chapter 23

STAFF SMARTS

To hire or not to hire? That is the question in the mind of the new entrepreneur. You see, hiring even one employee changes everything. Suddenly, you need payroll procedures, rules regarding hours, and a policy for vacation pay. You’re hit with a multitude of legal requirements and management duties you’d never have to deal with if you worked solo.

To decide whether you need employees, take a closer look at your ultimate goals. Do you want to create the next Starbucks, or do you simply want to work on your own terms without a boss looking over your shoulder? If your goals are modest, then adding a staff may not be the best solution for you.

If you do need employees, there are plenty of ways to meet your staffing needs—without driving yourself nuts. From temporaries and independent contractors to employee leasing, this chapter takes a closer look at the dos and don’ts of staffing your business. Read it over, and you will have a better idea whether hiring is the right solution for you.

e-FYI

Use the internet to help you find employees:

• Careerbuilder (career builder.com) offers advice, webinars, leadership development and hiring solutions to employers and job recruiters.

• Monster.com helps you screen resumes so you can find the right candidate quickly.

How To Hire

The employees you hire can make or break your business. While you may be tempted to hire the first person who walks in the door “just to get it over with,” doing so can be a fatal error. A small company cannot afford to carry dead wood on staff, so start smart by taking time to figure out your staffing needs before you even begin looking for job candidates.

Job Analysis

Begin by understanding the requirements of the job being filled. What kind of personality, experience and education are needed? To determine these attributes, sit down and do a job analysis covering the following areas:

• The physical/mental tasks involved (ranging from judging, planning and managing to cleaning, lifting and welding)

• How the job will be done (the methods and equipment used)

• The reason the job exists (including an explanation of job goals and how they relate to other positions in the company)

• The qualifications needed (training, knowledge, skills and personality traits)

If you are having trouble, one good way to get information for a job analysis is to talk to employees and supervisors at other companies that have similar positions.

Job Analysis

Job Description

Use the job analysis to write a job description and a job specification. Drawing from these concepts, you can then create your recruitment materials, such as a classified ad.

The job description is basically an outline of how the job fits into the company. It should point out in broad terms the job’s goals, responsibilities and duties. First, write down the job title and whom that person will report to. Next, develop a job statement or summary describing the position’s major and minor duties. Finally, define how the job relates to other positions in the company. Which are subordinate and which are of equal responsibility and authority?

TIP

It’s easy to hire employees who are just like you, but it’s often a big mistake. Especially with your first employee, try to find someone who complements your strengths and weaknesses. While personal compatibility is important, hiring a carbon copy of yourself could leave your business ill-prepared for future challenges.

For a one-person business hiring its first employee, these steps may seem unnecessary, but remember, you are laying the foundation for your personnel policy, which will be essential as your company grows. Keeping detailed records from the time you hire your first employee will make things a lot easier when you hire your 50th.

The job specification describes the personal requirements you expect from the employee. Like the job description, it includes the job title, whom the person reports to, and a summary of the position. However, it also lists any educational requirements, desired experience, and specialized skills or knowledge required. Include salary range and benefits. Finish by listing any physical or other special requirements associated with the job, as well as any occupational hazards.

Writing the job description and job specifications will also help you determine whether you need a part- or full-time employee, whether the person should be permanent or temporary, and whether you could use an independent contractor to fill the position (more on all these options later).

Writing the Ad

Use the job specification and description to write an ad that will attract candidates to your company. The best way to avoid wasting time on interviews with people who do not meet your needs is to write an ad that will lure qualified candidates and discourage others. Consider this example:

Interior designer seeks inside/outside salesperson. Flooring, drapes (extensive measuring), furniture, etc. In-home consultations. Excellent salary and commission. PREVIOUS EXPERIENCE A NECESSITY. San Francisco Bay Area. Send resume to G. Green at P.O. Box 5409, San Francisco, CA 90842.

This job description is designed to attract a flexible salesperson and eliminate those who lack the confidence to work on commission. The advertiser asks for expertise in “extensive measuring,” the skill he has had the most difficulty finding. The job location should be included to weed out applicants who don’t live in the area or aren’t willing to commute or relocate. Finally, the capitalized “PREVIOUS EXPERIENCE A NECESSITY” underscores that he will hire only candidates with previous experience.

Job Description

“My philosophy is,
‘When you snooze, you
lose.’ If you have a
great idea, at least
take the chance and
put your best foot
forward.”

