Clearly the Reagan era is over. Ideas like meritorious raises based upon performance, and free markets appear to have fallen into disfavor by many Millennials. This leaves hardworking lawyers being forced to turn to technology, rather than be left with an “entitlement mentality” employee. None the less, hiring an employee is often one of the first steps a law firm makes and sometimes there is no way around this painful necessity. Outside of the initial partners, the need for secretaries, typesetters, paralegals, and experts may be needed.
These positions can also overlap and often result in several highly skilled employees. With the state of the labor market and legal field, the better the training and background, the more you can expect to pay out to get the help. However, there are many factors to look at when you have the choice of whether to expand your payroll or not. Even the best attorneys are not always accountants or general managers, and sometimes look at only the hourly wage or salary. There can be many hidden costs or potential effects of hiring extra hands.
- Payroll Taxes, Unemployment, and Disability Coverage: All employees and employers must pay in for Medicare and Social Security coverage (Source.) The employer’s share of 7.65% up to $117,000 can be a hefty sum, especially for highly paid employees or multiple paylines. Furthermore, unemployment insurance costs the average employeer between $200 and $300. Disability insurance coverage can also cost in the middle three-digits each year and if an employee is injured, the cost could easily rise into four or five digits.
- Medical Coverage: Chances are you will offer at least rudimentary health coverage to your staff, especially if they are highly skilled. Such a plan can range, especially depending on which state you are in. If they have family coverage in a high-cost state, like California or New York, expect to be paying over ten grand each year.
- Time Off: Everyone needs days off from work. When tabulating the total time off, which can include sick days, insurance, maternity leave, you could lose a lot of efficiency every single year.
- Retirement: You probably won’t be offering a pension, but you are likely going to offer some sort of retirement package. Many times it includes a 401(k) plan, with about a two percent contribution. If you decide to match employee contributions, the costs can be even higher.
- Day to Day Expenses: Many employers like to keep an open and comfortable office. They often offer coffee, snacks, and amenities, such as additional air conditioning. All of these can add up small costs that would ordinarily slip under the radar.
With today’s rapidly changing technology, it isn’t the same case to have to bring on more workers as it was in the past. Easily outsource-able tasks can be done by remote contract-based workers rather than a warm body in an office. There are now many computer programs that can do the same actions of a secretary of thirty years past. Furthermore, smartphones, tablets, and PCs mean that just about all of your relevant information is right at your fingertips.
There will likely be a time when you simply need another perosn in the office. This primer is not meant to tell you not to hire at all, but be instructive and use the experience of other attorneys and changing times to make sure that you do so as efficiently and effectively as possible.
Michael Ehline is based in Los Angeles and is the head of the Ehline Law Firm PC. He is one of the premiere accident liability attorneys in Southern California and has built his reputation in clear eyed assessments of clients’ options. His work with the community has also assisted at risk youth and those entering the legal field. He writes to assist those entering into the field or in need of a tune-up in their own practice.
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