self employed vs hiring employees
self employed vs hiring employees
(OP)
I started my business in structural engineering about two years ago and have been lucky enough for things to have really taken off. My client base is growing and I'm at a point now where the thought of hiring is in the very back of my head. Has anyone else out there experienced the internal conflict of self-employed vs. hiring employees? I REALLY enjoy being self-employed, working from home, and being able to spend time with my wife and daughter even when work is insanely busy; however, I wonder if hiring employees would free me up to do more of what I like to do outside of work. I love and am passionate about the work I do, but I would love to have more time to play golf and go on some hikes. Nine months out of the year, I stay busy enough right now to have enough work for almost two people; however, my first few winters (January, February, March) have slowed down to where I only had enough work for me, but I'm confident that I could go out and get a lot more work if I did hire someone. But I do understand that having an employee(s) is a complete game changer in terms of dealing with personalities and all kinds of situations that can (and probably will) come up. And I understand that times would be potentially lean in the beginning if I did decide to hire, as the cost of hiring is muuuuch more than just a salary.
What I'm looking for is advice from other business owners who have either decided to stay self employed or who have ended up hiring, and pros/cons of both sides. Any thoughts would be greatly appreciated!
What I'm looking for is advice from other business owners who have either decided to stay self employed or who have ended up hiring, and pros/cons of both sides. Any thoughts would be greatly appreciated!





RE: self employed vs hiring employees
TTFN
I can do absolutely anything. I'm an expert!
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers
RE: self employed vs hiring employees
If you decide to grow, sub contractors are the way to go. Professional employees represent a trap that can consume you. If you are doing something that requires hourly workers (e.g., product assembly, equipment maintenance, etc.) then you have no option to hiring W-4 employees. If you are employing engineers then their contract price is just a business expense without the need to provide insurance, match SSI, etc. Figure on billing the client about twice what your subs charge you.
David Simpson, PE
MuleShoe Engineering
In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist
RE: self employed vs hiring employees
RE: self employed vs hiring employees
As a person who started out self employed,I speak from experience, you get to that point where you cannot manage the work flow by yourself. At this point you have to decide, do you WANT to take on more work and hire an assistant, or do you cut back on the work level, and stay by your self ?
Look to sub contractors before you hire Employees, they are more motivated to get things done , and when they are finished they will simply bill you and wait for the next job.
Hiring an employee now means you have to set up a payroll system, deduct taxes, both state, and federal, arrange with your state for unemployment compensation insurance payments, also secure workman's compensation insurance , some but not all states will let you skip workman's comp if you have less than 3 employees. You can hire Payroll companies to take care of this for you, but figure at least a 50% overhead before you give the employee a penny.
Now having said that, the person you hire can be a goldmine, or an albatross, with your first hire you have to be exceedingly careful, because of this.
However if you choose right, you will prosper and consider putting another on the payroll.
B.E.
You are judged not by what you know, but by what you can do.
RE: self employed vs hiring employees
AND, you're no longer free to drop work and go on an extended vacation, since you need to feed your employee. My wife's a doctor, so she's not really free to on vacation at will, since she still has to pay her two MAs, while not getting any income.
TTFN
I can do absolutely anything. I'm an expert!
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers
RE: self employed vs hiring employees
If it's about money, then using employees to do more work so you can earn more money is a way to go. Doesn't sound like money's the issue for you though.
If it's about having more personal freedom, i.e. freedom to take time off etc. despite the demands of the job, then adding AN employee is unlikely to get you that. Rather, you're likely to be more chained after adding an employee, or three, than you were when you were on your own.
Subcontracting work or picking up the services of people on contract would be the 1st practical step, and might give you more freedom than having full-time employees.
RE: self employed vs hiring employees
Disclaimer, I don't own my own business or anything, but while I was growing up this has been a decent strategy for my dad (self employed handyman) - when I can get him to follow it anyway.. he has a hard time charging people more and saying No to anyone
RE: self employed vs hiring employees
In terms of raising rates, I am about to do so by the end of June...I have to with as much as E&O insurance is going up on my 2-year anniversary! With it being my first rate hike to my clients, I'm interested to see how clients respond.
