Is Your Home Business Ready for Employees?

By: Isabel Isidro


Many home-based entrepreneurs start out small, oftentimes working alone in their businesses. Eventually, their business begin to expand that hiring part-time workers becomes warranted, or even a full-time assistant maybe required. As the business continue to grow, their home-based businesses will reach a point when hiring full-time employees becomes critical and renting a commercial facility is needed. Hiring employees becomes important as your business moves to higher-income and profit levels.

You as an entrepreneur need to be prepared for the new challenges and difficulties this period in the growth of your previously small home-based business will present. One new responsibility you need to face is human resource management. This entails human resource planning, handling turnovers, employee training, monitoring performance and productivity, salary management, and handling benefits. Whew! These are tough responsibilities for the once solo entrepreneur.

The degree of success or failure of your small business will often depend on the quality of your employees. However, small businesses often experience difficulties in hiring, retaining and motivating employees. According to a survey by Advantage Payroll Services, of the small businesses that feel they are at a disadvantage for recruiting new employees, 93 percent of them feel it is because larger companies can offer better benefits. In today's marketplace, every employee expects 401k, health plan, profit sharing, pre-tax flexible spending options, even stock options; and businesses that don't offer these extras just may lose top-notch employees who seek better opportunities.

The process of managing benefits is a huge task that can be cumbersome and time-consuming for those without a benefits manager in the staff. It requires staying abreast with thousands of tax codes and adjusting deductions every time an employee hits a new tax threshold. A small business owner needs to give full attention to their core business, not be encumbered with administrative duties and huge amount of paper work.

Many experts recommend that small businesses - specifically those with fewer than 100 employees or without a dedicated accounting department - outsource their benefits and payroll tasks. Why? Outsourcing can reduce cost. Human resource experts estimate that it costs the small business owner $5,000 per year per employee if he manages the payroll in-house versus under $2,000 if he outsources it.

Outsourcing can also improve benefits for employees, thereby increasing the company's ability to recruit and retain quality employees. Payroll companies do not only serve payroll needs, but also offer a wider selection of benefits at less cost than the company could offer on its own.

It also allows the entrepreneur to devote all his time and energy to his business without being distracted by administrative duties. When a company outsources payroll, the firm handles all the paperwork, tax filings, workers' compensation, FICA Tip Credit Reporting, and 401(K) plans. Studies by both APA and KPMG find that 10.5 percent of payroll processing time is consumed in error correction, even though the average error rate is only three percent. These outsourced companies offer 100% guaranteed tax filings. They will be filed accurately and on-time, or they will pay any penalties and interest.

The process of outsourcing payroll and benefits has become easier for small businesses with the advent of Internet. e-Payroll is beginning to dominate the payroll industry, allowing small businesses more control over their accounts. One of the top five payroll service providers in the U.S., Advantage Payroll Services at http://www.advantagepayroll.com, offers an easy to use online service with a 24/7 access to accounts of their clients. Other outsourcers are Automatic Data Processing and Paychex.

However, despite the obvious merits of outsourcing today, only 20% of businesses use this resource. This is a huge opportunity for companies in the payroll business, but it also means that these businesses, particularly small businesses, are wasting valuable time, money and resources on a function that is ancillary to their core businesses.

Copyright Isabel Isidro

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