Happy 2022! Austyn P. Belle Isle, Med Spa owner in Columbia, MO, checking in and sharing some helpful information with our community here at InjectablesEdu.com. I recently hired my first employee and want to share what I’ve learned through that process.
In the new year, I’ve taken a brand new step as a business owner and brought on an employee part-time. I would like to walk you through the process of hiring an employee and share what I have learned:
- Things to consider when bringing on an employee
- The difference between employees and contractors
- Establishing a payroll system and paying yourself and your employees
- Forms and considerations to keep you in good standing with IRS regulations
When is it time to bring someone else on?
At some point, you’re going to become busy enough that you’ll need to bring on an employee and/or begin to hire out some of your administrative tasks in order to focus on your injection practice and business development. Though I encourage you to do all you can on your own for as long you can in order to keep your overhead low, at some point, you’re going to need to invest in some form of assistance and support. Do this before you reach burnout. You didn’t get into this industry so you could be overworked and overwhelmed.
Up to a certain point, working my heart out has been a deeply satisfying aspect of launching my own business. I’ve loved every aspect of this journey, but I new I couldn’t keep the same pace indefinitely. When you get to the point where your hours of availability are saturated to the point that you no longer have time to keep up with your administrative tasks, it’s a good time to consider freeing up your time.
According to the Society for Human Resource Management, the average cost of bringing on a new employee is $4,000. Consider the hours spent in training before your employee is able to generate revenue, payroll taxes, additional bookkeeping expenses, and the time you will spend administrating these duties all contribute to these expenses. In the medspa industry, it is more than likely that this will also mean the additional purchasing of equipment and/or supplies to support your new employee in their work. This is a significant investment in the growth of your business and each aspect should be carefully considered.
Things to consider when bringing on an employee:
Given that 62% of small businesses owners believe they have made a bad hire, it is incredibly important to consider the readiness of the business as well as yourself as the business owner.
Ask yourself these questions: Am I prepared for the financial and emotional resources required to be an employer?
Have I identified my goals in bringing on a new employee?
Have I given careful thought and consideration to my own unique personal and professional needs, and what a compatible employee would look like?
If the answers to these questions are “No” or only vaguely outlined in your mind, I would encourage you to take some time to reflect on your needs and values before you begin to search for candidates or extend any job offer.
Ask yourself these questions:
- Is my business generating enough interest and case volume that it will benefit from the availability of a new provider?
- Am I currently generating enough revenue to maintain my existing operating expenses as well as support the wages of an employee until they are able to generate additional revenue?
Employee vs. Contractor, which is correct for your business?
- Work at a specific time and place set by you, the employer
- Work for one company
- Use your equipment and resources
- Are paid a salary or hourly wage (which means you will have payroll taxes)
- Are responsible for completing tasks set by you
- Can work wherever and whenever they like
- Can perform work for multiple companies
- Use their own equipment
- Use their own resources
- Get paid on a project or flat-fee basis (but not always)
- Are responsible for their own payroll taxes via their own business activities.
Establishing a payroll system for paying yourself and your employees
Whether you have a contractor or an employee, you’ll need to establish a payroll system. The simplest way to do this may be to expand on a system that you already use, whether it be Aesthetic Record, Square, Quickbooks, TurboTax, or a variety of other small business resources. If you are already retaining the services of a bookkeeper, that may be the most efficient method of implementing a payroll system.
Make sure to read the fine print for activation fees, monthly fees, and any minimums or maximums as they pertain to your business model. What may be the best system for a business with 20 employees may be different for a business that has two. If you haven’t already been paying yourself a salary, now is a good time to start. For the first year of operations, you can generally justify not taking a salary, but if you are at a point of needing to hire help, you are also at the point where you need to be paying yourself a salary to avoid potential penalties from the IRS.
Speaking of Uncle Sam, part of setting up your payroll system is making sure you are paying your taxes appropriately.
Forms and considerations to keep you in good standing with IRS regulations:
When you formed your business entity, you received a Federal EIN. In most states, you will also need a state specific EIN, and you will need your federal EIN to obtain one. You will need to do a little research to determine the specific rules for federal taxes, state taxes, and withholding for your specific state and business structure.
That said, there are some guidelines that are going to apply to most situations:
- Deposit and report employment taxes.
- File a Tax Form W-2 to report wages for each employee.
- Withhold taxes from employees according to the IRS Withholding Tables.
- Deposit your withholdings.
- Withhold part of Social Security and Medicare taxes from employees’ wages and pay an equal amount as the business owner. IRS Publication 15, Employers Tax Guide and Publication 15-A and Publication 15-A, Employer’s Supplemental Tax Guide will be helpful here.
You MAY: also need to withhold 0.9% Additional Medicare Tax on an employee’s wages and tips if they exceed a threshold amount.
Last but not least, you’ll need some specific inform
Forms that you will need to provide to your employee for completion and signature on or before their official date of hire:
Tax Form W-4, Federal
Tax Form W-4, State Specific
I-9 Form from US Citizenship and Immigration Services
For 1099 Independent Contractors, you will need Tax Form W-9
You will also need to make copies of their Government Issued ID and Social Security Card -OR- a Passport to complete the 1-9 form and for the purpose of reporting your new hire to your state labor office.
That should be enough information to get your gears turning and the ball moving into action if you’ve already begun the process of hiring a new employee. If you’re still mulling over the possibility of taking this step, stay tuned for expanded considerations of owner and business readiness!
Congratulations on taking this next step, whether you are in the planning stages, or you have already extended a job offer!
Want to learn more about getting your business off the ground? Check out all the other great resources we offer! We offer policies and procedures for your office, Medical Director agreement, Botox Party Presentation, and tons of free info at the blog?