—RON POPEIL, FOUNDER OF
RONCO INVENTIONS LLC

Finally, specify how applicants should contact you. Depending on the type of job (professional or nonskilled) you are trying to fill, you may want to have the person send a cover letter and a resume, or simply call to set up an appointment to come in and fill out an application.

Recruiting Employees

The obvious first choice for recruiting employees is the classified ad section of your local newspaper, both in the printed and online versions. Place your ad in the Sunday or weekend edition of the largestcirculation local papers.

Beyond this, however, there are plenty of other places to recruit good employees. Here are some ideas:

• Tap into your personal and professional network. Tell everyone you know—friends, neighbors, professional associates, customers, vendors, colleagues from associations—that you have a job opening. Someone might know of the perfect candidate.

• Contact school placement offices. List your openings with trade and vocational schools, colleges and universities. Check with your local school board to see if high schools in your area have job training and placement programs.

• Post notices at senior citizen centers. Retirees who need extra income or a productive way to fill their time can make excellent employees.

• Use an employment agency. Private and government-sponsored agencies can help with locating and screening applicants. Often their fees are more than justified by the amount of time and money you save.

• List your opening with an appropriate job bank. Many professional associations have job banks for their members. Contact groups related to your industry, even if they are outside your local area, and ask them to alert their members to your staffing needs.

• Use industry publications. Trade association newsletters and industry publications often have classified ad sections where members can advertise job openings. This is a very effective way to attract skilled people in your industry.

• Go online. There are a variety of online job banks and databases that allow employers to list openings. These databases can be searched by potential employees from all over the country. One to explore: LinkedIn, an international professional networking site, where you can post jobs and find candidates through the site’s automated talent matching system. Check it out at linkedin.com.

AHA!

If relevant, ask employees to send samples of their work with their resumes or to bring them to the interview. Another technique: Ask them to complete a project similar to the actual work they’d be doing (and pay them for it). This gives you a strong indication of how they would perform on the job ... and gives them a clear picture of what you expect from them.

Prescreening Candidates

Two important tools in prescreening job candidates are the resume and the employment application. If you ask applicants to send in a resume, that will be the first tool you use to screen them. You will then have qualified candidates fill out an application when they come in for an interview. If you don’t ask for a resume, you will probably want to have prospective employees come in to fill out applications, then review the applications and call qualified candidates to set up an interview.

In either case, it is important to have an application form ready before you begin the interview process. You can buy generic application forms at most office-supply stores, or you can develop your own application form to meet your specific needs. Make sure any application form you use conforms to Equal Employment Opportunity Commission (EEOC) guidelines regarding questions you can and cannot ask (see “Off Limits” on page 365 for more on this).

Your application should ask for specific information such as name, address and phone number; educational background; work experience, including salary levels; awards or honors; whether the applicant can work full or part time as well as available hours; and any special skills relevant to the job (foreign languages, familiarity with software programs, etc.). Be sure to ask for names and phone numbers of former supervisors to check as references; if the candidate is currently employed, ask whether it is OK to contact his or her current place of employment. You may also want to ask for personal references. Because many employers these days hesitate to give out information about an employee, you may want to have the applicant sign a waiver that states the employee authorizes former and/or current employers to disclose information about him or her.

When screening resumes, it helps to have your job description and specifications in front of you so you can keep the qualities and skills you are looking for clearly in mind. Since there is no standard form for resumes, evaluating them can be very subjective. However, there are certain components that you should expect to find in a resume. It should contain the prospect’s name, address and telephone number at the top and a brief summary of employment and educational experience, including dates. Many resumes include a “career objective” that describes what kind of job the prospect is pursuing; other applicants state their objectives in their cover letters. Additional information you may find on a resume or in a cover letter includes references, achievements and career-related affiliations.

WILLING AND ABLE

The Americans With Disabilities Act (ADA) of 1990 makes it illegal for employers with 15 or more employees to refuse to hire qualified people with disabilities if making “reasonable accommodations” would enable the person to carry out the duties of the job. That could mean making physical changes to the workplace or reassigning certain responsibilities.

While the law is unclear on exactly how far an employer must go to accommodate a person with disabilities, what is clear is that it’s the applicant’s responsibility to tell the employer about the disability. Employers are not allowed to ask whether an applicant has a disability or a history of health problems. However, after the applicant has been given a written or verbal explanation of the job duties, you may then ask whether he or she can adequately perform those duties or would need some type of accommodation.

