Owner-Operator Ramp-Up Before the First Hire

When setting aside a hiring reserve before bringing on a new field employee, you only need to save enough to cover the employee's base wages for the reserve period.

An electrical contractor is preparing to hire their first apprentice and wants to establish a hiring reserve. According to best practices, how should the contractor determine the correct amount of cash to set aside?

You are preparing to hire a new apprentice electrician at a base wage of $3,000 per month. You decide to establish a three-month hiring reserve to ensure you can cover payroll even if revenue slows down. After checking current local payroll guidance, you determine that your specific employer payroll tax obligations add an additional 12% on top of the base wages. The total cash hiring reserve you must set aside before adding this employee is $____.

An electrical contractor is planning to hire a new field employee and wants to establish a hiring reserve to ensure payroll can be covered during revenue lulls or cash-intensive jobs. Based on best practices for mitigating financial risk, arrange the steps the contractor must take to accurately calculate and secure this reserve in the correct logical order.

Evaluate the following strategies an electrical contractor might use when planning to establish a hiring reserve for a new field employee. Match each proposed strategy with the correct critical assessment of its viability.