 or at ecormier@allianceswla.org.