There are a lot of myths when it comes to hiring employees for your business. Here are 4 truths around hiring and recruitment to help you find top talent.
There’s a common cultural story around today’s workforce is that’s comprised of three main ideas: (1) employees are showing less loyalty to their employers, (2) people are switching jobs without much consideration, and (3) Millennials can’t (or won’t) hold a job.
But data suggest this story isn’t true.
In fact, contrary to popular belief, today’s employees are holding onto jobs almost a year longer than in decades past. The median number of years that wage and salary workers have worked for their current employer is 4.2 years, up from a 20-year low in 1987 at 3.4 years.
This is true even with Millennials representing more than 50% of the workforce, upseating Gen Xers as the “majority working generation” back in 2016.
Employees are expensive to organizations. Apart from salary or hourly wages, employers cover various other costs including employers taxes, healthcare costs, and other overhead costs such as office space, hardware, and tools of the trade.
Wages and salaries only accounted for 68.3% of total employee costs, in 2018, and benefits accounted for the remaining 31.7%, across all US businesses.
But employees don’t just cost money. In addition to earning money through adding revenue potential, scaling, selling, and expanding, “hiring” in and of itself can actually give employers significant tax savings if they certain types of employees.
The Work Opportunity Tax Credit (WOTC) is a federal income tax break available to employers that hire certain “targeted groups” of people including:
If you hire one of the above listed targeted groups, your business can submit IRS Form 5884 with your federal income tax return to claim a hiring tax credit. The tax credit then becomes a part of the general business credit, which you claim by including Form 3800 with the return.
How much is the credit worth?
In most cases, the WOTC equals 40% of eligible first-year wages paid to an employee, up to a maximum of $6,000 of wages, or $2,400 per employee. But there are exceptions to the rule. This article by MarketWatch does a great job listing the groups, credits, exceptions, and processes to claim your credit.
This type of hiring can translate into major tax savings.
Which costs more: a temporary, contract worker receiving an hourly wage or a full-time salaried employee?
When hiring employees for your business, you may think you’ll save money with contractors. In some ways, full-time employees cost employers more. With W-2 designated employees, businesses are required by law to cover employer taxes, roughly a 15% markup on salary, depending on where the employee lives and organization is registered.
Sometimes hiring an independent contractor, or 1099 worker, is a more economical choice for an employer looking to get work done on a lean budget. But not always.
Contractors can adjust their hourly rates to include things like the costs of taxes, healthcare, paid leave, and monthly expenses (like equipment or office space), passing incremental costs through to employers.
Depending on how rates are calculated, how long you need help on your project, and how diverse of a scope of work you are hiring for, a contractor could end up costing your organization more than hiring a full time employee would have. Not to mention, if you scope-creep a contract worker, and he or she starts doing more “employee” type tasks, you could be at risk of IRS penalties that crackdown on employers hiring independent contractors where W-2 employee standards make more sense.
Want a more powerful calculator and workforce planning tool? Check out the powerful Excel worksheets in The Essential Employee Hiring Kit.}
While salary is an important consideration for any job applicant looking to secure a job, it’s not the only factor, and new data suggests it alone is not the most important factor.
70% of small business employees ranked “flexible work arrangements” “as important to me as my pay rate or health benefits” according to a June 2018 small business survey of 601 people employed at businesses between 1–500 employees.
Type of work is important, compensation is important, and more employees are recently proving that a flexible work arrangements policy is important, too. This could mean policies around adjustable work hours, work from home policies, or telecommuting options.
[Discover more small business benchmarks, data, and working remotely best practices in the Flexible Work Arrangements Benchmark Survey]
When hiring employees for your business, be aware of how the small details of hiring can make larger consequences: from tax implications, cost savings, IRS classifications, and retention.