For further clarification, read the laws, regulations, and enforcement guidance documents available online from the Equal Employment Opportunity Commission at eeoc.gov.

Look for neatness and professionalism in the applicant’s resume and cover letter. A resume riddled with typos raises some serious red flags. If a person can’t be bothered to put his or her best foot forward during this crucial stage of the game, how can you expect him or her to do a good job if hired?

There are two basic types of resumes: the “chronological” resume and the “functional” resume. The chronological resume, which is what most of us are used to seeing, lists employment history in reverse chronological order, from most recent position to earliest. The functional resume does not list dates of employment; instead, it lists different skills or “functions” that the employee has performed.

e-FYI

When looking for employees, don’t overlook these lesser-known sites: FlipDog.com, JobBankUSA.com and NationJob.com. Also, check out niche sites, such as Accounting.com for accounting positions or Dice.com for tech professionals.

Although chronological resumes are the preferred format among HR professionals and hiring managers, functional resumes have increased in popularity in recent years. In some cases, they are used by downsized executives who may be quite well-qualified and are simply trying to downplay long periods of unemployment or make a career change. In other cases, however, they signal that the applicant is a job-hopper or has something to hide.

Because it’s easy for people to embellish resumes, it’s a good idea to have candidates fill out a job application, by mail or in person, and then compare it to the resume. Because the application requires information to be completed in chronological order, it gives you a more accurate picture of an applicant’s history.

Beyond functional and chronological resumes, there is another type of resume that’s more important to be on the lookout for. That’s what one consultant calls an “accomplishment” vs. a “responsibility” resume.

The responsibility resume is just that. It emphasizes the job description, saying things like “Managed three account executives; established budgets; developed departmental contests.” An accomplishment resume, on the other hand, emphasizes accomplishments and results, such as “Cut costs by 50 percent” or “Met quota every month.” Such a resume tells you that the person is an achiever and has the bottom line firmly in mind.

OFF LIMITS

Equal Employment Opportunity Commission (EEOC) guidelines, as well as federal and state laws, prohibit asking certain questions of a job applicant, either on the application form or during the interview. What questions to sidestep? Basically, you can’t ask about anything not directly related to the job, including:

• Age or date of birth (except when necessary to satisfy applicable age laws)

• Sex, race, creed, color, religion or national origin

• Disabilities of any kind

• Date and type of military discharge

• Marital status

• Maiden name (for female applicants)

• If a person is a citizen; however, you can ask if he or she, after employment, can submit proof of the legal right to work in the United States

Interviewing Applicants

Once you’ve narrowed your stack of resumes down to ten or so top candidates, it’s time to start setting up interviews. If you dread this portion of the process, you’re not alone. Fortunately, there are some ways to put both yourself and the candidates at ease—and make sure you get all the information you need to make a smart decision. Start by preparing a list of basic interview questions in advance. While you won’t read off this list like a robot, having it in front of you will ensure you cover all the bases and also make sure you ask all the candidates the same questions.

The initial few moments of an interview are the most crucial. As you meet the candidate and shake his or her hand, you will gain a strong impression of his or her poise, confidence and enthusiasm (or lack thereof). Qualities to look for include good communication skills, a neat and clean appearance, and a friendly and enthusiastic manner.

Put the interviewee at ease with a bit of small talk on neutral topics. A good way to break the ice is by explaining the job and describing the company—its business, history and future plans.

AHA!

Posting a job on an online job site offers you advantages like 24-hour access to job postings, unlimited text for postings and quick turnaround. They also allow you to screen candidates, search resume databases, and keep your ad online for a long period of time—30 to 60 days—vs. a newspaper ad, which runs for only one weekend.

Then move on to the heart of the inter view. You will want to ask about several general areas, such as related experience, skills, educational training or background, and unrelated jobs. Open each area with a general, open-ended question, such as “Tell me about your last job.” Avoid questions that can be answered with a “yes” or “no” or that prompt obvious responses, such as “Are you detail-oriented?” Instead, ask questions that force the candidate to go into detail. The best questions are follow-up questions such as “How did that situation come about?” or “Why did you do that?” These queries force applicants to abandon preplanned responses and dig deeper.

Here are some interview questions to get you started:

• If you could design the perfect job for yourself, what would you do? Why?

• What kind of supervisor gets the best work out of you?

