Bits of Wisdom For Hiring Your First Employee

Soon after I started my landscape design business in Tulsa, OK, I was hired by a prominent family to restore their large residential property. Normally, I would have hired a landscape construction company to implement the design, but this client expressed concern about past work with unsupervised crews who, within a matter of hours, had turned their trees and shrubs into ‘lollipop land;’ damage that took years to outgrow. So, I decided to manage this week-long project myself. A landscape contractor friend’s employee was hired. This was perfect timing because my friend had planned on vacationing this week and was grateful that his employee would have work that week at someone else’s expense.

So off we went, he and I, working side-by-side. He supplied the truck, tools, and muscle, I purchased plants and offered guidance. At the end of the week, he was paid. It was a job well done and the client was extremely happy.

It wasn’t until years later that I realized what I had done. About two years after the project was complete, the IRS sent me a letter requesting payroll tax information for this employee. Since he was a contractor, I felt confident that no taxes were owed. No 1099 was issued because his invoice amount was less than $600. A letter was written explaining the situation. Problem solved.

A few months later, another letter arrived. This one requesting details of the project. What were the man’s responsibilities? Who owned the tools? Who supervised the work? Again, I sent answers back with confidence.

Another couple of months passed; another letter received. This one was an invoice; several hundred dollars were owed. This man claimed I was his employer! And, not only were payroll taxes due, but penalties and interest had accumulated. I was shocked and angry. The first course of action was a call to the IRS. The agent quickly set me straight on the definition of an employee. Let me spare you some pain. Here are the rules.

Here are some additional things you should know before hiring anyone. If you wish to hire a contractor, request a W-9, liability and worker’s compensation insurance certificates, their contractor’s license number, and an invoice. If you decide to hire an employee, find the right person and enroll them in an employee payroll service like Labor Ready. They pay the taxes and insurance for a very reasonable fee. This is true for office staff and laborers. These services have employees for hire, but I personally prefer to do the interviewing and hiring. Once a candidate is hired, send the new hire over for a background check and payroll interview. The service will send you weekly time sheets that, when completed, can be submitted via fax or email. Payment to the employee can be made that same day, if needed. An invoice will follow; that amount is due within 30 days. Before providing any new service, make sure you hold the appropriate state licenses for the type of work you’ll be performing.

If your business grows to a point where three or more employees are necessary, it might make more sense to manage your own payroll and taxes. Until then, this type of service is a great resource for our industry.

I hope this was helpful. Now, go do good work.