Since transitioning from freelancer to small business owner, you have probably been contemplating hiring your first employee. This is an exciting event in your business’ new journey, but it can also be very daunting.
While it can be a difficult task, hiring an employee will bring new skills, perspective, and energy to your business. In turn, you can bring your business to the next level. This person will also help relieve you of some responsibilities so you can focus on the larger more revenue focused aspects. Because you are hiring this employee without a human resources team, it may be difficult to navigate the process.
This article will help walk you through hiring your first employee from start to finish.
Make Sure it is Time
First, determine if the time is right to hire your first employee. Start by keeping a list of routine tasks that need to be completed daily and weekly. This will help you define a potential role for that employee. The employee could also handle special upcoming projects that require a specific skill set. They can handle work throughout the week that needs to be completed when everything else is done like filing or organizing. If your list adds up to 20 hours per week of ongoing tasks and projects, it may be time to hire your first employee.
Prior to beginning the actual hiring process, there are a few tasks to consider including budget and legal obligations. Before posting your job, take these things into consideration.
Prepare for the Hiring Process
Determine What You Can Afford
Crunch the numbers and figure out what you can afford. When you hire an employee there are more costs than just their salary. Now that you are an employer you may be required to pay state payroll taxes, unemployment taxes and workers’ compensation taxes. Other expenses to consider are benefits, equipment, supplies and workspace necessities.
When you figure out what you can afford, you can decide what you need: a full-time, part-time or possibly a contract employee.
An independent contractor could be hired on a temporary basis until you are more comfortable financially with hiring a permanent employee. They can help with specific projects with little overhead costs. Having a permanent employee, however, you will get a stronger sense of company loyalty and long-term commitment.
Next you will want to take care of your legal obligations. Many people are intimidated by the legal aspect of things and it can get complicated. According to Indeed.com, “navigating the legal aspect of hiring a new employee simply comes down to filling out a few forms and complying with certain regulations.”
They offer the following steps that should be considered when hiring a new employee in the U.S.:
- Obtain an EIN (Employer Identification Number) from the IRS
- Register with your state’s labor department
- Sign up for your state’s new hire registration system
- Check with your state to see if you need to withhold state income tax from your new employee’s paycheck
- Obtain paperwork to withhold federal income tax from your new employee’s paycheck (Form W-4)
- Prepare Form I-9 to verify your new hire’s eligibility to work in the U.S.
- Find out if you need to purchase workers’ compensation insurance in your state; you should also check to see if you need to purchase paid family leave and/or disability insurance
- Set up a payroll system
(Note: consider speaking with a professional about quarterly and annual payroll tax return filing requirements.)
Prepare for Your Employee
Now is the time to determine the specific terms and put together documentation for the employee. Figure out the salary you will pay this employee by researching the average salary range for this job in your location. Of course, you have to keep in mind your budget as well. Establish the employee’s classification whether they will be exempt or nonexempt under the Fair Labor Standards Act (FLSA).
Look into what employee benefits you will offer and set them up. If you plan to offer health insurance, retirement plans, profit-sharing, parental leave, etc., put together a benefits package for your employee. Along with a benefits package you will want to create an employee handbook. If you have not already, establish your company’s policies and procedures. This can include employee code of conduct, health and safety policies, dress code, attendance rules, paid time off and more. Have this prepared prior to hiring your first employee.
According to the U.S. Department of Labor, an employer must maintain basic records for their employees for the length of their employment. Start by preparing an employee filing system to keep track of all of important documents, records, and forms. This will help you stay organized and keep everything in one place.
Now it is time to search for the right applicant.
Appeal to and Identify the Right Applicant
Figure out who you are looking for to get the right candidates to apply for the job. This means creating a list and converting it into a compelling job description.
Envision what your ideal candidate would look like. Write down the characteristics, skills, and qualifications you are looking for and incorporate those into the job description. This will aid you in crafting a job description that attracts the most suitable applicants for the job. Putting these qualities out there from the start will hopefully make the hiring process go more smoothly. For example, if you are looking for your first employee to be a self-starter with a growth mindset you want to identify these qualities early on. This will help you spot the best candidate right from the start.
You will also need to decide whether you will require a background check or drug test. This should be in the job description, and disclosed to candidates from the start. A lot of industries require these two elements, but as a small business this is optional.
Make sure you have a compelling job description for your post. When you are just getting started as a small business you want to stand out from your larger competitors. Write up an appealing summary of the job role and a description of what the job entails. You might even want to put that you are hiring your first employee and are excited to be expanding your business. This may help to attract candidates who enjoy or prefer to work at smaller companies.
Here is a list of elements you may want to include in your job description:
- Job title
- Brief overview of your company
- Position duties and responsibilities
- Preferred and required skills
- Working conditions (e.g., travel requirements, environment, physical demands)
- Pay range or salary
- Employee benefits (e.g., health insurance, 401K)
- Employee perks (e.g., flexible schedule, remote work)
Distinguish Your Top Candidates
Now that you have your job description posted and are receiving applicants, it is now time to identify your top candidates. Screen your candidates to determine who should move forward in the hiring process. Review the applicants resumes to find out which ones meet your basic requirements and desired skill levels. Start to conduct short phone interviews with those who do or communicate with them through email. Then move on to in-person, or in today’s environment, video interviews with those applicants who meet your needs thus far.
When interviewing, ask questions that will tell you whether the candidate has the same vision as you. Try to find out what motivates them and how well they respond in difficult situations. Make sure they possess the qualities you are looking for in an employee and someone you would like to work with.
Next you will want to check the candidate’s references. This will give you an opportunity to assess their honesty, skills and ability to do the job. You may also want to contact prior employers to speak with someone who has worked directly with your candidate. They can provide you with the most insight into whether or not this person is the right fit.
Offer Your Top Candidate the Job!
Now that you have gone through most of the hiring process and narrowed it down to your top candidate, it is time to offer them the job. Give them a call and verbally offer them the job, again setting forth the terms of the employment. If for some reason they do not accept the position it is always good to have a few runners up. If your first candidate accepts the job, congratulations!
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Disclaimer: To ensure compliance with requirements imposed by the Department of Treasury, we inform you any U.S. federal tax advice contained in this document or video is not intended for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.