• How would you describe your current supervisor?

• How do you structure your time?

• What are three things you like about your current job?

• What were your three biggest accomplishments in your last job? In your career?

• What can you do for our company that no one else can?

• What are your strengths/weaknesses?

• How far do you think you can go in this company? Why?

• What do you expect to be doing in five years?

• What interests you most about this company? This position?

• Describe three situations where your work was criticized.

• Have you hired people before? If so, what did you look for?

Your candidate’s responses will give you a window into his or her knowledge, attitude and sense of humor. Watch for signs of “sour grapes” about former employers. Also be alert for areas people seem reluctant to talk about. Probe a little deeper without sounding judgmental.

Pay attention to the candidate’s nonverbal cues, too. Does she seem alert and interested, or does she slouch and yawn? Are his clothes wrinkled and stained or clean and neat? A person who can’t make an effort for the interview certainly won’t make one on the job if hired.

Finally, leave time at the end of the interview for the applicant to ask questions—and pay attention to what he or she asks. This is the time when applicants can really show they have done their homework and researched your company ... or, conversely, that all they care about is what they can get out of the job. Obviously, there is a big difference between the one who says, “I notice that your biggest competitor’s sales have doubled since launching their website in January. Do you have any plans to develop a website of your own?” and the person who asks, “How long is the lunch break?” Similarly, candidates who can’t come up with even one question may be demonstrating that they can’t think on their feet.

FAMILY AFFAIR

Want to get good employees and tax savings, too? Consider putting your family members to work for you.

Hiring family, especially children, enables you to move family income out of a higher tax bracket into a lower one. It also enables you to transfer wealth to your kids without incurring federal gift or estate taxes.

Subject to applicable child labor laws, even preteen children can be put to work stuffing envelopes, filing or sorting mail, says Daniel Hart, a tax and estate planning attorney with Turner Padget Graham & Laney in Florence, South Carolina. If a child’s salary is reasonable, it is considered earned income and not subject to the “kiddie tax” rules that can apply to anyone under the age of 23. And if your business is unincorporated, wages paid to a child under 18 are not subject to Social Security or FICA taxes. That means neither you nor your child has to pay these taxes. Finally, employed youngsters can make tax-deductible contributions to an individual retirement account.

Be sure to document the type of work the family member is doing and pay them a comparable amount to what you’d pay another employee, or the IRS will think you’re putting your family on the payroll just for the tax breaks. Keep careful records of time worked, and make sure the work is necessary to the business.

Your accountant can suggest other ways to take advantage of this tax situation without getting in hot water.

End the interview by letting the candidate know what to expect next. How much longer will you be interviewing? When can they expect to hear from you? You are dealing with other people’s livelihoods, so the week that you take to finish your interviews can seem like an eternity to them. Show some consideration by keeping them informed.

During the interview, jot down notes (without being obvious about it). After the interview, allow five or ten minutes to write down the applicant’s outstanding qualities and evaluate his or her personality and skills against your job description and specifications.

Checking References

After preliminary interviews, you should be able to narrow the field to three or four top candidates. Now’s the time to do a little detective work.

It’s estimated that up to one-third of job applicants lie about their experience and educational achievements on their resumes or job applications. No matter how sterling the person seems in the interview process, a few phone calls upfront to check out their claims could save you a lot of hassle—and even legal battles—later on. Today, courts are increasingly holding employers liable for crimes employees commit on the job, such as drunk driving, when it is determined that the employer could have been expected to know about prior convictions for similar offenses.

AHA!

Looking to fill an important position, but dreading the hassle of hunting for candidates? Executive recruitment firms, also known as “headhunters” or search firms, can find qualified professional, managerial or technical candidates for you. Search firms typically charge a percentage of the executive’s first-year salary.

Unfortunately, getting that information has become harder and harder to do. Fearful of reprisals from former employees, many firms have adopted policies that forbid releasing detailed information. Generally, the investigating party is referred to a personnel department, which supplies dates of employment, title and salary—period.

There are ways to dig deeper, however. Try to avoid the human resources department if at all possible. Instead, try calling the person’s former supervisor directly. While the supervisor may be required to send you to personnel, sometimes you’ll get lucky and get the person on a day he or she feels like talking.

