Small Business Strategies: Many factors weigh in hiring
— -- I've got a good problem: My business is growing, and I need help.
Like many business owners, I've been cautious about adding employees, especially in such a weak economy. But I'm about to do something that America desperately wants me to do — I'm about to create a new job. By job, I mean a payroll-tax paying, benefits earning, in-the-office, steady income job. The kind of job America needs if we're going to get healthy again.
It was a tough decision, and it took a long time before I added another permanent staff member. Instead, I've relied on independent contractors. Now, that's helped the economy too — especially at the substantial rates I have to pay independent contractors in my area (Silicon Valley). By hiring independent contractors, I've kept people who had been laid off or were entering a tough job market off the unemployment rolls.
But guaranteed monthly-paycheck, Social Security-earning, benefits-paying jobs are the kind we need to create if people are going to feel secure enough to make large purchases and get the economy moving. So perhaps my situation can give insight into some of the thinking that holds even healthy companies from adding jobs.
In deciding whether to add an employee, use independent contractors, or not hire at all, I look at:
• Do I have so much work that I really need to add staff, or can my existing staff work harder and on overtime?
• Is there enough demand to enable me to afford this person?
• Do I have confidence that this demand is going to continue so I won't have to lay this person off?
• Can I meet my needs with independent contractors or outsource vendors instead of employees?
• Will hiring an employee be cheaper than using independent contractors?
• Will hiring an employee be more expensive — due to payroll taxes and benefits — than independent contractors?
Big corporations have another issue, though, playing a big part in holding them back from hiring. Unfortunately, Wall Street rewards companies for having as few employees as possible — giving publicly traded companies an incentive to not hire.
When the recession hit and hit hard, I scrambled for ways to increase my decimated income. I had to innovate and work very, very hard. I also took advantage of the recession. In my area there were highly talented people who'd been laid off, and I attracted some of them as independent contractors to help me reinvent my business.
It worked. But as our workload has picked up, the number of hours I'm using contractors has dramatically increased. Since contractors typically get a higher hourly rate than employees — often twice or even three times higher — once I'm spending that much, the cost of payroll taxes and benefits start to balance out.
Moreover, it's been tough juggling schedules. Independent contractors have more control over their own time than regular employees, making it a challenge to have meetings when everyone in a project can actually attend. And I sometimes feel that I'm fighting to get their attention.
Now, fortunately, I feel confident enough that my revenues will be able to sustain this new position. Of course, that's a big commitment, because with an employee, my sense of obligation to them is much higher. With a contractor, it's far easier to reduce hours, or stop a project altogether.
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