Advice for Small Employers Hiring in 2010

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What about small companies that are still struggling to avoid further employee layoffs. Are there alternatives they should consider?

Heverly: Employers should try to be flexible. Maybe they could consider replacing some full-time employees with independent contractors. They could even ask current employees if they would consider becoming independent contractors. The biggest downside for employees is that they wouldn't get benefits, but there are substantial upsides that many employees might be willing to trade for.

Oftentimes, for instance, the base pay is higher for a contractor because of the lack of benefits. But for someone who can get health insurance coverage from a spouse or some other source, the extra money might be significant. The other advantage for the employee is the leeway in when and where they perform their jobs.

What are the benefits to employers?

Heverly: Basically, the employer can structure his or her relationship with the individual around the work, rather than around the body. You don't have to give employees 40 hours of work or be faced with downsizing them.

Velton: Ultimately it can save the employer a tremendous amount of money, avoid layoffs, and could mean that the worker still has a job.

Aren't there serious legal and tax implications that go along with classifying people as independent contractors?

Velton: Yes, that's an issue that definitely should be examined carefully. There are serious potential consequences that can cost a tremendous amount of money in penalties if you misidentify an employee as a contractor. Different guidelines are issued by difference agencies, so you can't just use the IRS guidelines and think you're good to go. Talk to an employment attorney who is familiar not only with the national guidelines but also with different nuances in state and local jurisdictions.

What other hiring advice would you give small businesses in this economic environment?

Heverly: Don't be caught in the model of 8-to-5 if it doesn't really matter. Working from home might be an option employers should look at if they've got employees they can trust. There are some risks from wage and hour laws and workplace safety perspectives, but that's something you can overcome in many cases.

Another area is to be creative in boosting your employees' compensation bundle with benefits and perks rather than salaries. Stock options, 401(k)s, and even nontangible things, such as a subsidized cafeteria or job sharing, can help retain valued employees and attract new hires without hurting your company's bottom line.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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