Hello and welcome to episode 141 of Design Curious Podcast.
I'm your host and mentor, Rebecca Ward.
Today on the podcast, we are talking about hiring people,
whether you want to hire someone as an employee versus an
independent contractor. There are pros and cons to each
and there are definitely some rules and regulations around
them. And I definitely have an opinion
in one way or another what I recommend.
So you're going to have to listen in and find out what I
have to say about it. And before we get to that, I
want to remind you that we're going to do the Launch Your
Business boot camp for July and August.
You can sign up right now. It's open and you actually can
have some pre work to get you up and running before our course
really starts. So check that out.
Links in the show notes. Now let's talk about hiring.
You're now listening to Design Curious, a place where you,
creative one, are here to learn about what it really is like to
be an interior designer. And I'm your host and mentor,
Rebecca Ward. If you're worried about how to
succeed in a creative career, if you're ready to learn your next
steps to become an interior designer, and if you want the
satisfaction of doing something you love every day, you are in
the right place. Grab a coffee, a notebook, and
let's dig into today's episode. So part of the growth of owning
a business might be that you need to take on someone else to
help you with the business. You might have more work than
you can handle. And growth is good.
You don't always have to grow, but if you'd like to opt in, its
way to make more income and to serve more clients.
And so you will likely want to get some help.
Now, the easiest way to hire somebody is to hire them as an
independent contractor, if that is something that is available
to you in your state. We'll touch on that later.
The legal side of it, but from personal experience have also
gone through hiring people versus independent contractors
and then as employees. And the thought of having an
employee is very scary to a lot of people and they just bypass
it all together and never even consider having an employee or
setting their business up so it can have employees as opposed to
just having independent contractors.
Today we're going to reframe that fear and show how hiring
employees and not just independent contractors can be a
smart and sustainable move for your business.
So let's talk about some of the fears that come up when someone
says, oh, do you have an employee or are you thinking
about hiring an employee? Some of the con fears are it's
too expensive because there are additional things you have to
provide when you are an employer.
There are certain requirements by the labor law in your state,
and you know you're paying part of their taxes as well, and you
might be required to provide some healthcare and maybe
retirement, but those are all added expenses in the overhead.
You might have a fear about how to manage someone.
Maybe you've never managed a person before, never been a
supervisor or in that type of position.
And so trying to manage someone and delegate is definitely a
skill to learn and to develop. If you have an employee, you
have a contract with them, you're committed to having them
on your team, whether it is for a year or maybe 10 years.
And so it might seem like a huge commitment.
Maybe you're afraid of commitment.
And another fear could be, what if it slows me down or creates
more work, having someone alongside me in the business
where I have to stop and explain everything or they make mistakes
and I have to correct them or pay for them.
And there's a myth that the ease of having an independent
contractor is better and that it's low risk.
But usually low risk gives lower reward than higher risk.
And it's usually you want an independent contractor as a
short term solution that maybe creates long term instability.
If you were to keep it on for very long as an independent
contractor, there's less commitment by the contractor to
you. Even if you have a contract in
place, there's less things that you can require of them if
you're doing everything correctly and legally.
So let's talk about my journey into hiring people.
So when I had my business growing, I decided I needed some
help. And my first couple of hires who
weren't hires were people who were interns at the local
college that I went to, Sacrament State.
As a part of their program, they are required to have an
internship, preferably with a designer who has passed the
NCIDQ. And so I qualified for that.
I made my business available to the college.
And I was like, yeah, I love mentoring people.
So I'd love to have an intern on kind of show them the ropes.
And then in turn, they get credit for working for me.
So I didn't have to pay them by state law and I didn't feel like
I could afford it at the time. And so I didn't pay my interns.
It was nice to have the help, but there was a lot of hand
holding that had to be done and it took extra time for a lot of
things. And so I felt like it was a
balance of them getting experience and me getting a
little bit of help. So I had several interns for a
few years. I had also a good colleague
friend who was wanting to learn under me and so I would have her
a few hours here and there and I pay her.
