software, hiring, employees, customer-service, contractorsI run a small (1 person) software development business and am in the process of hiring someone to help with customer support. The person will be working remotely whenever their schedule allows (hopefully about 20 hours a week on average), and will be paid hourly based on how many hours they work.
I’ve never hired anyone before, do most small businesses just pay part-time people like this as independent contractors, and just send them a check every month? Or do I have to go through the whole headache and expense of hiring them as an “employee”, setting up payroll, payroll taxes, etc? I understand that I’ll also lose my solo-401k if I hire them as an employee, and can no longer deduct my healthcare premiums! Seems like a lot of expense and loss tax savings just to hire a little part-time help.
Any help would be much appreciated :)
PS. I’ve read this IRS page but I’m still not clear on this and am looking for advice on what other small businesses do/have done.
I would lean towards hiring a Virtual Assistant as a contractor via services like odesk and elance. Customer Support is usually the first part of a small business to hire help for.
There a several advantages hiring a cotractor versus an employee:
As far as I know the most important thing to consider is to have a documented support process in place. This means, in the beginning you’re doing support yourself and then document how you do that. A lot of small software business owners use screencasts for efficiency reasons.
This is a complicated area, and even well established companies need to be careful. Uber, for example, hires its drivers as independent contractors. Recently, some Uber drivers sued Uber to be classified as employees, and so far, the court is siding with the drivers.
Is the person you want to hire ok with being an independent contractor instead of an employee? If so, then that is a huge factor in your favor. Disputes as to status are often started by the independent contractor wanting to be an employee.
Can you consider the working relationship a trial period? If he is working for you short term (e.g., 6 months) that favors independent contractor status. You could hire him short term as an independent contractor, and if everything is going great after 6 months, you could then take a deeper look as to whether you keep him as an independent contractor or change his status to that of an employee.
I am currently an independent contractor for a smallish tech company that has about a dozen independent contractors where the circumstances are very roughly similar to yours. There are risks however. If somehow he does get reclassified as an employee, then there are risks as described here. If that makes you uncomfortable, then you'll need to talk to an attorney.
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