As a part of my "People + Paychecks" series, today, we're getting up close and personal with the heartbeat of your business – your amazing people. As business owners, you've got three avenues for bringing in support: employees, consultants, and subcontractors. Let's break down who's who and how to budget for them.
Meet the backbone of your organization! Employees are the ones who get a fixed wage or salary, no matter what the sales or income. Budget for these rockstars in your Indirect Costs under Team + Personnel – but don't forget to dial in on the extras such as payroll deductions, vacation pay, WCB and the perks that make your team feel like family.
Think of consultants as your business's temporary superheroes – no capes, just expertise. They're the marketing whizzes, virtual assistants, and business coaches who offer up specific business expertise and invoice you for their work. Budget for these individuals in your Indirect Costs - likely under Space + Operating or Sales + Marketing, taking into account the project scope, deliverables and timeframes.
Now, subcontractors are specialists on a mission, here to complete specific tasks necessary to delivering your products or services. Budget for these taskmasters in your Direct Costs, because their work is directly linked to the magic your business delivers. Don't forget to factor in any travel, per diems, material costs, and required taxes that come with the territory.
If you're a Canadian business owner, the CRA has very specific criteria in place to determine if your recruits are employees or consultants. Check out CRA'S guidelines; they're the golden rule.
THE BOTTOM LINE IS THIS...
Know who you need to recruit, for what purpose and budget accordingly. Understand the subtle differences between Employees, Consultants and Subcontractors, and check in with CRA or IRS guidelines to avoid any costly retroactive payroll deductions.
ABOUT TAUNYA WOODS RICHARDSON
Taunya is well-known for her straight-shooting, bottom-line-building approach to founder finance. As the Founder of Nail The Numbers, she brings 30+ years of experience in entrepreneurship, finance, and neuroeconomics to our mission of strengthening the minds and bottom lines of Founders across North America.