First helper....What or how much to pay?

[andyinchville]

HI All,

As some of you may know,  I had purchased a snack route earlier this year and have been learning

a lot from both the forum here (Thanks!) and actual hands on in the field...

I have been doing the route now for about 6 months and have even landed a few new accounts so things are going well so far (knock on wood!)....

One thing that I have thought about for some time now is getting my helper to run the route for me....Not only would this help me have a "back up person" (or in this case a main person)  but of course the only way to grow the business is to get some helpers working (I am pretty much working 12+ hour days 7 days per week so not a lot of extra time or energy to take care of other things....NOTE: The actual snack vending is only a 5 day per week job for me but the other 2 days are spent catching up on paper work from online sales (I eBay and misc administrative work for my lawn care business)...

The man I have in mind is a hard worker and has been with me for some time  (in my lawn care business)..

My  basic question is what is a fair wage to pay?......I have been paying him $100 per day doing lawn care for me.....I am thinking that this should be fine for starting out in vending? (one thing tho is that vending takes considerably more time to do than the lawn care so I am a little concerned that the 12+ hour days may take a toll on him just in terms of time spent away from home....vending is by far less physical than lawn maintenance).

What are you all paying your help?.....I had thought about doing a straight percentage or commission basis also but typically it is easier just to pay a flat amount daily (like a salary).

Thanks in advance for any and all help.

Andrew

[IVEND11]

I pay commission only the reason I do is that it seems to make them work harder for the money. I pay 9 %.that may be high or low for you or where your at but my drivers make around 900 a week after taxes and where I live the coast o living is low where I am. Just don't pay hourly that will break you 

[alyssamma]

I'm not sure what a "fair" wage would be, however, be careful paying your worker w/o paying payroll taxes. If you ever get audited (or get sued), this could cause big problems for you.

Also, if you have insurance, make sure your insurance covers your worker too.

Kevin

[mission vending]

I also have paid my past employees a nominal wage(and my current), currently $8.00 per hour. That meets the federal minimum wage requirement plus a little. On top of that 5% of everything over 5K a week that he brings in(incentive pay). If he gets a few hours overtime that's fine with me.

As a route driver he wouldn't qualify an an "exempt" employee, that is, you could not legally put him on a salary and then work him 60 hours because he is not considered management. He might agree to it for the paycheck but if you wind in a pissing contest down the road you will likely lose and be liable for claims of unpaid overtime, plus the taxes on that, plus penalties on the unpaid taxes, plus legal expenses, plus damages(get the picture?).

Alyssamma, has it correct, if you are going to have employees do it the right way, paying the payroll taxes REALLY sucks but it is the best way. Filling out all the additional paperwork also adds time to your bookeeping efforts, it's not hard it just takes some time. If you want a few pointers let me know, I'll be happy to help.

Some states have mandatory workers comp, where you are required to pay into the system. Others like here in Texas you can opt out and do without or buy your own worker's comp or other alternative insurance.

[coinvestor]

Use paychex.com it will cost about $50 a month, but they will take care of everything. Money well spent, even if just for paying yourself.

JD

[mrsar66]

Hey Andrew,

This is a little off topic, but I am looking to get into the lawn care business and have a few questions. The first having to do with price point. If I was looking to offer a 4 month lawn care service for residential customers, including one lime treatment one fertilizer treatment and about 14 cuts, how much should I charge? The second question is, how many average size yards (about ½ acre in size) would I be able to cut per week with a 3 person crew?

Please note, the reason for the 4 month lawn care service is because that’s all that is needed here in Nova Scotia, Canada.

[alyssamma]

Mission actually brought up an excellent point I forgot about. If your emps work more than 40hrs/wk, you'll need to pay them time and a half.

JD, I would recemmend investing in QuickBooks. I have 2 emps in another business and it takes me about 5min every 2 weeks to do payroll for them. Then, once per month I spend about 10min doing payroll taxes. To me, better than spending $50/mo

Kevin

[mxer518]

Mission actually brought up an excellent point I forgot about. If your emps work more than 40hrs/wk, you'll need to pay them time and a half.

