Friday, August 13, 2010

The CFO and the Risk of Employees

From looking at the unemployment rates it appears that businesses are starting to understand the risk in employees. This Wall Street Journal Editorial by Michael P. Fleischer, President of Bogen Communications in Ramsey, NJ identifies all you need to know with respect to the risk of employees. However if that was not enough let me add some other risks:

• What if a new hire is only a sub par performer on the job? Here you are risking all this money and the productivity isn’t even there. This employee who you interviewed multiple times and had your current employee’s interview multiple times who all giving this prospective employee rave reviews isn’t working out. Now you have to lay off this employee adding to your unemployment insurance contributions.

• The risk of rising health care costs and the latest health care plan providing much uncertainly among many business leaders and small business entrepreneurs.

• Take a look at existing employees. Can you really afford to have sub par performers?

• The risk of laying off or firing an employee is another burden of having an employee. One never knows when they layoff or fire an employee what legal action awaits. Even if you win the case you lose as you lose the legal costs to defend!

In the final analysis, subcontracting work and responsibilities has got to be a more viable option than ever before. Today’s business owner needs to take a look at this option. Subcontractors can be interchanging movable parts and if they do not work out it is easy to let them go. When you let go a sub contractor there is virtually no risk of legal action especially when compared to the risk of letting go an employee. With subcontractors there are no health costs and no benefits. Keep in mind that I am talking about Sub Contractors, not independent contractors who in the eyes of the taxing authorities could be employees in disguise. Hiring people as independent contractors could get you into a lot of trouble. Subcontractors are real businesses that can do work for you and other customers that needs to be done within your business. Independent contractors are individuals who are looking for work and really do not operate a business in their field and come and go as an employee would. For IRS distinction click here.

A reputable Part Time CFO who is a subcontractor and not an employee or independent contractor can help you assess the risk associated with your current or proposed employees. A good CFO will also help you identify, assess and mitigate other risks in your business.