Lots of work at home moms are content to remain as "sole proprietors" or single heads of their personal businesses, but if your little business has taken off, and there's more client demand than you can handle, you may be thinking about hiring an independent contractor or an employee to the mix. But, small business owners should be careful when thinking about how to add workers to their fledgling enterprises. Look carefully at how an independent contractor or an employee will affect your work at home business budget.
Costs of Hiring an Employee
If you're looking to add an actual employee to your small work at home business, the costs of this kind of expansion can be huge. Employees generally receive health benefits from their employers, and for a small business where the owner may not even have their own group policy, it can be hard to offer this kind of benefit to an employee. In addition, a business needs to pay into the employee's Social Security and Medicare taxes, and also pay into unemployment insurance in case an employee gets laid off when client demand drops.
Traditional hiring of single full-time employees, or even part-time workers, is a structure that is more geared toward the needs of a well-established company, and not a small business. More small businesses are recognizing that sourcing work to independent contractors helps them to better manage their budget and keep control of their bottom line.
Costs of Hiring an Independent Contractor
In most cases, the costs of hiring an independent contractor to help with business related tasks are limited to the actual billable charges that the contractor invoices to the business. If these rates seem high, remember that the contractor is responsible for covering all insurance related her work, and for paying all of her Social Security and Medicare taxes. The business assumes no further liability, and there's not a whole lot of paperwork involved. In some cases, a business can even use the amounts paid to independent contractors as a tax deduction, since the amounts may qualify as "capital gain or loss for business."
The very appealing structure of independent contracting has led to a common process where larger businesses hire smaller ones in a kind of "food chain" that extends many levels down from large corporate project management. Businesses of all sizes have found that independent contracting arrangements can be a much more efficient way to source work. Whether this is a good thing for the individual worker remains to be seen, but for many small work at home businesses, seeking out good independent contracting relationships is critical to continued success for those who want to grow a thriving local shop and help make their business a little more secure.
Think about these considerations next time you're looking at whether to expand something started out as "a work at home business for mom." Some of the most successful small business owners are women who did the tough work of building an enterprise from the ground up, in the comfort of their homes.