Sometimes, too, a supervisor can tip you off without saying anything that will get him or her in trouble. Consider the supervisor who, when contacted by one potential employer, said, “I only give good references.” When the employer asked, “What can you tell me about X?” the supervisor repeated, “I only give good references.” Without saying anything, he said it all.

Depending on the position, you may also want to do education checks. You can call any college or university’s admissions department to verify degrees and dates of attendance. Some universities will require a written request or a signed waiver from the applicant before releasing any kind of information to you.

If the person is going to be driving a company vehicle, you may want to do a motor vehicle check with the department of motor vehicles. In fact, you may want to do this even if he or she will not be driving for you. Vehicle checks can uncover patterns of negligence or drug and alcohol problems that he or she might have.

If your company deals with property management, such as maintenance or cleaning, you may want to consider a criminal background check as well. Unfortunately, national criminal records and even state records are not coordinated. The only way to obtain criminal records is to go to individual courthouses in each county. Although you can’t run all over the state to check into a person’s record, it’s generally sufficient to investigate records in three counties—birth- place, current residence and residence preceding the current residence.

SAVE

Whenever possible, look for employees you can crosstrain for different jobs. A welder with college courses in engineering and a secretary with human resources experience are workers one business owner has successfully cross-trained. Cross-trained employees can fill in when others are absent, helping keep costs down.

For certain positions, such as those that will give an employee access to your company’s cash (a cashier or an accounting clerk, for instance), a credit check may be a good idea as well. You can find credit reporting bureaus in any Yellow Pages. They will be able to provide you with a limited credit and payment history. While you should not rely on this as the sole reason not to hire someone (credit reports are notorious for containing errors), a credit report can contribute to a total picture of irresponsible behavior. And if the person will have access to large sums of money at your company, hiring someone who is in serious debt is probably not a very good idea.

Be aware, however, that if a credit check plays any role in your decision not to hire someone, you must inform them that they were turned down in part because of their credit report.

If all this background-checking seems too time-consuming to handle yourself, you can contract the job out to a third-party investigator. Look in the Yellow Pages for firms in your area that handle this task, or Google “background checking.” A criminal check can cost as little as $20; a full investigation averages $50. There are even better deals online, so be sure to shop around. It’s a small price to pay when you consider the damages it might save you.

After the Hire

Congratulations! You have hired your first employee. Now what?

As soon as you hire, call or write the applicants who didn’t make the cut and tell them you’ll keep their applications on file. That way, if the person you hired isn’t the best—or is so good that business doubles—you won’t have to start from scratch in hiring your second employee.

For each applicant you interviewed, create a file including your interview notes, the resume and the employment application. For the person you hire, that file will become the basis for his or her personnel file. Federal law requires that a job application be kept at least three years after a person is hired.

Even if you don’t hire the applicant, make sure you keep the file. Under federal law, all recruitment materials, such as applications and resumes, must be kept for at least six months after the employment decision has been made. In today’s climate, where applicants sometimes sue an employer who decides not to hire them, it’s a good idea to maintain all records related to a hire (or nonhire). Especially for higher-level positions where you narrow the field to two or three candidates, put a brief note or memo in each applicant’s file explaining why he or she was or wasn’t hired.

The hiring process doesn’t end with making the selection. Your new employee’s first day is critical. People are most motivated on their first day. Build on the momentum of that motivation by having a place set up for them to work, making them comfortable and welcome. Don’t just dump them in an office and shut your door. Be prepared to spend some time with them, explaining job duties, introducing them to their office mates, getting them started on tasks or even taking them out to lunch. By doing so, you are building rapport and setting the stage for a long and happy working relationship.

“I think people
who have a real
entrepreneurial spirit,
who can face difficulties
and overcome them,
should absolutely
follow their desires.
It makes for a much
more interesting life.”

—MARTHA STEWART,
FOUNDER OF MARTHA STEWART
LIVING OMNIMEDIA

Alternatives to Full-Time Employees

The traditional full-time employee is not your only hiring option. More employers are turning to alternative arrangements, including leased employees, temporary employees, part-timers and interns. All these strategies can save you money—and headaches, too.

Leased Employees

If payroll paperwork, personnel hassles and employee manuals sound like too much work to deal with, consider an option that’s growing in popularity: employee leasing.

Employee leasing—a means of managing your human resources without all the administrative hassles—first became popular in California in the early ’80s, driven by the excessive cost of health-care benefits in the state. By combining the employees of several companies into one larger pool, employee leasing companies (also known as professional employer organizations, or PEOs) could offer business owners better rates on health-care and workers’ compensation coverage.

