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Adding to your team

When you first started your flower shop, it was just you, doing all the work, there was no payroll, you would take money out of the business as your cash flow allowed and at the end of the year, your accountant filed a business tax return and based on your profit, you paid self-employment taxes of 15.3%.

Now you want to add a staff member to your shop, you can hire the staff member as an independent contractor and pay them by the piece, pay them with a check and at the end of the year issue them a 1099 for tax purposes. There are risks that the member may be considered an employee and subject to payroll taxes and if working in your shop be covered by a worker’s compensation insurance policy.

Or you hire them as an employee and put them on the payroll.  Here are some things to think about;

1.Time Keeping – keeping track of the employee’s hours they worked. Most POS systems have a timeclock function or if you go to a payroll service, their system may have one. Worst case, a handwritten time slip. Be sure you are familiar with the state laws on paying employee’s pay especially when it comes to overtime. Some States calculate overtime daily, any time worked over 8 hours is overtime, other states are weekly, any hours worked over 40 hours is overtime. Non-Worked hours like Holiday, Vacation, Sick or Bereavement may not count towards the calculation of overtime, again depending on the state employment laws.

2.Paychecks – with the ever-changing tax laws, rates and compliance, a payroll service makes a lot of sense and will allow you, the owner to focus of what you do best. There are plenty of choices of payroll service providers and they offer a list of features, while nice to have, but maybe a little over-kill for a small payroll and the cost may be pricey.

As the employer, besides paying an hourly rate, you will match the employee’s deduction for FICA (Social Security) of 6.20% of the first $128,400 and Medicare of 1.45% no limit. In addition, Federal Unemployment Tax (FUTA) is 6.00% of the first $7,000, with a credit up to 5.4% paid to your State Unemployment Tax (SUTA). SUTA ranges vary from state to state as well as the tax base limit. For new employers, there may be a special rate. In Florida is rate is 2.7% on the first $7,000 and in California the rate is 3.4% on the first $7,000. Some State have other Payroll Taxes which the employer pays and Local City or County may also have payroll taxes the employer contributes to as well. An expense that is driven by payroll is Workers Compensation Insurance. You will need to get this policy from your insurance agent. The Workers Compensation code for florist is 8001 and the rate in Florida is around 5.20% before credits and or sur-charges for losses and claims.

Other factors are the additional expenses of bring an employee on to your payroll. It is not uncommon, to require drug testing which runs about $40 and you may want to run a background check on the employee to make sure there are no surprises in the past that could hurt you by employing them. A Delivery driver that delivers to pre-school and elementary schools that is a register sex offender, is not an appropriate choice for an employee. It would be worth the background check to ensure that does not happen.

Last costs associated with the employee is the benefits. Do you offer Holiday Pay, Vacation or Sick Time and Bereavement pay and are you paying anything towards health insurance? All these taxes & benefits add up to what we call “Burden”

With the Florida minimum wage being $8.25 ($1.00 higher than the Federal Minimum Wage) and California $10.50 (under 25 employee) let’s make some assumptions on the cost of one full time employee, that works 8 hours a day time 5 days a week.

   

LABOR COST - EMPLOYEE

 
   

FOR 2018

   

BASED ON FULL-TIME EMPLOYEE IN FLORIDA

     
   

PER HOUR

HOURS PER YEAR

ANNUAL COST

 

BASE RATE

 

      10.00

                    2,080

 $              20,800.00

 
           

TAXES

 

RATE

BASE

ANNUAL COST

 

FICA TAXES - SOCIAL SECURITY

6.20%

 $        128,400.00

 $                1,289.60

 

FICA TAXES - MEDICARE

 

1.45%

 $                      -  

 $                  301.60

 

FEDERAL UNEMPLOYMENT (FUTA)

6.00%

 $            7,000.00

 $                  420.00

 

FUTA CREDIT FOR SUTA

 

-3.30%

 $            7,000.00

 $                (231.00)

 

STATE UNEMPLOYMENT (SUTA

2.70%

 $            7,000.00

 $                  189.00

 

TAX BURDEN

     

 $                1,969.20

9.47%

           

WORKER COMPENSATION

5.20%

 

 $                1,081.60

5.20%

           

OTHER BENEFIT COSTS

         

HEALTH INSURANCE CONTRIBUTION

   

                        600.00

 

HOLIDAY PAY - # DAYS

5

   

                        400.00

 

VACATION PAY - #DAY

5

   

                        400.00

 

TOTAL OTHER BENEFITS

     

                    1,400.00

6.73%

           

TOTAL BURDEN

     

                    4,450.80

21.40%

           

TOTAL EMPLOYEE COST

     

             25,250.80