I got rid of my two employees nine months ago, I am still dealing with it. I am still getting bills for Workmans Comp insurance and items from the Department of Labor nine months after having employees.

Unless you are huge and you can support them and give them 40 hours a week and benefits and can do that to the point of it being as simple as painting an apartment at turnover, it's better to stay small.

The more I learn about this business, I am seeing there are two styles at work here. There are the massive landlords with huge numbers of units and huge amounts of money that run one way and there are small timers with small numbers of units that do just fine and enjoy it that way and they run a certain way.

When you try to make that transition without understanding the difference of the two and what needs to be done and the chain of events that have to happen, you can slit your own throat.

Taking employees in the my business, with a slit my throat. Luckily it wasn't so bad that it cut my head off. I'm glad I saw how it could've ended up and ended it before it got any worse.

Now I had these guys working for me for "gas" none for years before making them employee. The employee thing was merely a formality.

What an EXPENSIVE disaster. It cost me a lot of money to be in compliance.

I really think to justify having one $10 an hour employee, they need to produce $30/ hr work.

So back to the drawing board still.

Back to doing most of it myself and subbing out the high stuff and the technical stuff.

NE, I'm not trying to pile on and "see, I told you so."

I recall your posts when you were considering this move, and that it was necessary to to get to the next level. Myself and others described the associated costs.

All it did was add Expenses. I didn't do it to necessarily grow my business, I did it more to formalize the relationship with my business to my guys. Not everybody was against it though. Sometimes you got to do things yourself in order to see it clearly.

No piling on from you, it's all good.

As far as your question regarding this move growing my business or not, these 2 employees were a test for this move.

They are my cousins and I thought if I'm going to mess this up, I'm going to be cautious and do it small.

Yes, getting employees for skilled work is difficult.

If they were cutting grass, you would still have problems but the work would at least be completed.

It is an interesting formula that is needed. Just the right amount of volume so you can support a higher paid employee.

NE,

Great post. Wisdom.

I'd love to hear what transpired. Did they quit? Let go? Not enough hours to give them?

And from the govt? Unemployment compensation?

A great example of govt stifling business.

NE, would you have these your 2 cousins or someone else do these things for you on a part time as needed basis? If so then check into using them thru a temp agency. I know a few people in my area that don't want to be hassled with all the rules, regulations & paperwork that regular employees cause. Instead they make a deal to hire them thru a temp agency. The agency becomes responsible for the taxes, the WC insurance, all of the paperwork, etc. However it means that someone you normally pay $10.00 per hour now becomes $18-25.00 per hour depending upon their classification. It's more expensive per hour than what you might pay them as a "for gas" worker and possibly even a legitimate part time employee but you only pay for the hours they work.

Steve, that's a good idea with the temp agency, but like you said, you're paying $18-$25 an hour for a $10 guy.

Brad, what happened? One went to school and the other got lazy. The one going to school worked out as a good stopping point. The one that got lazy, I kept hinting

That things were slowing down and he may want to get himself a back up plan. That worked. I expect people to work when they're on site. I expect to give them instruction on what needs done, but I won't keep around someone who I need to remind to keep busy.

As far as government and workmans Comp, those are some of the main reasons I stopped. My guys that were getting $10, now cleared $7.50, but I paid $12.50.

That was just taxes. (I paid the taxes for them in years prior when they were treated as 1099 Subs, WAY EASIER!!!!)

Then you have all the Book keeping, you have all the

Workers rights posters and crap to deal with. Had I moved To employees beyond my cousins to guys off the street, I would've had to develop an employee handbook defining expectations, breaks, what is grounds for firing. All sorts of nonsense. When I saw this stuff, I can't help but wonder why things can be so tough for people. It's designed to hold people back in a way. I don't know, that's just me. Not everybody sees it.

Plus, the workmans Comp can audit your

Books and make you pay

Workmans comps on other independent contractors that work on your jobs.

That was the straw that broke the camels back for me.

I'm not paying Comp on independents.

Rumor has it now that WC can still audit my books for a while after getting rid of employees and charge me for Subs. If that continues to happen, I will dissolve that llc and open another one.

Also, having paychex process payroll was ridiculously expensive.

Just the added work of having employees alone made me want to stop.

Interesting idea about hiring through a temp agency! Never thought of that. But there ARE jobs where we could use a temporary worker bee, not a sub-contractor.

With temp agency you pay 30bux to get a 8-9bux value worker who still only comes in temporary.

