start up

That’s great! You will be one of 3,190 individual’s (2015 figures, via the Kauffman Index) across the United States who is adding to a still-vibrant economy, in spite of war and recession elsewhere. In fact, entrepreneurship is actually up from 2014, by about 10 percent, so clearly some people are still hopeful about the economy, Wall Street aside.

Like many entrepreneurs, you may have to shoulder the burden of the workload by yourself for a while, with part-timers on call when things get really crazy.

Those part-timers can help you get through the sticky stuff, so go ahead and hire them. Young and strong, or older and wiser, they are an important addition to your business. If you are successful, they may even transition along with you to become permanent, full-time employees.

But there are rules, even when hiring part-time or temporary help, and you could lose your precious startup – and everything else you own – if you are not careful to follow them.

What Defines Part-Time

You do. Not the government, and not some anonymous management company, but you. The Fair Labor Standards Act (FLSA) applies whether your new employee works 14 hours, or 30 hours. However, U.S. Bureau of Labor Statistics describes “part-time” as working one to 34 hours per week, so that is a good guideline.

Mandatory Benefits

What are you required to offer, or pay? Mandatory benefits include workers’ compensation and Social Security – or a short-term benefits package for disability, depending on your state. You are required to pay minimum wage in most cases. This is equivalent to $7.25 per hour.

Starting out, you may want to keep it simple and hope that your employees are healthy and capable. On the other hand, a small, simple, very carefully crafted benefits package may be just the incentive your new employees need to work just that much harder to help you succeed.

Health Insurance

Don’t forget the Affordable Care Act (ACA, or Obamacare) for health insurance. Again, depending on your status as an employer, etc., you may not have to offer anything to those working less than 20 hours a week, but your insurer can advise you and help you plan for an acceptable minimum of coverage – perhaps with employee participation.   

The law says you must pay for health insurance if you have 50 full-time employees or more. This is the 2016 threshold. This means you either offer health insurance, or pay a tax penalty. You can get around this by cutting hours, or dividing your company into two parts (e.g., manufacturing and sales), and some larger firms are doing just that, but that’s kind of a shabby way to meet the letter of the law while ignoring the intent.

If your employees are seasonal – if, for example, you build sailboats, but only in the summer – you are required to offer health benefits to employees if there are more than 50 of them, and they work for a consecutive 120 days (4 months) in a row.

Whatever you do, remember that any health insurance you offer must meet the guidelines of “affordability”. That is, it must not exceed 9.56 percent of your employee’s combined household income.

There is a caveat, of course. Since you, the employer, are unlikely to know what your employee’s combined household income is, you can take advantage of any one of three “safe harbor” stances. These are:

1. The amount of wages on the W-2 form
2. The rate of pay, typically calculated at 130 hours per month or more times the hourly wage
3. The Federal poverty line, or FPL, takes the position that the coverage is affordable if your employee’s contribution is not greater than 9.5 percent of the FPL for a single individual during the calendar year.

Best Advice

Good employees are a treasure beyond gold. Learn to spot them, and reward them, outside of mandatory state and federal employment guidelines. For example, that Thanksgiving turkey or Christmas bonus may mean more in the long run than all the niggling little attempts you make to stay precisely within the law.