TIP

Motivating independent contractors can be tough. How do you make them feel like they are part of your business? Communication is key. Send regular memos or hold in-person meetings with independent contractors to let them know what’s going on in the company. Also include them in company social events, such as holiday parties and company picnics.

Today, there are more than two to three million leased employees in the United States, and the employee leasing industry is projected to continue growing at a rate of more than 20 percent each year, according to the National Association of Professional Employer Organizations (NAPEO).

But today, employee leasing firms do a lot more than just offer better health-care rates. They manage everything from compliance with state and federal regulations to payroll, unemployment insurance, W-2 forms and claims processing—saving clients time and money. Some firms have even branched out to offer “extras” such as pension and employee assistance programs.

While many business owners confuse employee leasing companies with temporary help businesses, the two organizations are quite different. Generally speaking, temporary help companies recruit employees and assign them to client businesses to help with short-term work overload or special projects on an as-needed basis, according to a spokesperson with the American Staffing Association. With leasing companies, on the other hand, a client business generally turns over all its personnel functions to an outside company, which will administer these operations and lease the employees back to the client.

According to the NAPEO, leasing services are contractual arrangements in which the leasing company is the employer of record for all or part of the client’s work force. Employment responsibilities are typically shared between the PEO and the client, allowing the client to retain essential management control over the work performed by the employees.

LOOK BEFORE YOU LEASE

How do you decide if an employee leasing company is for you? The National Association of Professional Employer Organizations (NAPEO) suggests you look for the following:

• Services that fit your human resources needs. Is the company flexible enough to work with you?

• Banking and credit references. Look for evidence that the company’s payroll taxes and insurance premiums are up-to-date. Request to see a certificate of insurance.

• Investigate the company’s administrative competence. What experience does it have?

• Understand how employees’ benefits are funded. Do they fit your workers’ needs? Find out who the third-party administrator or carrier is and whether it is licensed if your state requires this.

• Make sure the leasing company is licensed or registered if required by your state.

• Ask for client and professional references, and call them.

• Review the agreement carefully and try to get a provision that permits you to cancel at short notice—say, 30 days.

For a list of NAPEO member organizations in your area, contact the NAPEO at (703) 836-0466 or write to 707 N. Saint Asaph St., Alexandria, VA 22314, or search their directory online at napeo.org/find/members.cfm.

Meanwhile, the PEO assumes responsibility for a wide range of employer obligations and risks, among them paying and reporting wages and employment taxes out of its own accounts as well as retaining some rights to the direction and control of the leased employees. The client, on the other hand, has one primary responsibility: writing one check to the PEO to cover the payroll, taxes, benefits and admin istrative fees. The PEO does the rest.

WARNING

Be sure you understand the precise legal relationship between your business and a leasing company. Some people consider the leasing company the sole employer, effectively insulating the client from legal responsibility. Others consider the client and the leasing company joint employers, sharing legal responsibility. Have an attorney review your agreement to clarify any risks.

Who uses PEOs? According to the NAPEO, small businesses make up the primary market for leasing companies since—due to economies of scale—they typically pay higher premiums for employee benefits. If an employee hurts his or her back and files a workers’ compensation claim, it could literally threaten the small business’s existence. With another entity as the employer of record, however, these claims are no longer the small-business owner’s problem. PEOs have also been known to help business owners avoid wrongful termination suits and negligent acts in the workplace, according to an NAPEO spokesperson.

Having to comply with a multitude of employment-related statutes, which is often beyond the means of smaller businesses, is another reason PEOs are so popular with entrepreneurs. According to the NAPEO, with a leasing company, you basically get the same type of human resources department you would get if you were a Fortune 500 firm.

Before hiring a professional employer organization, be sure to shop around since not all offer the same pricing structures and services. Fees may be based on a modest percentage of payroll (2 to 8 percent) or on a per-employee basis. When comparing fees, consider what you would pay a full-time employee to handle the administrative chores the PEO will take off your hands. (For more information on what to look for, see “Look Before You Lease” on page 375).

Temporary Employees

If your business’s staffing needs are seasonal—for example, you need extra workers during the holidays or during busy production periods—then temporary employees could be the answer to your problem. If the thought of a temp brings to mind a secretary, think again. The services and skills temporary help companies offer small businesses have expanded.

