Topic: Employees/Sub contractors (Page 1 of 1)

My little web dev company has been building up pretty steadily since I started it... I'm getting very close to the point that I will not be able to handle the workload myself and I find that I am avoiding potential sales because of it. I have a really good friend that is very interested in learning and helping out. He has no previous knowlegde of web design/development but is learning very quickly. I was just wondering your thoughts on how much of pay would be fare and how you handle employees/sub contractors. What is your method? I was thinking of giving him projects and paying him on an hourly rate figuring how long it would take me to complete it (plus a bit). But then I'm not sure what that rate should be. I was also thinking of giving him a percentage of projects we work on together (mainly for him to learn) but I'm not sure what would be fair where he is at such a begining level. Anyways, I appreciate your thoughts. Peace.

Interesting questions... , I think however there are, far more critical questions 'you' first must answer.

Poorly phrased I'm sure but my brain works like this.

What are the possible ramifications on my existing business?

When you become an employer the 'rules' change. Sometimes dramatically.

Payroll... payroll deductions for a,b,c, & d federally. e,f & g at lower levels of government. Who's taking care of all the paperwork? Ideally your accountant. Oh... don't have one of those well then your book-keeper. Oh.. that's you. Hmmmm adding how much time to an already too heavy workload which is why you're looking to hire in the first place... yes no?

Oh... you already have a bookkeeper ..ok..and they want how much more money to take on this extra workload?

And when it gets down to the bottom line because that indeed is what were talking about... the bottom line in straight dollars and cents. Are you going to end up with more dollars in your pocket and if you do will the increased compensation be 'worth' it?

Ideally you'd have a business model where you could pump X$'s into a spreadsheet and come away with a pretty accurate indication of just what it all means in dollars and cents. Because who knows... after taking a brutally hard & cold look at the $$$ you may come to the conclusion that your money is better spent on a bookkeeper. You all but eliminate that part of your 'personal' workload (which you really don't like doing anyway) and the potential 'business' you're now avoiding becomes potentially, viable income.

After you've determined the ramifications of 'possible methods' it then becomes a matter of your personal philosophy versus your ' business reality.'

The reality of a 'friendship' thrown into the mix will certainly at some point test that friendship...and that will come the first time, as the employer, you say... 'No... I want it done this way.'

Is the money worth the friendship? Let him read this.

Thanks for the reply NoJive. It's not quite that complicated though. I do have an accountant to handle paperwork and we (my friend and I) actually met because I was his boss at a previous job. He's an excellent worker and very reliable. The ramifications on my existing business would be to have a trustworthy person I know at a top level in my company as it grows to help out; the bad if it falls through?... time lost teaching, but not really because he would have those extra skills which would be worth it. Basically, I'm just not sure what is fair to pay... I fully believe it will be worth it in the long run to have him in the company so paying him in my mind is a no brainer; i'm just not sure how much to pay.

You are in a "Service Industry" that bills labor only. I'm not going to talk about if you are the creative genius of all of graphics only the business side.

A usual labor only business must bill at at least 2.5 times wages. [ this assumes you are a legit employer] Why let's figure our over head in the most basic sense.

Wage + Taxes [SS + Medicare + state or insurance co. workers comp + un employment + I don't remember the rest...] + liability insurance as based on labor cost +] plus the portion of everything else that you have to lay out just to DO what ever you contracted t do. Oh yeah that everything else includes everything you pay for your self like computer storage, legal fees for - trade mark etc et al, rent of space , Insurance ....

And now days please remember employees want to be insured for at least health and the employee alone will cost at least 4-500 dollars a month and if you have top cover the signif other , at least as much.

I think the 2.5 x of wage is weak. When you bid with employees, you must remember they think they have worked 8 per day [or more] no matter how effective you think they were -Likely not as effective as you were - on this project.

Good luck

redr.

Very encouraging you're dealing with the business side of the business. As you're well aware that is of course the main cause of business failures... so we'll leave that.

eyepaint has provided a basic formula for a good starting point I think. Dig out all the paperwork you can on a recent project... everything with dollar signs and 'time' sheets and start crunching some of those figures...with the most basic of $ values. I'd take it to my accountant actually and do a bunch of the what 'if's.'

Don't forget you have options such as probationary periods. X$ increase to XX$ after a given period of time. Bonuses if a project is completed on time on budget under budget ahead of schedule. Possible shares in the company if things work out 'very' well. Well down the road of course.

There's one other thing to keep in mind. I mentioned it in another thread quite some time ago but worth repeating here I think. Came from a fella best described as a successfull businessman.

The only reason to start a business is to sell that business.

Thanks for your help fella's. I guess there's really no cut 'n dry answer which is pretty much what I thought... I appreciate your thoughts though as they have helped.

I was once a contractor. Now I am a web co. owner. I am also a broker for web co. owners. ( I find them contractors when they start to get overloaded, for a markup on wage. works out great). Answer to your question is you can pay whatever you both are willing to reason out. Fair negotiation is the key. But it's important to ensure that the terms are very clear. Percentages on projects seem to work out great...