One thing about hiring subs too, is if he isn't 100% aboveboard and has guys working that aren't on the books, you as the owner/homeowner can still be sued.

If you hire a 100% legitimate sub who has employees, your paying for EVERYTHING! All the insurances, all the comp, all the taxes, etc.. Granted, it should be broken down throughout the year over different jobs, but it still makes it expensive and sometimes cost prohibitive to where you still need to do it yourself.

I always fall back to the painter that looked at painting 3 rooms for me. He wanted $600. My cousin (employee at the time) and I did it in 3 hours. I paid him $10 per hour.

I don't know what the formula should be. 1-20 units, do it all your self with minor subbing. 20-30 units, do the technical stuff, hire a broom pusher for 15-20 hours a week. Then deal with the massive book keeping and updating w-2's every time they turnover every 2-3 months. 40-50 units, keep your broom pusher and hire a 30-40 hour a week guy for all the maintenance.

I don't know the answer. The bigger you get though and the more hours you give guys, the more things will be required of you. Health insurances, etc..

If it could be made into a formula, it would probably be more of a monthly cashflow formula than a # of units formula.

How much disposable cashflow must you have to hire 1 $15/hr guy for one hour of work per week?

How much disposable cashflow must you have to hire one $30/hr guy for 1 hour of work per week. Is it $100 per week for 1 hour? I bet it's at least $50!

It's a tricky thing.

I definitely didn't get into this business to deal with this stuff. So as I said originally, I will stick with doing it myself, hiring subs and staying smaller. Just make what I have as rock solid as possible. To me, there's no shame in that.

This is normal stuff with employees and the audits for worker's comp routinely look at subs and include them as a basis for the premiums unless they have their own insurance. To avoid that, you have to make sure they have it, but most of these small guys do not. Personally, I find working with the bigger contractors more effective in some instances. First, there's no issues on the insurance and secondly, they're far more responsive. Unless it's pretty simple, I stay away from doing stuff myself. I just don't have the time.

My gut feel at least with my business is if I doubled my size to 50 units I'd need a full time handyman.

Somewhere close to 100 I'd want a book keeper/office person and probably a leasing agent of some sort.

I did the same thing several years ago. I had a good guy that I was using like a contractor. I was going to convert him to an employee as I was controlling the hours and supplying tools. I looked into the additional costs and all the paperwork including setting up accounts with various governments. Sending tax/ss payments weekly etc. All so that the "take home" pay would go down for the employee. I figured either I could do the work or I could do the paperwork. We parted ways and I have been on my own ever since.

I want to know how temporary places don't get nailed with unemployment costs. Here if they are employee for 20 days they can get unemployment for a year... How do the places that hire seasonal work for Christmas work?

Allin, you brought up an excellent point. One worthy of printing out and hanging on the wall:

Allin: they are "part time temporary" employees.

I've been a 1099 employee for 22 years. About five years ago one of my biggest clients decided that we were technically employees if you go by the letter of the law. Work the times they tell us to, using their machines, and telling us what to do.

They made us all part time temporary employees. It was a ridiculous amount of paperwork. Especially since I worked on one project that lasted only about three weeks.

I I asked my accountant about it at the time, she said that I would actually be making about 20% more since they were taking the taxes out and paying all the etc.

Now they have gone to using freelancers (and I use the term loosely) from Robert Half, which is the largest temp agency in the world.

I came back to this post because it is all so familiar, however the depressing point is that I came across these same numbers about 20 years ago.

Employer vs employee.....one takes home 8 and the other pays out 12.5. My rule of thumb went to 35% when I looked into it.

Every since those days I looked to government jobs and thought " how can they afford to pay these people...I know what it must cost " . This was before health insurance.

I have solutions, but for another post.

Meanwhile. I have some shacks which I would like to still put on line. I'm wondering if I should just slowly build them up myself. I enjoy the work and I don't really need to buy anything now. I wonder what I will do. I'm tempted to finish them myself...a simple easy going life with very high quality workmanship.

I like the words above "There are no right answers"

NE,

Thanks! Good explanation.

Other than the govt interference (blech!) it still boiled down to "good help is hard to find".

Locally the temp agencies take 33%. If I want a $10 guy I have to pay them $15. I gave it a stab but THEY could not find workers for me!

Amazingly factories, WalMart, Lowes, etc are paying LESS than $10.

Its hard to find workers for under $15 an hour in my area.

Residents can sue for minor management errors and so can employees.

Tough for an Independent Contractor to sue for a management error.