It Costs To Have Pet Sitting Employees: Payroll Taxes

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One of the first objections I hear when talking about employees is “They cost a lot.”

I was even one of those people at one time. But guess what?

Having a business costs money, and you have to spend money to make money.

In a world where everyone is sue happy and the government is teaming up with the states and coming after businesses who misclassify workers because they need money, do employees actually cost money or do they save you money and your sanity?

Stay with me here… we are about to go on a journey.

Have you ever thought about these situations?

{I’m sure you have!}

  1. You have an independent contractor, and they are bit by a dog. What do you do? Would that once incident put you out of business?

2. You want to know that things are going to be done a certain way and you can tell your clients that things will be done exactly they way they told you. How can you tell a client this would be the case? You might run your business 100% the right way with IC’s, but then the government comes along and wants to challenge you. So you start running your mouth explaining what you are doing, say one wrong thing and BOOM they

3.  You are audited and the agency keeps pressing you that you have misclassified your workers. They can site a number of reasons, but your pet sitter not providing their own dog bowl at each gig wasn’t one that ever crossed your mind. You are found in the wrong and you need to switch.

{This actually happened to a business in Tx. Listen to the story here}

There are many other scenarios too. Basically, with employees you are paying for everything up front. You are mitigating the risk and (for some) being able to sleep at night.

Payroll taxes are what every business should factor into the cost of doing business. So rather than pay your IC 50-70%, you pay them 32-35% and taxes and yearly raises will add onto that. Most pet sitters are paying their ICs way too much anyways.

So for those of you who want to know the breakdown of payroll taxes are, here it is. Straight from the payroll companies mouth. Please note: these are AZ percentages. You would have to check with your state for specific information:

7.65% of gross wages FICA taxes- ALL YEAR

2.00% of gross wages AZ State Unemployment Tax (ONLY DUE ON THE FIRST $7,000 EACH EMPLOYEE MAKES, then the tax goes away for the rest of that calendar year)

0.8% of gross wages Federal Unemployment Tax (ONLY DUE ON THE FIRST $7,000 EACH EMPLOYEE MAKES, then the tax goes away for the rest of that calendar year)

2-5% of every hundred dollars of gross wages for Workers’ Compensation coverage (this changes from state to state.)

 

Does It Really COST More To Have Employees?

The answer really is, it all depends on what you are currently paying them. I know many companies that start out paying their ICs from their heart. This means, usually, it isn’t backed up my mathematics and usually a very high percentage. I know others who started out with more realistic labor costs. So it depends on which end of the spectrum you are on.

I want to take a moment to tell you that NO WHERE in the pet industry will you find  more written, researched, and interviewed about employees in our industry. I want you to go ahead and click on the employee tab at the top of this page to see exactly what I am talking about. There, you will find all the articles I have written, podcasts I have recorded, and interviews I have done. I have interviewed many pet sitters who were audited by many different agencies. I have interviewed insurance agents, pet sitting business owners whose staff were bit in the face by a dog, and the list goes on.

Please join me in my facebook group to learn more. I have dedicated that past 5 years to this subject and I would love to answer any questions you may have!

– Bella

 

 

 

 

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5 replies
  1. Kelly Hall
    Kelly Hall says:

    Hi Bella! I have been closely following your posts/articles about IC vs. employee. Employee definitely sounds like the way to go but I don’t know if I can afford it. I just raised my rates to $17 visit Jan 2014 (I know…) We don’t live in a particularly affluent area (median household income for Medford, OR latest figure $44,810). The minimum wage in Oregon is $9.10/HOUR. Do I have to pay employee for travel time to/from client’s homes? My client area is a 10 mile radius from where I live, so it can take awhile driving. I know every job I have had, I got paid for travel time that was not regular commute to/from the office. I also have to pay a bookkeeper and would have to pay someone to do payroll as I do not have those skills. Your thoughts?

    Reply
    • Bella Vasta
      Bella Vasta says:

      Hi Kelly,

      First, I am so sorry it has taken 2 years to respond. I just realized it was here when Kat commented on it.
      For travel time, that is up to the states. So it is best to call your Department of Labor. For example, in Az we don’t have to, but Cali does. Travel time doesn’t include the time from the sitters house to the first stop and from the last stop, back to their house.

      Hope that helps!
      Bella 🙂

      Reply
  2. Xanthe
    Xanthe says:

    Read several of your posts about ICs and employees. I agree with you that employees is the less risky option. Paying per job isn’t legal in some places (have to pay for time at pet sit plus time between plus mileage plus superannuation) and the minimum wage is much higher in Australia and New Zealand compared to the US. Your recommended percentages – is that including mileage? Many pet sitters I’ve talked to pay 50-70% whether ICs or employees.

    Reply
    • Bella Vasta
      Bella Vasta says:

      HI there!

      Well, to be honest, I am not sure of the economics in NZ. You can talk to pet sitters that pay that… but then ask how big is their pay check, how much money do they have in the business bank account, and how much money they are saving. Those percentages are unhealthy for a pet sitting business.

      Yes, that would include the mileage. 🙂 I have an entire guide written and on audio about pricing… have you seen that? 🙂 http://jumpconsulting.net/pricing-guide/

      -Bella

      Reply

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  1. […] Were you wondering what exactly the breakdown is of the cost in the paychecks? I interviewed Alexia from Payroll Experts (an incredible payroll company that I highly recommend) and here is the breakdown. […]

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