As I mentioned in a previous post, two New York State Department of Labor auditors stopped by my office recently. They came, they said, in order to determine whether I properly paid unemployment insurance. I suspect many small business owners could benefit from my experience.

I’ve hired one single employee for 14 months during my four years in business as an alternative source of credit to small businesses and consumers. But the auditors decided it would be a good use of state resources to check into whether they got paid their lump of flesh for unemployment insurance. (Oh, and by the way: they did.) Cedarcrest is a one-person operation, and hosting two auditors for a day puts a total stop to all business. (There’s no human resources department to send them to, for one thing.)

Leaving no good deed unpunished, the auditors informed me that I will owe unemployment insurance taxes for a few college students I hired for odd jobs over the last four years--even though my one full-time employee had been taken care of.

There’s a message in here for small business owners who hire people part-time--or just hire anyone for that matter.

As the head auditor read to me from his rule-book, I realized there’s probably a lot of small employers out there who do not know who qualifies for unemployment insurance. The list, at least in New York, is extremely inclusive, encompassing basically anyone who does any work for you—however temporary or clerical in nature—who is not incorporated as a separate business.

The college senior who spent 15 hours filing papers for me three years ago? Yup, gotta pay extra for him. The friend who I sent to take pictures of a property Cedarcrest lent money on two years ago? A total of ten hours for the project? Absolutely, they informed me. Unemployment insurance is due.

I’m reminded too that while there’s a lot of debate about the minimum wage laws raising the cost of hiring, the greater regulatory and government cost of employing others comes from Social Security, Medicaid, and unemployment insurance costs.

Anyway, gotta go. I think that’s Ben calling me on my other phone (you know Ben, right? chairs the Fed, nice guy). He’s pushing through legislation to shore up federal support for Cedarcrest.