Perhaps the most crucial decision a sole-proprietor with a growing business can make, the decision to hire an employee is a financial, legal, and empirical one. Can you, as the business owner, pay the wages (full or part-time, or contractual) of an employee? If so, does your current profit allow for an additional salary, or do you need to take on additional work? Are you ready to give enough of your day-to-day tasks over to your employee that he or she will have plenty to do, and feel valued and busy? And if the person you’ve selected doesn’t work out, will you be prepared to help him or her improve, or, failing that, be prepared to fire the employee?

There are tax implications in taking on extra help; you may be liable, depending on state and federal regulations, for labor codes associated with holidays and medical leave, as well as federal, state, and local taxes, along with worker’s compensation. It’s a good idea to check with your accountant or local small business development center to make sure you are prepared for these additional expenses.


When to Hire

Subjectively speaking, it might be time to hire help when you feel overwhelmed with work or bogged down in doing tasks that someone else could be doing more effectively—organizing, sending samples, ordering supplies, etc.—or when you feel that you’d like to expand into a new area, gain production capabilities, or simply reduce your stress level. Perhaps you have enough work to consider buying another press, and so would like to hire another printer to run it. Or perhaps you would like a dedicated customer service person or project manager who will free up some of your time so that you can focus on production. Especially if you are accustomed to working by yourself, hiring an employee is a leap of faith: you need to trust the new employee to be able to competently do the job at hand, and  you need to trust yourself to delegate and give someone else some of the responsibility for maintaining your business.

Interviewing and Checking References

Before you gather a range of people you are interested in interviewing, think about what you’d like to discuss in the interview, the questions you will ask, and how you will assess the applicant’s responses. Pay attention to how the applicants answer your questions, as well as to their body language, eye-contact, and comportment.

If you are hiring based on resumes—or a call for proposals for a contract—tailor each interview a bit to the information the interviewee has given you in the resume/proposal they submitted. Ask them questions about areas that need more clarification, or that are particularly applicable to the work you need them to do. Having them describe their last few jobs/projects will also give you a really strong sense of how they approach their work.1

It’s important to check references, regardless of how strong you feel the candidate was in the interview or how good he or she looks on paper. You can gather a combination of personal (i.e., friends, family) references, as well as professional ones (past employers, teammates, etc.), “as long as they answer some of the questions that are essential to the skills you need that person to bring to the job. Everything from punctuality and reliability to specialized knowledge needs to be verified before you start to rely on this person.”2


When you’ve found the right person, it’s important for both parties, employer and employee, to sign a contract or contracts delineating expectations, responsibilities, benefits, grounds for termination, and the like.

Whenever you hire new employees, there are several agreements that you may want to consider having them sign:

  • A reasonable noncompete agreement if the employee might learn things that could be used against you later
  • A nondisclosure agreement to prevent employees from disclosing confidential trade secrets
  • An assignment of inventions or “work for hire” agreement if the employee will be involved in creative endeavors.”3

You might also consider an employment contract, which should include the detailed job description—hours, responsibilities, your expectations and so on—salary or wages, benefits, and other conditions of employment. Walk your new employee through this document and ask him or her to sign it to show that they understand your expectations and their responsibilities.

On the Job: Engaging and Maintaining

It’s important that your new employee feel invested in the work he or she is doing, and that the environment and tasks are motivating enough to keep the employee interested and industrious. You might assign short-term as well as long-term projects—every-day tasks as well as tasks that will take many weeks or months to complete—in order to create enough variety and challenge for the employee. Allowing the staffer some autonomy, along with a clear sense of direction, will help your business run smoothly.

Regular staff meetings and performance reviews are good opportunities to check in with your employee, and correct his or her course if necessary.

Independent Contractor vs Employee

What is the difference between hiring a contractor and a full or part-time employee? The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.4

Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

Example: Dave Smith comes in to Sally Jones’ print shop five days a week, eight hours a day. He wraps packages, answers the phone, orders supplies, and manages workflow under Sally’s supervision. Sally pays Dave’s hourly wage, contributes to his retirement, and pays for his health insurance. In this scenario, Dave is an employee of Sally.5

Facts that provide evidence of the degree of control and independence fall into three categories:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. Instead, look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, document each of the factors used in coming up with the determination.


  • 1. Bacon, Lauren & Mears, Emira. The Boss of You: Everything a Woman Needs to Know to Start, Run, and Maintain Her Own Business. Berkeley, Seal Press, 2008. pp 193-4.
  • 2.  Bacon and Mears, 194
  • 3. Strauss, Steven D. The Small Business Bible: Everything You Need to Know to Succeed in Your Small Business. Hoboken, John Wiley & Sons, 2012, pg. 260.
  • 4. irs.gov
  • 5. irs.gov


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