JD, I would recemmend investing in QuickBooks. I have 2 emps in another business and it takes me about 5min every 2 weeks to do payroll for them. Then, once per month I spend about 10min doing payroll taxes. To me, better than spending $50/mo

Kevin

its a really good thing to have a complete understanding of how things work, outsourcing may be a decent idea once you get to me a decent size but its still a good idea to understand how things work. I am starting to get involved in more of this type of stuff and knowing what is going on is a must for me.

[mission vending]

its a really good thing to have a complete understanding of how things work, outsourcing may be a decent idea once you get to me a decent size but its still a good idea to understand how things work. I am starting to get involved in more of this type of stuff and knowing what is going on is a must for me.

The bad part is when you finally realize just how hard we have to work to be "legal" and be able to pay the tax burden that comes with that. Not that I think all taxes are bad, just the unnecessary ones.

[andyinchville]

HI Guys,

Thanks for the input so far....lots of good tips and points I had not thought about...

As far as the OT and hourly VS salary that is kind of an interesting because once upon a time (feels like eons ago), I was an assistant manager at Taco Bell...I was considered "salary" AND I was scheduled for 50 hours per week....Of course it usually ended up being more for numerous reasons (crew no shows, being busy, etc...)...I suppose it could be argued that I was a "boss" of sorts over the crew whereas a route driver has nobody to manage so they can't be salaried? OR can they in fact be salaried because they would be "managing" the route?

I do like the commission idea because it definitely makes them accountable for and want the route to make as much as possible since it would have a direct impact on their bottom line...

Good points about making sure my insurance covers the helper as well....I will call my insurance co tomorrow to let the, know my helper will soon be running the route....On the flip side I have tried to be conscious about potential liability....The have insurance for vending and the vending business is an LLC . The machines are owned by yet another LLC and leased to the company actually doing the vending.....that way in case a lawsuit exhausts the insurance n the vending co LLC they can't take the machines themselves because they are the property of a nother LLC and only leased to the other LLC.....

As far as income.....I wished I could pay my help $900 weekly after taxes!.....I should work for you!  HA.....Right now my route (altho time consuming) has only netted about $750 per week......I am hoping as time passes the net will increase (and it should because the net for the last 4 months has been low due to lots of repair expenses that should not be issues in the near future (the previous owner did not maintain anything so the Step van needed lots of work, machines needed repairs, spare validators and coin mechs needed to be sent off  so I have back ups just in case and I have actually bought 6 machines for future expansion....now that the bulk of the repairs have been taken care of and the fact that I will soon start actively searching for more and better accounts the net should be going up....Ironically and  initially my income will actually go DOWN since I will have to pay him and not just make the $$ myself....Hmmm I have to find LOTS more $$ somewhere!.

Concerning the aside regarding lawn care, we have generally priced ourselves a little below average (average depends on your area so I wouldn't be able to specifically say  $ XX for a 1/2 acre lawn....it really depends on a lot of factors such as  distance to other jobs, difficulty of the job etc...We typically charge about $30 for a lawn OR less if it is close to another job we do ...I sometimes "feel out" a person to see what they will pay (you can learn alot about a person just chatting with them and watching them.....Referrals you can generally charge more for since they are likely to go with you anyways so in short pricing kind of "just depends"   I think it is best learned by doing estimates and doing the work and soon you will get a "feel" for it......We typically offer in my opinion above average quality (I am an owner operator so I double check everything before leaving a job)  so we typically don't have difficulty in keeping a full schedule.....FWIW we mow April until mid November......I got into vending because it offered year round work of the type I am used to....i.e. going to different locations to service them....I did not want to do something where I was stuck inside all day or couldn't move around.....Vending was just the perfect match!

