Hiring Help: Hourly Or Percentage?

Business By cakeldy1 Updated 8 Jul 2008 , 11:11pm by mjcakes

cakeldy1 Posted 1 Jul 2008 , 4:20am
post #1 of 15

I am new to this forum, but I have read other topics and have been helped by them, so I am giving a shout out to other business owners on this one! Thank you for taking the time!

I have been working out of a bakery for the last 9 years and I have finally added on to my house, and have my own place to work (licensed and all!) I have never been an "employee", but have worked under my business name. I have given the store owner a percentage of my profits to "pay" for the space and the help. I would like to have my own help in my new shop, but I am concerned about paying by the hour. I have seen the help that I pay a "percentage" for, take hours to do something that I know they could do in 1/2 the time or better. I've been thinking about hiring a few people to do the work based on tasks and paying a percentage of what I believe it is worth, ie. Baking a wedding cake, making a bucket of frosting, base icing per cake., etc. They will have a deadline and flexible hours. Any thoughts? Thanks for the time!!

14 replies
cakeldy1 Posted 1 Jul 2008 , 4:23am
post #2 of 15

I wanted to add that I am currently doing about 4 wedding cakes per weekend, and my assistants are helping me produce about 30 other cakes per week. Thank you!

jessfmaldonado Posted 1 Jul 2008 , 4:26am
post #3 of 15

I say, Where are you, and I will come work for you! lol icon_lol.gif . I think percentage isn't a bad idea. I actually didn't know there were places that paid like that instead of hourly. I think it would be better for a business to run like that.

Jessica

indydebi Posted 1 Jul 2008 , 4:31am
post #4 of 15

Check with your accountant .... when we debated the options of "hiring" vs "contract help", our accountant told us there were definite rules of what constituted contract help .... and what we were going to do didn't qualify.

Same with salary vs. hourly. There are guidelines and rules to determine it. An employer just can't make someone salaried as a ploy to avoid overtime. It has to do with if the job is more productivity vs. decision making.

When you pay a percentage, you're actually paying a commission-type of salary. I've no idea if there are "rules" to govern what's a commission type of job, but I would venture a guess that it has to give the person some control in the sales THEY can earn. Hopefully, there may be some accountants on here who can clarify, as each state may have different rules.

Anyone you hire is going to get faster as they go along ... the training period takes awhile, no matter what the job. Even the high school girls who do nothing but make cookie dough balls for me .... you'd think that would be a no brainer and they could hit the ground running ..... but they started out slow and are doing much much better productivity now.

cakeldy1 Posted 1 Jul 2008 , 4:48am
post #5 of 15

Thank you for the information! I was thinking that I would plan out what I would need done earlier in the week, and then let them know what they would be paid for completing the tasks. That way I would know how much I was paying out, and they would know how much they would make. Then it wouldn't bother me so much how long it took them to complete the tasks, as long as they were finished by the deadline. Any thoughts?

indydebi Posted 1 Jul 2008 , 4:53am
post #6 of 15

check with your accountant .... that sounds like "salary". You may be ok, but you want to be sure you're within IRS rules.

AllCakedOut Posted 1 Jul 2008 , 1:23pm
post #7 of 15

Hourly for most things, percentage for someone to do outside sales, I'd say

akgirl10 Posted 1 Jul 2008 , 6:12pm
post #8 of 15

I do not run a cake business, but I have ran other businesses before, and I think for the most part hourly is the way to go. Like indydebi said, there is a learning curve, and people will get faster, but you as the employer have to set the expectations. You can also find other ways to reward productivity.

Doug Posted 1 Jul 2008 , 6:35pm
post #9 of 15
Quote:
Originally Posted by cakeldy1

Thank you for the information! I was thinking that I would plan out what I would need done earlier in the week, and then let them know what they would be paid for completing the tasks. That way I would know how much I was paying out, and they would know how much they would make. Then it wouldn't bother me so much how long it took them to complete the tasks, as long as they were finished by the deadline. Any thoughts?




that sounds like a kid mowing lawns, or paying a maid or.....any of those "I pay you by the job...."

flat fee for XYZ work not matter how fast or slow the person is.

it's also called "piece work pay"

depending upon how structured --

the person would be viewed as an independent contractor --they would offer a service for a fee and then you can accept or negotiate to mutually acceptable fee.

if you hire them as any type of employee, then you are also responsible for Federal taxes (withholding, matching on FICA & MEDI), state taxes, and also possibly workman's comp.

if you can set it up that they are an independent contractor, you are still responsible for reporting the amount paid to them to the IRS at the end of the year but not responsible for taxes -- they end up paying those as self-employed.

as independent contractor the only real control you have is too not rehire them

as employee more control, more hassle

Call in the accountant on this one.

