You’ve decided to start your own business and as excited as you are, you are entirely overwhelmed by everything you need to do. You are working on a limited budget and trying to stretch those funds as far as they’ll go but you hit the ground running. In no time at all, you’ve found office space, launched your website, hired a marketing firm and setup your technology. About eight months in, you realize that business is booming. You have more work than you can handle but you don’t want to turn anyone away. With growth in mind, you decide to hire your first employee as your mind floods with worry that this employee will cost you more than you can afford.
It occurs to you that you don’t know the first thing about having an employee. Spending money on human resources seems like overkill because you only have the one employee. You did not budget for an attorney to advise you on the dos and don’ts of hiring. The only appealing option is to stumble your way through this. Many business owners ride the wave and hope for the best when motivated by cash flow issues. You are not alone but you are not in good company either.
Finding ways to save money becomes your top priority. Instead of hiring an employee, you hire an “independent contractor” to run your office while you’re working with clients. You have not been paying overtime. You are, however, scheduling your employee to work 10 hours a day and controlling every aspect of her job. Recently, she has become agitated by your increasing demands and finally walked out. You are beside yourself but nothing prepares you for the process-server who came to your door with the misclassification lawsuit filed by your former employee.
If you thought you couldn’t afford an attorney before, you certainly won’t be able to afford one now but you are out of options. Not only do you need to compensate the employee, you need a defense, and revision of your employment policies and systems so this doesn’t happen again. You have set the standards for your entire workforce with your first employee. This is not quickly undone when something goes wrong and fees will mount.
Maintaining compliance with California law is essential to a thriving business. The math is easy. You can hire an attorney on a limited basis to create and/or revise your employment policies or you can hire an attorney indefinitely to defend employee lawsuits. Although an attorney can’t prevent an employee from suing you, she can minimize the likelihood.
When you are ready to hire an employee, be cognizant of necessary expenses and consider these helpful tips:
- Budget for legal fees;
- Obtain an employee handbook for California;
- Shop quotes for workers compensation insurance; and
- Invest in payroll software. e.g. Intuit or QuickBooks
Being prepared for the unknown can keep you in business and give you peace of mind.