Seeking Guidance on Hiring My First Employee
I’ve been running my own business for several years, handling everything on my own. However, due to a chronic illness, I can no longer complete the physical aspects of the work. I’ve had to significantly reduce my hours, and I’m still facing challenges. After much consideration, I’ve realized that hiring someone is crucial for the future of my business.
My primary concern is understanding the additional costs associated with hiring a W-2 employee, as this position won’t qualify for 1099. If I plan to pay them $15 per hour, what should I expect the total cost (X) to be on top of that wage? I’m aware that I’ll need to account for workers’ compensation and payroll taxes, but are there any other mandatory expenses I should consider? Additionally, will using a payroll service like Gusto simplify this process?
I’m based in Louisiana and the position will be part-time. Any insights or advice would be immensely helpful. Thank you!
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bdadmin
It sounds like you’re in a challenging situation, and it’s great that you’re looking to hire an employee to keep your business running. Here’s a breakdown of some of the extra expenses you should consider when hiring a W2 employee:
Payroll Taxes: As an employer, you will need to match Social Security and Medicare taxes, which is typically around 7.65% for each. In addition, you will need to pay federal and state unemployment taxes (FUTA and SUTA).
Workers’ Compensation Insurance: This is essential for protecting your business in case of work-related injuries. The cost can vary based on your industry and the employee’s duties but plan for a few hundred dollars annually.
Health Insurance (Optional but Recommended): If you choose to offer health benefits, this can significantly increase your costs. However, it’s not mandatory unless you meet certain criteria (like having 50 or more employees). Even as a small employer, employees may expect some benefits.
Other Mandatory Expenses: Depending on your location and the nature of the job, there may be other expenses related to compliance with local labor laws, such as mandated sick leave or disability insurance.
When you calculate “X” on your $15 wage:
– Start with adding roughly 10-15% for payroll taxes.
– If you factor in workers’ comp and any other costs, you might look at an additional 20-30% total expenses.
So, using your example:
– $15 (hourly wage) + $3-$4.50 (10-15% payroll taxes) + additional costs (workers’ comp, etc.) could bring you to $18-20/hour as the true cost of employing someone at $15/hour.
Using a payroll service like Gusto definitely simplifies the process, as they handle most of the calculations and payments for payroll taxes, as well as providing you with necessary reports and compliance reminders. They can be a great resource, especially if you’re new to managing employees.
Lastly, consider consulting with an accountant familiar with Louisiana laws to understand all potential expenses and fulfill your tax obligations properly. Best of luck with your hiring process!