I think for now I will tell my helper I will continue with his current $100 per day plan....Next year I will pay him a little more for the vending (because of the additional stops I hope to have) and I will cut him in on a piece off the lawn mowing profits (since he will technically manage that  for me as well although his brother will begin doing the actual work on that).....I did plan on giving him $25 per day for each extra lawn truck I can get running if he can help me keep it all together....so theoretically he should end up with about $150 per day ($100 per day at current vending levels, $25 extra for the extra vending jobs I will get (hopefully!) this winter and $25 per day off the current truck we have running for lawn care....PLUS I told him if all works out smoothly I will start sealcoating driveways and doing other misc things and he will get a cut off me as well (I say this because HE weill be responsible for not only doing the vending but managing the other work as well....of course he won't have to manage me  HA!.....One side benefit of paying somebody well is that I hope to have him for life without problems!

Thanks and feel free to keep the ideas coming!

Andrew  

 

[JPVendCo.]

I think you could definitely do them as independent contractors. You would not necessarily have to pay them overtime either. you could offer to pay them say 400/week, they keep track of their time, anything they get over 40 hrs in a week gets "banked" which they can in turn use as vacation time down the road. people eat it up, because they build a little time in the bank and can take a few weeks off.

The only thing you have to do to make this legal is real simple. You can tell them WHAT needs to be done, but never HOW it is to be done.    

[andyinchville]

HI,

Good point about the independent contractor.....I had heard about that in my lawn care dealings with helpers and you are absolutely right about telling them what needs to be hone and leaving the how up to them....good point.

ON the topic of vacations, that is a new one for me to have to deal with....Historically, we have always worked from April 1 until November 20....with only sporadic work after that (mainly a few leaf jobs and the occasional snow work)....My help always worked straight through the season and then have off all winter long.....Matter of fact most wanted some work to do in the winter but for the most part there was none so it was basically vacation whether they liked it or not....

Of course with vending there will potentially be no breaks except maybe Thanksgiving Day , and Christmas day itself since most places we service will be closed anyways....BUT I do worry about thinking about how to plan on giving alot of time off otherwise (like suppose my help wants to take a week off to go on vacation with his family?)....I am lucky tho in that the previous 2 owners of the route before me said they would or could fill in if I needed them to (the first owner of the route works Fri, Sat, and Sunday at a "regular" job and can help all the other days and the person I bought the route from is currently unemployed so he is pretty much available until he gets a job)....I suppose in a pinch I could fill in BUT I plan on getting enough extra jobs that I too shuld be working at least 75% of my capacity (the other 25% will be spent making sure everything else is up and running right)....

Andrew

[coinvestor]

its a really good thing to have a complete understanding of how things work, outsourcing may be a decent idea once you get to me a decent size but its still a good idea to understand how things work. I am starting to get involved in more of this type of stuff and knowing what is going on is a must for me.

I use quickbooks, and have done my own payroll. Paychex documents everything for the business and for me personally and they pay all taxes for me. To me it is one of the few luxuries I give myself along with liftgate trucks for moving machines:)

[alyssamma]

As for independent contractors...you can *do* whatever you want. However, if you ever get audited, you will be in trouble. Unless these guys have their own companies (LLC, S-Corp, or even a sole prop), you must (per the IRS) treat them as employees.

JP, it is more complicated than "what" vs. "how". The IRS is pretty smart about this and doesn't let people get through loopholes on this one. Payroll taxes are the one thing the IRS will come down hard on you for. It is the one thing that they will come after *you* personally for, regardless of how your business entity is set up.

As for salaried vs. hourly, I'm not sure of the law specifics here, but I am pretty sure you can't "call" someone salaried to get around OT laws If they truly are salaried (i.e., you don't dock their pay for showing up an hour late, etc.) and their pay is based on $X/mo (or whatever time period) and not based on how many hours they work, you should be ok.