Today, some companies specialize in medical services; others find their niche in professional or technical fields, supplying everything from temporary engineers, editors and accountants to computer programmers, bankers, lab support staff and even attorneys.

“Don’t look at successful
people as aberrations.
Excellence is out
there for anyone.”

—LEONARD RICCIO,
CHAIRMAN AND CEO
BARNES & NOBLE INC.

With many temporary help companies now offering specialized employees, many business owners have learned that they don’t have to settle for low skill levels or imperfect matches. Because most temporary help companies screen—and often train—their employees, entrepreneurs who choose this option stand a better chance of obtaining the quality employees they need for their business.

In addition to prescreened, pretrained individuals, temporary help companies offer entrepreneurs a slew of other benefits. For one, they help keep your overhead low. For another, they save you time and money on recruiting efforts. You don’t have to find, interview or relocate workers. Also, the cost of health and unemployment benefits, workers’ compensation insurance, profit-sharing, vacation time and other benefits doesn’t come out of your budget since many temporary help companies provide these resources to their employees.

How do you find the temporary help company that best suits your needs—from light secretarial to specialized technical support? First, look in the Yellow Pages under “Employment Contractors—Temporary Help.” Call a few and ask some questions, including:

• Do you have insurance? Look for adequate liability and workers’ compensation coverage to protect your company from a temporary worker’s claim.

• Do you check on the progress of your temporaries?

• How do you recruit your temporaries?

• How much training do you give temporaries? (According to the American Staffing Association, nearly 90 percent of the temporary work force receives free skills training of some kind.)

TEMPORARY TREATMENT

How do you make the most of your temporary workers once they’ve come on board? For one, don’t treat them any differently from your other employees. Introduce them to your full-time workers as people who are there to help you complete a project, to relieve some overtime stress, or to bring in some skills you might not have in-house.

And don’t expect temporary workers to be so well-trained that they know how to do all the little (but important) things, such as operating the copier or answering the phone. Spend some time giving them a brief overview of these things, just as you would any new employee.

One strategy for building a better relationship with your temporary workers is to plan ahead as much as possible so you can use the same temporaries for an extended period of time—say, six months. Or try to get the same temporaries back when you need help again. This way, they’ll be more productive, and you won’t have to spend time retraining them.

• What benefits do you offer your temporaries?

• Should a temporary fail to work out, does the firm offer any guarantees? Look for a firm that can provide a qualified temp right away.

• How quickly can you provide temporaries? (When you need one, you’ll usually need one right away.)

Also ask the company to provide references. Contact references and ask their opinions of the temporary help company’s quality level, reliability, reputation, service and training.

Before securing the services of a temporary help company, also consider your staffing needs. Do you need a part- or full-time temporary employee? What are your expectations? Clearly defining your needs helps the company understand and provide what you are looking for.

Defining the expected duration of your needs is also very important. While many entrepreneurs bring on a temporary worker for just that—temporary work—some may eventually find they would like to hire the worker full time. Be aware that, at this point, some temporary help firms require a negotiated fee for “stealing” the employee away from them. Defining your needs upfront can help you avoid such penalties.

e-FYI

Need to find an employee for your specific industry? Try a trade association’s website, many of which have classified sections or job boards. These sites allow you to post job listings at a low cost and receive responses from a very targeted pool of candidates.

Because a growing number of entrepreneurs purposely use temporary workers part time to get a feel for whether they should hire them full time, many temporary help companies have begun offering an option: temporary-to-full-time programs, which allow the prospective employer and employee to evaluate each other. Temporary-to-full-time programs match a temporary worker who has expressed an interest in full-time work with an employer who has like interests. The client is encouraged to make a job offer to the employee within a predetermined time period, should the match seem like a good one. According to the American Staffing Association, 74 percent of temporary workers decide to become temporary employees because it’s a way to get a full-time job.

Last, but not least, before contracting with a temporary help company, make sure it is a member of a trade association such as the American Staffing Association. This means: 1) The company has agreed to abide by a code of ethics and good practices, 2) it is in the business for the long haul—meaning it has invested in its industry by becoming a member of its trade association, and 3) it has access to up-to-date information on trends that impact its business.

Part-Time Personnel

Another way to cut overhead costs and benefits costs while gaining flexibility is by hiring part-time workers. Under current law, you are not required to provide part-timers with medical benefits.

