What are the considerations for adding a new ’employee’ to my small business?
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What are the considerations for adding a new ’employee’ to my small business?
Hello. I have a small sole proprietorship with no employees. Somebody recently
approached me, asking if they could become an employee for my business, be
registered as my employee, even though he would offer services for free, like an
internship or volunteering. I haven’t had any employees in the past, so I was
wondering what legal, financial, or tax considerations adding this person would
be to my business. Any advice would be greatly appreciated. Thanks
Asked on June 11, 2016 under Employment Labor Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
1) They can't offer their services for free: the law doesn't allow "volunteer" employees for for-profit businesses (even interns) outside of certain special circumstances, like students doing externships for class credit or course requirements. If you hire him, you will have to pay him equivalent to at least minimum wage. If you fail to pay him appropriately, he could sue you or bring a complaint to the department of labor. You'd also owe overtime as applicable.
2) You will have to, because you are paying him, also pay the employer portion of social security and medicare, make unemployment contributions, etc.
By the way, having had a small business myself in the past and having had to pay employees, I can tell you from first hand experience that managing even a payroll of one and paying the appropriate taxes is burdensome--either you'll spend a surprising amount of time doing this personally, or else hire someone like ADP to go it for $100 - $200/month. (Right now, I share another attorney's secretary and just pay him monthly for her services specifically to avoid having to manage payroll.)
3) If he does something during the course of employment that injures another, your business (which means *you* if the business is a sole proprietorship) could be liable--e.g. if he defames someone, or runs into another car or pedestrian while driving somewhere for business.
4) He could obligate the business--again, you, as a sole proprietor--to contracts or to buy goods/services in many cases, as long as it would reasonably appear to the other party that he had the authority.
In short, while you often need an employee as you grow/expand, doing so is a significant step and should not be done lightly.
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