So it's time to start hiring employees...
Once you start hiring employees to do the installation work, your
overhead figures will change. Your office overhead will change
due to the time spent processing payroll and its related activities,
and you will now have labor overhead to figure into your bid.
Labor overhead is the cost of paying the employees for their work.
You will have workers compensation insurance, state paperwork,
additional IRS forms, office paperwork pertaining to payroll, (etc.).
labor expenses will have to be added
in as they become applicable.
Now that you're hiring employees to do the installation work,
you won't be paying yourself to do the installation but rather
your employees. Because of that now you'll have to add an expense
to your office overhead to pay you your wages and still earn the
planned profit on the job.
If you look at the profit as your wages then you might as well
go to work for someone else because technically you are working
for wages when you do not collect a profit on the job.
Yes paying yourself will raise your overhead but there comes a
time when you have to spend a little more if you want to expand.
If you don't pay yourself to do the bid work, how can you afford
You would have to work out in the field (for yourself) so that
you could pocket some of the labor money but if you are working
out in the field every day you won't have time to do bid work to
win more jobs!
Do you know the nightmares involved with doing payroll?
Payroll entails a lot more than just giving a paycheck to your
You've got lots of calculations to make; hours times
wages, wages times taxes, etc.
You've got to know when your payroll
taxes are due (sometimes every month) and you've got to get the
correct tax forms filled in and mailed, along with the proper payment,
to the appropriate tax authorities.
It's very time consuming and so vulnerable to errors.
QuickBooks by Intuit has a payroll feature but unless you already
possess accountant type knowledge then the payroll feature is somewhat
difficult to set up.
You could do it on your own but that's definitely
not something I would recommend.
This leaves you with the option of the various payroll service companies
that are out there.
There's several different types of set-ups.
You've got the temp agencies where the agency has a pool of candidates
that you must choose from. While this keeps you from having to
do payroll (the agency pays the employees and then bills you) it
is a rather costly way to avoid doing payroll yourself.
There are payroll service companies that do your entire payroll
and send you your paychecks, and you manage the taxes; payroll
service companies that do your entire payroll for you, send you
paychecks and they manage the taxes; companies that have online
payroll systems where you print your paychecks on your own printer
(or have them direct deposited); and so on...
Payroll Leasing Agencies
There are online payroll services
who would be happy to run your entire payroll
for you. Some are very expensive and some are very reasonable.
When the fee is reasonable it's nothing when you compare it to
the fact that the payroll leasing company takes on all responsibilities
involved with payroll and employment (payroll taxes, unemployment
claims, literally everything that goes along with payroll).
We use an online payroll service, have for
many years now, and have never had a problem. We pay them a minimal
fee, and when it's time to file our taxes,
we can do it all online through the service!
There there are payroll leasing agencies. When using a payroll
leasing agency, you are not an employer so you are not required
to purchase worker's
compensation insurance, pay the employment taxes or deal
with the employment tax paperwork, or meet any employee related
governmental requirements and reporting, etc., because the payroll
leasing firm handles all of it.
The person you hire works for you but is employed by the payroll
firm. The payroll leasing agency usually does not have a pool
of employees to pick from. You find your own people, and then
add them to the payroll leasing agency's payroll. You pay what
you want to pay to the employees, there are no restrictions (other
must be paid at least minimum wage...).
You send weekly time cards to the agency (hourly wage information)
along with a check that covers the payroll and related expenses
(the workers comp., etc. that the payroll firm pays) and the payroll
agency sends you the paychecks to hand out to the employees.
Now, although these employees are not legally yours, it is still
your responsibility to see that they get paid when they should.
Should the company you are using not send the paychecks one week
and either split town or go belly-up, you will need to make sure
those employees get paid, even if you have already sent your payroll
to the payroll company.
This could mean that you pay out double payroll, once to the payroll
firm and once to your employees! Chances are pretty slim that this
will happen, but always remember that if you do not keep a good
grip on your company and it's goings-on, you could end up in a
Payroll can be extremely time consuming as well as confusing,
and if you make a mistake you have to answer to various governmental
agencies. If the payroll leasing company makes the mistakes, they
have to do the answering, not you.
Payroll Service Companies
Should you wish to keep your employees and manage the payroll
related exercises and expenses yourself, then take a look at the
various payroll management service
companies out there, which operate
differently than payroll leasing agencies.
to use payroll management service
companies will have
an online payroll system where you can literally get your payroll
done in 5 minutes. Once you've got it set up, all you do is enter
the employee's name and amount of hours worked, and instantly you
can print payroll checks!
The system usually allows you to print out completely filled in
payroll tax forms, sign and mail them to the tax people (and/or
you can take advantage of Electronic Tax Payment functions,
also included for free!
Often times if the payroll management company makes a mistake in the numbers, they'll pay your penalties and
interest (but check with them to make sure). But, the online payroll service
company that we use has never made a mistake, in all the years we've been using their services.
Back to top of this page: Hiring Employees
Back to home page: TheContractorsGroup.com - Download Construction Forms
We have many more articles pertaining to
business. Check 'em out if you get a chance. =)