(ah the stuff you have to know to be a) church treasurer b)formerly self-employed by IRS definition tho' working for a school)

Mike1394 Posted 1 Jul 2008 , 8:42pm
post #10 of 15

I think it would be awful hard to hire someone under those guidelines. It seems to me it would also create unrest amongst the troops. If your paying me to exclusivly decorate a cake. I'm getting X to do this. I hope you plan on emptying the garbage, wash dishes, sweep floors. I'm not taking away from my "paid" task to help do something I'm not getting paid for.

That's just a scenario. It seems like that envoirnment could be very easily come about.

Mike

cakeldy1 Posted 1 Jul 2008 , 9:08pm
post #11 of 15

Doug & Mike- Thanks! great advice! I'm torn. I plan to make it clear that each task would include start to finish, preparation and clean-up. I'm still unsure. I've also heard that it would be more of a "contract" environment like Doug mentioned. Still deciding..... Thank you!

justducky Posted 1 Jul 2008 , 9:09pm
post #12 of 15

The IRS has very strict guidleines as to who qualifies as an indepedant contractor. Check their website. The guidlines are listed there.

I agree with Mike, very good point.

mjcakes Posted 8 Jul 2008 , 8:14pm
post #13 of 15

Wow, this is great info!

I got legal in my home based kitchen a few months ago. Sales are great and at times I know I could use the help. Recently a friend approached me to hire him, on the basis that he would help me generate sales while learning the trade.

Ok, I knew that I was going to have to hire someone sometime but now I have to really think about things quickly b/c my friend is in a turning point and needs to know if he can count on me for work.

I trust him, I know he'd be great in so many areas and I could concentrate on the decorating. I'm nervous about sharing what I have built with anyone!

I average 5-12 regular cakes along with several weddings a month, so nothing huge. I know the potential to be bigger is there and I hope to tap into the corporate end.

I am now going to check with the IRS & my accountant. I really wanted to wait until I have a full year on paper, etc.

Any words of wisdom? Thanks!!!

Doug Posted 8 Jul 2008 , 8:31pm
post #14 of 15
Quote:
Originally Posted by mjcakes

Wow, this is great info!

I got legal in my home based kitchen a few months ago. Sales are great and at times I know I could use the help. Recently a friend approached me to hire him, on the basis that he would help me generate sales while learning the trade.

Ok, I knew that I was going to have to hire someone sometime but now I have to really think about things quickly b/c my friend is in a turning point and needs to know if he can count on me for work.

I trust him, I know he'd be great in so many areas and I could concentrate on the decorating. I'm nervous about sharing what I have built with anyone!

I average 5-12 regular cakes along with several weddings a month, so nothing huge. I know the potential to be bigger is there and I hope to tap into the corporate end.

I am now going to check with the IRS & my accountant. I really wanted to wait until I have a full year on paper, etc.

Any words of wisdom? Thanks!!!




very simply -- bottom line it.

sit and work out the numbers.

what rate will you pay him at ($/hr)
then what does that do in terms of your matching the FICA and MEDI and having to pay for workman's comp.
will you offer any kind of benefits?

at the rate of income you have now, can you afford to add him and still make a profit?

will his working for you increase production capacity enough that after taking out the costs of hiring him there is a substantial enough uptick in profit that the increase hassles are worth it? (after all -- some one will have to file the increased paper work, the tax forms and the tax payments -- will that be you or will you now need an accountant? if you, how will the increased time affect you ability to produce product? will his working for you more than offset that time?)

mjcakes Posted 8 Jul 2008 , 11:11pm
post #15 of 15

Doug, thanks! I needed to have all of those ideas in front of me. I get so much moral support and wisdom from this site, I love it!!!

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