[mission vending]

As for independent contractors...you can *do* whatever you want. However, if you ever get audited, you will be in trouble. Unless these guys have their own companies (LLC, S-Corp, or even a sole prop), you must (per the IRS) treat them as employees.

JP, it is more complicated than "what" vs. "how". The IRS is pretty smart about this and doesn't let people get through loopholes on this one. Payroll taxes are the one thing the IRS will come down hard on you for. It is the one thing that they will come after *you* personally for, regardless of how your business entity is set up.

As for salaried vs. hourly, I'm not sure of the law specifics here, but I am pretty sure you can't "call" someone salaried to get around OT laws If they truly are salaried (i.e., you don't dock their pay for showing up an hour late, etc.) and their pay is based on $X/mo (or whatever time period) and not based on how many hours they work, you should be ok.

I am in agreement with alyssamma on this. There are a number of questions that must be answered negatively in order for someone to be classified as an independent contractor. Some that I recall from a conversation with my accountant, there are like 20 or 25 questions that if you get a "yes" answer he would likely be considered an employee.

1. Does the individual have an investment in the operation?

2. Is that investment at risk?

3. Can the individual work for for himself and others in the same industry?

4. Is he paid by the hour, week or month?

5. Does he make his services available to the public?

6. Is there a continuing relationship?

7. Does he furnish his own tools and equipment?

8. Is he required to wear a uniform?

9. Is he supervising other employees?

That being said, I know of many in this and other industries that do pay their workers on a contract basis. I have also seen several companies be liquidated by the IRS and or state comptroller. I've got 14 years in this business and there is no way in hell that I'm going to screw around with taxes.What happens when one of those "contract workers" gets hurt and files a worker comp claim against you? You will lose. What happens if one of those "contract workers" gets pissed at you one day and files a claim for unpaid overtime? You will lose.

As stated earlier, on payroll taxes the IRS will come after you personally and no corporate veil will protect you. You will be forced to sell everything to pay what is owed or face prison. I read somewhere that around 3000 people a year DO go to jail for this kind of stuff.

IF YOU ARE GOING TO HAVE EMPLOYEES, DO IT THE RIGHT WAY OR RISK EVERYTHING YOU HAVE!!!!

I hope my sentiments and opinion is clear.

[The Mage]

Here is an internet article about independent contractors, and tax laws:

http://www.wwwebtax.com/general/independent_contractor.htm

[JPVendCo.]

I have done it that way for 3+ years. it has many advantages. Alot of piloting jobs are paid this way.(non-airline) but even airlines are similar in a way.

If you choose this option, make sure to file the appropriate paperwork, 1099's, and explain to the contractor EXACTLY how it works. If they do not like it they will go elsewhere.

[alyssamma]

The key thing to take from Mage's article is this:

The laws surrounding the employee versus independent contractor issues are extremely complex and you should consult with a tax attorney on these issues.

Focus on the "extremely complex" part

Like Mission said, if anything happens, the IRS will come down hard on you. To me, it isn't worth it. I pay about an extra 15% (Medicare, FICA, Unemp, Worker's Comp) of the employee's salary and do maybe a total of 30min of "extra" work each month. It is money well spent. Think of it as insurance

If you *do* choose to treat people who should be emps as contractors, at least fully realize that you are doing something wrong and the consequences will be severe. By this I mean, don't think you can try and explain it away, or find some type of loophole - it won't work

Kevin

[Poplady1]

After 25 years in the vending business with lots of employees and several audits, please be sure to treat employees as employees and contractors as independent contractors.  You know the difference and when a IRS audit happens you won't be in the bathroom tossing up your cookies for hours. 

I did find with the audits that the IRS considers many employees as management.  They aren't as sticky on that point as the employee status.  So if you have one employee responsible for your route, the IRS would probably consider that as a management position on a salary or a route manager position.  To be sure, just call the IRS and ask the question.  If you get the answer that you want, ask for a letter of determination for your employees file.  They will send it and just put it in the file.

Blue Moose