Hiring Employees for Your Home-Based Business

Success for a home-based business can produce elation, quickly followed by panic as you realize you do not have enough hours in the day to get everything done. You cannot humanly work 24-hours a day, and you may end up burning out quickly or alienating your family if you try to do too much. Instead of becoming overwhelmed with stress and spending every waking minute slaving away, you may need to hire some employees to offset your workload.

If your spike in business is due to a specific event or the holiday season, you may need these employees only on a temporary basis. However, if you consistently have trouble functioning on your own, you may need to hire permanent help.

Hiring employees for your home-based business: 7 areas to consider

1. Can you afford to hire employees?

First, though, make sure that your profit margin is high enough to allow you to add employees. If you cannot pay their salaries and still make a profit, you are on the fast road to failure. In a situation that requires only temporary help, you may be able to withstand a drop in profits. Over time, however, this can quickly eat away at your business.

2. Salaried employee vs. independent contractor?

You need to decide whether you require a full-time salaried employee or whether you can hire an independent contractor. Make sure you hire the appropriate person for the task at hand because there can be tax and legal implications to your decision. For more information, read The Proper Classification of Workers.

3. What are your tax responsibilities?

If you hire a full-time, salaried employee, you will need to withhold several different types of taxes from your employee's checks. Visit the IRS website for specific information on employer tax responsibilities.

4. Do you know your zoning laws?

n addition to taxation issues, there are zoning laws in some residential areas that prohibit non-related employees in a home-based business. Make sure that you are on the right side of the law before being faced with angry neighbors or a lawsuit from your local zoning commission. Read Dealing with Zoning Laws for Your Home-Based Business.

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5. Do you need to offer employee benefits?

You will also need to decide if you can afford to offer your employees benefits, such as health insurance, paid time off, or sick leave. If you only have part-time or temporary employees, this is not a large concern. However, if you plan to have a full-time staff, this is crucial to the proper conduct of your enterprise. There are some outsourced HR options that can help you afford employee benefits. See What Is HR Outsourcing? for more information.

6. Special consideration when hiring for a home-based business: How do you know if an employee will be a right fit?

Once you have waded through all of the legal and financial implications, you are ready to begin interviewing employees. Keep in mind that these are people who will be working in your home and that you will be exposing your family—and home—to strangers. Make sure to do a thorough background and reference check. Consider consulting legal counsel and, for general information, see the EEOC’s Background Check: What Employers Need to Know.

7. How will you pay your employee(s)?

Once you have found the perfect employee(s), you will need to decide how often you want to pay them and how long you will require their help. At this stage, you should invest in a software program to handle your payroll. This may seem like overkill if you have one part-time employee, but it will be helpful for tax purposes and to track your employee's wages. If you are using QuickBooks in your office, try out their payroll solutions.

Importance of planning ahead before you hire

Hiring an employee does not have to be a nightmare. Take the time to ensure that you are prepared for the legal and tax issues before hiring someone. Then, you can rest-assured that you are getting the necessary help without risking a lawsuit.