She had her own business and so she was like an independent
contractor. Then I needed some more regular
part time help. Designer let me know that
someone who had reached out to her was looking for part time
work, and this person had actually applied to be an intern
before, but it didn't work out because she ended up getting an
internship somewhere else before I could take her on.
Anyway, I decided to have her come on as an independent
contractor part time. At that time, here in the state
of California, it was still OK to hire her as an independent
contractor. I'll get into that a little bit
later, but while she was working for me.
So she worked part time for a couple years before she got to a
place where she needed to come on full time.
Before we got there though, my business had grown quite a bit.
My CPA recommended I was the sole proprietor and I didn't
have an LLC or anything. So he recommended I was getting
enough income that I should set my business up as an S Corp,
which is what I did. I switched over to an S Corp.
And when you're a corporation then you are an employee of your
business. Even if you have no others
employees. You as the business owner are an
employee of your corporation and so you have to set up payroll
and all those things. So I did that.
My bookkeeper helped me, who is an independent contractor.
My first hire actually, I didn't mention was the bookkeeper.
Keep my books sorted and she'd do like 10 hours a month or
something like that as needed anyway.
So she helped me set up my payroll and all that.
She's still doing my payroll to this day.
It's been great to have her along this journey, but once my
company was set up in that fashion, having one employee to
two employees on the business end of it was not a big deal to
change. And so when my part time person
needed to go on full time, I decided, yeah, I'll hire you as
an employee and we'll move forward in that way.
So I think for me, what really helped get me over the fear of
hiring an employee was actually setting my company up correctly
as a corporation where I had to have payroll.
And there's a whole slew of reasons why you should set your
company up in this way, different corporation styles
that you can set it up as. But really having this kind of
official separation and not being a sole proprietor helps
you to see your business in a more legitimate way.
And being an employee of yourself is great, especially if
you're going to go buy a house or buy a car and you need to
have that credit. You have AW 2 that you can show
you no longer just self-employed, which a lot of
creditors don't see as regular income.
Having AW two really can change things for you.
And also that means that you have to meet payroll every month
or every two weeks. It really encourages you to make
sure that you're bringing in the money to pay yourself.
Some sole proprietors who don't have that company set up this
way end up not paying themselves.
The money goes back into the company and they never pull any
money out, which is a terrible way to live because you're not
getting any of the benefits of working so hard.
So what changed for me once I had the business was that I had
a committed employee who was committed to me, but also I was
committed to them. I was helping to build this
person's life. They were relying on me for
income, and I was a big part of that.
And it really gave me a sense of purpose and fulfillment to have
an employee. It allowed me to scale up, take
on more projects because she was working more hours.
And it gave me more freedom of time as well because we were
both having regular paychecks, a certain number of hours for her
as an independent contractor that she was relying on, which
is not always guaranteed. But I knew that she was getting
regular income and I was getting regular income.
Now, to be honest, going back, I was still learning how to run a
business well at that time, and I was still working on my money
mindset. It was a process.
And when I did have my first employee, I was scared and I
started out paying her more. And then I was paying myself.
I wasn't sure that the company could support both of us.
And so I said, this is the salary I'm giving you, but I'm
going to pay myself less because I just don't know if I can
commit to that. And it took me a couple years to
really figure out like, oh, hey, we can make this work.
I need to be paying myself more even for my husband to see my
business legitimately, that he saw a paycheck coming in every
two weeks. It was just helpful for him
because he's more of a person that looks at the facts when I
talk about the potential income, profit of shareholder
distributions and things like that, He's like what's in the
paycheck? And so for him, it was helpful.
So it helped our marriage. It helped all the things to set
up the business its way and to have employees.
OK, so that's my story into it, as well as the fumbles and faux
pas I did. So hopefully you're not going to
go through that, but I am definitely understanding all the
fears that you have when it comes to hiring.