What are the other benefits to you? By using permanent part-timers, you can get more commitment than you’d get from a temp but more flexibility than you can expect from a nine-to-fiver. In some industries, such as fast food, retail and other businesses that are open long hours, part-timers are essential to fill the odd hours during which workers are needed.

A traditional source of part-time employees is students. They typically are flexible, willing to work odd hours and do not require high wages. High school and college kids like employers who let them fit their work schedule to the changing demands of school.

Although students are ideal for many situations, there are potential drawbacks to be aware of. For one thing, a student’s academic or social demands may impinge on your scheduling needs. Some students feel that a manicure or a tennis game is reason enough to change their work schedules. You’ll need to be firm and set some standards for what is and is not acceptable.

Students are not the only part-timers in town, however. One often-overlooked source of employees is retired people. Often, seniors are looking for a way to earn some extra money or fill their days. Many of these people have years of valuable business experience that could be a boon to your company.

THE INTERN ALTERNATIVE

Some colleges encourage students to work, for a small stipend or even for free, through internship programs. Student interns trade their time and talents in exchange for learning marketable job skills. Every year, colleges match thousands of students with businesses of all sizes and types. Since they have an eye on future career prospects, the students are usually highly motivated.

Does your tiny one-person office have anything to offer an intern? Actually, small companies offer better learning experiences for interns since they typically involve a greater variety of job tasks and offer a chance to work more closely with senior employees.

Routine secretarial or “gofer” work won’t get you an intern in most cases. Colleges expect their interns to learn specialized professional skills. Hold up your end of the bargain by providing meaningful work. Can you delegate a direct-mail campaign? Have an intern help on photo shoots? Ask her to put together a client presentation?

Check with your local college or university to find out about internship programs. Usually, the school will send you an application, asking you to describe the job’s responsibilities and your needs in terms of skill level and other qualifications. Then the school will send you resumes of students it thinks could work for you.

The best part of hiring interns? If you’re lucky, you’ll find a gem who’ll stay with your company after the internship is over.

AHA!

Like the idea of part-time workers but got a full-time slot to fill? Try job sharing—a strategy in which two part-timers share the same job. Susan works Mondays, Tuesdays and Wednesday mornings; Pam takes over Wednesday afternoons, Thursdays and Fridays. To make it work, hire people who are compatible in skills and abilities, and keep lines of communication open.

Seniors offer many of the advantages of other part-time employees without the flakiness that sometimes characterizes younger workers. They typically have an excellent work ethic and can add a note of stability to your organization. If a lot of your customers are seniors, they may prefer dealing with employees their own age.

Parents of young children, too, offer a qualified pool of potential part-time workers. Many stay-at-home moms and dads would welcome the chance to get out of the house for a few hours a day. Often, these workers are highly skilled and experienced.

Finally, one employee pool many employers swear by is people with disabilities. Workers from a local shelter or nonprofit organization can excel at assembling products or packaging goods. In most cases, the charity group will work with you to oversee and provide a job coach for the employees. To find disabled workers in your area, contact the local Association of Retarded Citizens office or the Easter Seals Society.

Outsourcing Options

One buzzword you are increasingly likely to hear is “outsourcing.” Simply put, this refers to sending certain job functions outside a company instead of handling them in-house. For instance, instead of hiring an in-house bookkeeper, you might outsource the job to an independent accountant who comes in once a month or does all the work off-site.

More and more companies large and small are turning to outsourcing as a way to cut payroll and overhead costs. Done right, outsourcing can mean you never need to hire an employee at all!

How to make it work? Make sure the company or individual you use can do the job. That means getting (and checking) references. Ask former or current clients about their satisfaction. Find out what industries and what type of workload the firm or individual is used to handling. Can you expect your deadlines to be met, or will your small business’s projects get pushed aside if a bigger client has an emergency?

Make sure you feel comfortable with who will be doing the work and that you can discuss your concerns and needs openly. Ask to see samples of work if appropriate (for example, if you’re using a graphic design firm).

If your outsourcing needs are handled by an individual, you’re dealing with an independent contractor. The IRS has stringent rules regulating exactly who is and is not considered an independent contractor. The risk: If you consider a person an independent contractor and the IRS later reclassifies him or her as an employee, you could be liable for that person’s Social Security taxes and a wide range of other costs and penalties.

For more on independent contractors, see Chapter 41. If you’re still in doubt, it always pays to consult your accountant. Making a mistake in this area could cost you big.