How to pay employees?

[eboniesmith]

I was thinking of the most effective way to pay my employees.  I'm anticipating:

• Secretary
• Operators
• Locators
• Bookkeeper

I'm thinking long term.  When I begin, I'll go in this alone, with the exception of maybe one or two employees.  My goal is to become passively involved in this company as it matures.  Anyway, As far as operators - which I'll probably need sooner than later - I was thinking of compensation by independent contract.  Perhaps $10.00 per machine.  Then I thought to myself, in the event that I have a month grossing $8.50, for example.  I have a charitable donation coming off the top in addition.  I'd be in the red just paying the operator! 

Of hourly wages and commissions which do you think is the best method for the operators and locators?  What if I did a percentage of the gross sales?  For instance, they'd be compensated 20% of net sales for each machine services?  I don't know, I'm just throwing out ideas.

[alyssamma]

Ebonie, a lot depends on whether or not you want to do this "legally"...I'll assume that you do

You need to be very careful paying employees as "independent contractors". The IRS looks closely at these types of arrangements. I would definitely consult an accountant or tax attorney before doing such a thing.

The reason the IRS is concerned about this is payroll taxes. As employees, you are responsible for their payroll taxes. As contractors, you are not (they are). Ultimately, if everyone pays what they are supposed to pay, then the IRS gets their $ either way. Still, this type of arrangement can set off flags.

There are other reasons too - benefits, for example. There are ways to not pay benefits to employees by treating them as contractors.

Bottom line, the IRS has rules for when you can and cannot treat employees as contractors. Your best bet here is to consult a professional.

Also, if you are incorporated (not sure about an LLC, but I assume it will work the same way), you will need to provide the same benefits to your employees as you provide to yourself.

Lastly, here is a case where you'll definitely want insurance. If any of your employees/contractors do something, you personally could be held liable. If you have an S-Corp or LLC I *think* you'll be ok here (although you're company will be lost), but again, check with a professional. This is a kind of grey area and I would err on the side of caution and get insurance.

BTW, this type of insurance will cost you $1500+/year.

That is all of the legal stuff. As for the non-legal stuff you'll need to insure you can find employees you can trust. If they skim a few quarters here and there it will be difficult for you to catch this.

Commission probably won't matter too much to an employee. They can't control the locations, so have no way to influence their commissions. If anything it will cause strife. Employees on "bad" locations will be pissed at employees on "good" locations.

I know all of this sounds negative, so here are some positives

You can "bankroll" a potential employee. Buy/Finance a route for them and tell them they must pay you a % of what it makes (or even a flat $ amount).

This type of arrangement can be fine tuned. For example, it could include only the initial machines, or could include initial plus future machines (but maybe a lower %/rate).

Essentially here you are flipping things around. You are investing in a piece of someone else's company instead of them working for you.

If you want to be passively involved, I would say this is your best course of action.

Kevin

[antoniocinisi]

you wont need a secretary,put your cell number on your machinesand answer your own calls.

you wont need any operators either for a while anyways.

if you get to the point where you will need hired help you need to get counters for your machines, by then you`ll be able to afford them easily,and they`d pay for themselves in the long run.

pay someone a set amount to do your route?or it could be someones part time job and pay min wage.its going up a quarter for the next couple of years thanks to that moron faced govoner of ours, so min wage wont be so minimum anyways,ecspecially with the cost of goods going down.

btw how far south of chi town do you plan on expanding??:shock:

[mwinn33]

I'm just getting started too and have wondered a couple of times how many machines would I need before I needed help servicing them. I'm planning to grow slowly and may realize that a small number of machines is the way to go for me but who knows. Can someone with hundreds or thousands of machines let me know when you hired your first employee?

[Jax Snacks]

Are we talking full line, amusement or bulk? I would think that you would need to be in either full line or amusement to justify employee costs. I really don't see how anybody can have employees in a 100% bulk vending business and make a decent profit.

Product costs, equipment costs and parts costs have risen too much. It's much harder to make any kind of margin at 25 cents for candy/one inch toys and 50 cents for two inch toys. Flat and gumballs still have some decent margins. There is also too much potential for employee fraud and cash skimming with bulk. Add on employee pay, benefits, workers comp. Add on employee vehicle costs, maintenance and insurance. There is not much left after all of those employee related costs.

IMO, what worked for Rodger Foltz 15 years ago will not work today (he sold it at just the right time). Coinstart continues to close offices and cut back on bulk. I know a vendor in Jacksonville who regularly visits the dumpster at the Coinstar office and has retrieved many boxes of bulk products, stands and equipment for free - no kidding.

Also, what do you do when you have major issues with an employee? If you fire him, will he retaliate against you? After all, he knows where your locations are and also knows your key code and probably has some spare keys. What is cost of changing all of your locks every time an employee leaves?

Employees are too risky and expensive (and moody!)  for my tastes. If you just hire family members or some of your church members it may work out better.   I have over 500 heads that work for me - they don't talk back , demand overtime pay or try to unionize - I like that.  I spent too many years dealing with corporate B.S. and don't want to start dealing with personnel problems again.

Not trying to negative here. I just don't see how bulk and employees can mix and be profitable.

Jax