Are you looking to hire an employee for your business? Here are some questions to ask yourself:
1. Should I hire an employee or bring in an Independent Contractor?
2. Do I need workers compensation insurance?
3. Do I need EPLI (Employment Practices Liability) coverage?
4. Do I need an employee handbook?
5. What steps should I take before hiring an employee?
In this article I will briefly discuss the questions posed above, and future articles will cover each one in more depth.
1. Should I hire an employee or bring in an Independent Contractor?
If you want to hire a 9-5 person with specific tasks assigned to that employee on a day to day basis, you are most likely hiring an employee and not an independent contractor. Even if you call someone an independent contractor (and even if you have entered into an independent contractor agreement with that person or company), they will still likely be considered an employee and not an independent contractor if you maintain certain levels of control over that person.
The IRS has specific tests to determine one’s status. To be continued….
2. Do I need workers compensation insurance?
Here is the short answer: California law requires any employers with one or more employees to carry workers’ compensation insurance. If you are sole owner(s) of a company, coverage is generally optional (there are some exceptions – for example: If you are a roofer, you are still required to maintain workers’ compensation insurance even if you don’t have any employees).
Look for future articles discussing how to get insurance, including self-insurance.
3. Do I need EPLI (Employment Practices Liability Insurance) coverage?
Keep in mind that most comprehensive general liability policies specifically exclude employment-related claims such as sexual harassment, wrongful termination, and discrimination. EPLI insures, to an extent, the company from employment-related claims. My first guest author – coming soon – will write about EPLI.
4. Do I need an employee handbook?
If you do not have any employees, the answer is almost always no. For everyone else, the answer is almost always yes. Even the smallest company can benefit from an employee handbook. A well drafted employee handbook:
• Can help streamline a company’s organization;
• Assists the company in managing its workers and its supervisors;
• Provides an additional layer of protection to help prevent lawsuits.
An employee handbook should discuss company policies, requirements, and what is expected of its employees.
5. What steps should I take before hiring an employee?
First, remember the golden rule: hire slowly. Rushing into a hire can have long term ramifications. Not only could a bad employee ruin relations with existing customers, but it can lead to expensive and time consuming litigation.
Before hiring, consider a reliable background check. Conduct interviews with relevant parties present (such as the prospective employee’s future supervisor).
Next, ask the right questions. Some of the questions can and cannot ask a prospective employee will be discussed in a future article.