It’s a big decision… could it be time to hire your first employee?
Maybe you’re putting in too many hours, far more than you thought possible. Or perhaps you’re missing out on booking new patients; your schedule is full, and you can’t add anyone for weeks. Or worse, you’re getting complaints about the long wait times.
And while adding staff can’t fix all problems, you know it will make it easier to handle some of them. Things like:
- Staffing the front desk
- Answering the phone and making calls
- Answering questions from patients
- Following up with insurance and billing …
And even though you’re ready to take that first step, you’re just not sure what goes into the equation. And consequently, you haven’t moved forward.
So today, let’s look at the real cost of hiring employees because paying a salary or an hourly wage is only one piece of the puzzle. But if you want to see the whole picture, there is a lot more to consider.
Of course, our discussion covers employees and not independent contractors. To learn more about the difference between the two and why it’s essential to know, go to the link above.
Since so many variables factor into the real costs of hiring employees, we’ll limit our discussion to three big categories:
- Labor costs
- Taxes & Insurance
- Benefits
Wages and salaries (Labor cost)
The cost of labor varies significantly across industries, locations, and qualifications of employees. How much an employee is paid depends on factors like:
- Your specialty
- Your location
- Size of practice
- Job requirements
- Employee qualifications
- Experience level
- Going rate for the position
- Type of position – salaried vs. hourly
- And of course, what you can pay
But with the internet at your fingertips, it is easy to find the information. Simply type in a few keywords to Google such as “wages paid for … in…,” “salary range for … in …” Then wait for the magic to happen behind the scenes and walk away with a few answers.
While the replies may not be definitive, they’ll point you in the right direction and get you started.
Taxes & Insurance
Federal
When you have employees, you are required to collect and pay taxes on their behalf, both federal and state. These include federal income tax and FICA (Federal Insurance Contribution Act) taxes.
… FICA is the federal payroll tax that gets deducted from paychecks across the land! Employees make regular contributions that go to fund both Social Security and Medicare.
Currently, 6.2% of gross wages are deducted as Social Security and 1.45% as Medicare tax. This is the percentage the employee pays. You, as the employer, will match the employee contribution, for a total of 15.3% of FICA taxes.
As the employer, you must collect and submit all tax payments to the federal government, along with the necessary reports.
Due dates for tax payments and reports depend on the size of the business. Most small businesses report and submit payments on a quarterly basis.
The other federal tax you will need to pay is FUTA (Federal Unemployment Tax). FUTA is paid solely by the employer; for most small businesses this comes down to one yearly report and payment.
The amount of FUTA due is based on a split calculation; go here to find the current rate and how it’s calculated.
Payroll taxes are serious business!
Too many businesses (of all types and sizes) get into trouble because they act carelessly when it comes to payroll taxes, either paying late or not at all. This is something you do NOT want to do!
State
Depending on where your business is located (state), you may also need to withhold tax payments for employees, including state income and unemployment tax.
Additionally, you may also need to cover employees through workers compensation, payable either to the state or a private entity.
Depending on your specific situation, additional taxes may need to be paid. Be sure to get adequately informed about all your obligations before hiring employees.
Other Insurance
Here is one more coverage you must have for any employee providing direct patient care. Anyone who touches a patient should be covered on your malpractice insurance, through the addition of a rider.
The idea is to protect you and your business in the event of a lawsuit. Be sure to check with the company providing your malpractice insurance.
Benefits
Most small businesses can’t offer the juicy benefits paid by the big companies, and they are not obligated to do so.
However, many small business owners try to get creative so that they can offer some form of benefits to their employees.
So if traditional benefits packages include:
- Paid time off (vacation for exempt employees vs. days off for non-exempt)
- Continuing education
- Health insurance
- Retirement contribution
… we’ve heard of practice owners providing more non-traditional benefits like paying for a gym membership or offering educational allowances, like paying for books, etc.
And while you may not be able to offer traditional benefits, you can align your creativity with the needs of your employees to provide something of value to them.
In Summary…
Hiring employees, certainly, your first employee can be daunting… if not outright scary. But it doesn’t have to be.
The information in this article should give you a head start. Do the necessary research, so you know how the pieces of the puzzle fit together before you hire employees.
And, take all the time you need when making your decision…
Come join the conversation!
Tell us what you think and leave a comment or ask your question below… we’d love to hear from you!
By Johanna Hofmann, MBA, LAc; regular contributor to the NPBusiness blog and author of “Smart Business Planning for Clinicians.”