Personal opinion is that I think that women are more likely to
hire independent contractors than employees because it seems
like a higher risk. And we like to play it safe
often. But I think that this is part of
our responsibility to the next generation is to show us having
sustainable businesses and being women.
Hiring women and empowering them by paying them well is just
going to elevate the whole industry.
Are you dreaming of launching your own interior design
business but feeling totally overwhelmed by where to start?
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Each week I guide you step by step through setting up your
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If you're ready to finally turn your passion into real,
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itself, so let's do this together.
So why is hiring employees better than an independent
contractor? Well, you have a lot of loyalty
and consistency. You can create a culture for
your business much easier when you have someone else on board
helping you and there's more than one person working there.
They can help you with branding. Of course you have employee
contracts so it's set up so that you own all of the designs that
they come up with and you can have a non compete clause in
there if needed. I've heard some bad stories as
well where a designer would take on clients secretly on the side
and basically took her employer's clients away from her
and started her own business. It was very unethical.
There are laws in place that can help.
You can put it into the contract where it can protect the
employer with their clients. Because part of the value of
your business, if you want to talk long term and succession
planning is the clients that are with the firm.
Your systems, practices and The Client List all belongs to the
firm and it's part of the value of the firm as well as the
designs that are being created. And so you definitely want to
talk to an attorney when you're setting up your contract for
your employees to make sure that you have it set in place where
it protects both of you long term savings and return on
investment. So overall, you're going to be
paying the employee probably less than what you'd pay them as
an independent contractor. Independent contractors should
be charging more because they have to pay for all of their
employment tax, whereas you're paying for part of it as an
employer. So that usually gives them a
lower hourly rate, but a more consistent number of hours.
Whereas independent contractors take all the risk of not having
any work. The person that they're working
with could at any moment say, OK, we don't have any work for
you this month, and then they have no income that month.
One of the best advantages though, of having an employee is
that you have control over their schedule.
Because an independent contractor, you can ask them to
meet a deadline, but they are not required to.
You can't dictate what hours they're working, and you're kind
of at their mercy. So you want to make an employee,
you can make sure the quality of their work is up to date and you
can manage their work load a lot better.
Because an intermittent contractor is supposed to also
have other clients besides you. You don't know how much work
they're doing for another designer.
Maybe you might be overloading them, they might be taking on
more than they should, and then they're falling behind.
All of that kind of gets mitigated once you hire them as
an employee because you know everything that they're working
and you have control over their hours, which should be normal
hours, 9:00 to 5:00, so that they have balance and that they
can also check out the end of the day.
I think that being an employee over an independent contractor
is nice because they have restricted hours in the day.
Independent contractors working for themselves might need to
make some more money this month. So they're working 12 hour days
or 14 hour days. I mean really that's not a
healthy balance. And so knowing that you're the
person who's working for you is only working from 9:00 to 5:00
that they are able to check out when they go home.
It is better for them as well. And I've touched a little bit on
the legal side of independent contractor versus employee here
in California over the past five years or so.
There was a Assembly Bill 5 that came through that kind of
changed the test for an independent contractor.
My husband happens to be an employment and labor attorney
and he's right now practicing as a subject matter expert for
California Chamber of Commerce, and so he is in this subject all
day long. Before the requirements were
just that. The test was that they had to
have their own business and that they had to have other sources
of income besides yours in order to be an independent contractor.
So they had to have multiple clients.
The law here in California made it more stringent.
The focus of that was to protect the workers, the employees, to
make sure that they are not being taken advantage of, that
they have good working condition, all of that.
The truth is that most designers who are hiring another designer
to help them design, they cannot be independent contractors.
They have to be employees if they are doing the core business
of work or this in the same line of work that is your business.
I can have an independent contractor who is a bookkeeper
because I don't have a bookkeeping business.
If you have questions on it, if you're in California, you can DM
me or let me know if you'd like. Maybe I could interview my
husband to talk about this subject matter if it you're
curious about it. Understanding the law.