RE: self employed vs hiring employees
David Simpson, PE
MuleShoe Engineering
In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist
RE: self employed vs hiring employees
As David indicates, the IRS has always looked at the autonomy of the contractor as a measure of employee-ness. Microsoft famously lost to the IRS because they labeled a bunch of their employees as "contractors," even though they had to show up to work during certain hours, and they were managed on a day-to-day basis by their ostensible managers. Therefore, much of what you might get hung up on is the actual contract and the statement of work to be performed. If their contractual obligations are solely work packages that are well-defined and do not require supervision or direction from you, that should be OK. Of course, the IRS probably won't bother with you anyway, given the low valuation of any additional tax revenue they could wring from you.
TTFN
I can do absolutely anything. I'm an expert!
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers
RE: self employed vs hiring employees
If you want to grow a business and ultimately sell it to a larger firm, don't use my model. That doesn't work. I've been approached for a buyout twice in the past 3 years. Both were conventional corporations that put employees on salary. They can't afford to pay my people what they currently make. It doesn't work in their business model.
On the other hand, if you want to make a reasonable amount of money and work with people who enjoy their work a lot more than if they were employees and also not have the administrative nightmare of payroll, insurance, vacations and other employee issues, my model works well.
I have no need to supervise anyone in my group. They are all self-motivated, understand the tasks, and can get things done without my involvement for the most part. I provide support and consultation to them as needed, but they like the fact that they are not supervised or "bossed" by anyone other than themselves (or their spouses (we have male and female team members), as is always the case, employee or contractor!
RE: self employed vs hiring employees
B.E.
You are judged not by what you know, but by what you can do.
RE: self employed vs hiring employees
I've even had clients hire me for a specified number of hours per week - example, 20 hours guaranteed while they grow and eventually decide to hire an employee. That way you can 'practice' having an employee without the real commitment.
RE: self employed vs hiring employees
In my opinion, any licensed professional engineer providing services in the US should be charge out at $125 per hour minimum....more if greater than 10 years of experience, specialized experience or certifications. Our lowest professional engineer rate is $190 per hour. Given that, if you charge your client 67% to 75% of his charge out rate, you both make good money.
RE: self employed vs hiring employees
I recently ran the numbers again.
To go full self-employed, my break even number is $95/hr if I work 40 hours a week with no vacation, sick time, downtime, overhead tasks, etc. It needs to be 40 hours per week of pure billable time.
To cover the down-time of no clients or wanting a vacation, handle overhead tasks like bookkeeping, or other non-billable tasks, $120/hr.
So my minimum will be $150/hr, which is still very cheap. When I have to bring in a consultant, the rate is between $200/hr to $400/hr.
--Scott
www.wertel.pro
RE: self employed vs hiring employees
David Simpson, PE
MuleShoe Engineering
In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist
RE: self employed vs hiring employees
I am an owner/partner in both a small Civil firm and small Surveying company. Work load is good in both and I need a drafter that I can swing into both companies. I need a person who has both civil and survey experience and I know just the right guy. Unfortunately, he works modeling for a structural concrete company right now. I tried to hire him directly into my engineering office, but could not offer quite enough for his needs. Basically, he needed an expensive health package and our provider was more expensive than the open market (Obamacare).
So, he and I have been working on setting him up as a drafting contractor. He has no business experience, but a great breadth of technical experience and a solid network. I personally have made arrangements for his office space, administration, insurance, and equipment - we are going to co-sign a small note for the start up costs. I could pay all of it in cash and he pay me back, but I am in the middle of a renovation project at home. The return is: a small piece of his company (for me personally, just a small fraction of monthly gross), precedence for my two companies over other projects he brings in, and the risk is on him to keep busy so if I cannot provide him work he does not hurt our overhead. The downside is that I will have to help with his sales and contracting for a while.
Because he is a startup, he can't workpay when paid, he needs to be paid monthly no matter if the client has not paid yet. If you are setting up your friend for a business keep the lag in pay in mind if he is going to be a contractor but needs a salary immediately.
It sounds like you are heading this direction, and I think it is the right one for both sides if you can make it work.
RE: self employed vs hiring employees
RE: self employed vs hiring employees