I really like to be in compliance with my state and
federal rules. I know that a lot of California
designers are in compliance in this way because most of them
that I know are hurrying designers as independent
contractors. They could be found out of
compliance if the state were to come and check on them.
So it's better to play by the rules is what I think in this
situation. So let me know if that's a
subject that you'd like me to delve deeper into.
But for the most part, I am on board with having employees over
independent contractors. And in order to get there, you
just need to work on your mindset shift.
You're going from sphere to strategy.
Because if you are wanting your business to grow or be
sustainable, having employees who have your back and are on
your team that you can rely on is the best way to do it.
It's an investment in your company.
It's not necessarily a risk. You learn something even if the
employee doesn't work out because you need to definitely
put some parameters around who you're hiring and take your time
hiring well. But once they're in there,
they're investing into your company and making it even
better than you would have on your own.
You're not just giving someone a job, you're building a business
that can support others and grow beyond you.
A lot of designers don't think about succession planning, but
we should. There are ways that you can sell
your design business. It doesn't have to die once you
decide to retire. So having employees who can
carry the torture business owner who wants to take on your design
company, that's a big part of it.
And then I want you guys to be thinking like CEO's, not
freelancers. Part of having a mature business
is. Being able to think like ACEO
and make some slightly scary decision, maybe slightly risky
decisions, but that's how you get over the line where you're
bumping up against. So you can't grow up beyond a
certain point because you're not hiring anyone to help you.
Who knows, you might have so much more enjoyment managing
people than you thought you would.
So start with a part time employee.
You can have employees who are part time as well.
If your business is set up for you to be an employee, hiring
someone else part time is not a problem.
Usually there's less restrictions as well.
I know in California like under 5 employees has different roles
than over 5 as far as the benefits that you're providing
to them. And then a part time employee is
often limited to the benefits they receive as well.
So if you just want to baby step into it, a part time employee is
a great way to do that. And then talk to your
accountant, your bookkeeper about setting up payroll if
that's scary for you. You don't necessarily have to do
it yourself. You can hire that part out.
Talk to them about other requirements that you might have
that you need to provide in your state.
I just know my own state and stories that I hear from other
people. And then the roles that you
might want to hire first to start with, often an assistant
designer or an office admin. An assistant designer is nice
because those are billable hours that you can have added on
office admin. Some of those tasks are
billable, but some are just getting off your plate so that
you can do ours. And so both of those areas are
great places to have an employee in.
And you're not alone in this. So reach out to me if this is
something that is scary to you and you need a little more
encouragement, we can talk about it in my Design Mentor.
So the key takeaways I want you to have are to not let fear get
in the way of your growth. Basically, having an employee is
a great thing. It can be very rewarding.
And I certainly have loved having employees.
I love developing my company culture, I love investing in
them, in their growth, and having my mission statement and
our core values that we work on together.
It really helps defy us and it helps me enjoy my job and my
career so much more having someone else alongside me.
Hopefully that takes some of the fear around the idea of having
an employee. So there you have it, my
opinions on employees versus independent contractors.
I obviously have an opinion of that.
And as you heard the ad during the episode, this is a great
opportunity to start your business.
We talked about this as well in Launch your business boot camp.
We are going to be able to set you up as a corporation and make
sure that you have that pathway that is so easy to make your
first hire because you've gone through all the right steps to
get there. You've talked to experts along
the way and I've been holding your hand to get there.
So lunch or business boot camp is going to be great for some of
you this summer. Space is limited, so I want you
to get in. You can sign up right now.
It's open and you actually can have some pre work.
You can start going in my Design Mentor platform to get you up
and running before our course really starts, so check that
out. Links in the show notes as well
as a lot of great free downloads and other things for you.
So that's all I have for you this week.
Next week I'll have another great episode and until then,
stay creative. Thanks for listening.
If you love this episode, please leave a rating and a review.
This helps me reach other curious creatives like you.
If you have a topic request or would like to contact me, simply
head over to my website arworddesign.com or e-mail me at
podcast@arworddesign.com.