Quick Guide to Hiring Your First Employee

So you started a business and you’re doing great, but you’ve hit a productivity wall.  It’s coming down to either getting help or burning out and keeping your business at its current level.

Except, you’re a small business and have no idea where to start.  Read on as I show you the process – from determining exactly who you need, how to lure them to your small business or startup, and through filing taxes on your successful candidate.

Determine Who You Need to Find

Before a business owner starts brainstorming all of the possibilities on what they would like to have someone do, it’s imperative, especially for your first employees, to only hire talent that is needed to either get your product or service to the public, or increase its ability to be.  Others can always be hired later when it’s known what works.  Your business needs to remain competitive and prosper through the transition and beyond.  Some things to consider, then:

  • Who is needed for a business to grow will depend largely on the specific company, industry, location, and the existing skills of the company’s founder(s).
  • Don’t overkill qualifications – although it might sound amazing to require a Master’s degree in something, that person is likely going to be used to corporate rules and boundaries.  As a smaller business, it’s a better idea to sacrifice some on qualifications in favor of someone who is versatile, and can wear several hats in your business as it ramps up.
  • Whatever needs are determined, this new person has to work at full capacity – it’s unlikely a small business can pay someone for a partial day of actual work or to learn several new skills.
  • Small businesses may decide to outsource.  If a business needs work done but it doesn’t help the bottom line, isn’t a main strength of the business, or isn’t needed regularly, this is a great option.  Vendors are often specialized in their expertise, so they don’t need to use your dollars to learn it.  Tasks like logo creation, website design, bookkeeping, or even human resources (like Pivot!) can easily be outsourced.  This means you essentially pay someone very part time to work on your behalf, but you don’t need to worry about taxes, benefits, or training them.  Talk about big dollar breaks to a small business!
  • There has been several studies recently that have found the average cost of hiring a new employee is roughly $4,000.  Seriously!  Between paying for ads, using time for planning and interviews, training, lost funds during the whole process…it’s no wonder small businesses have to get it right the first time!  Here is one recent study by SHRM, which also found that the average time someone spends at a job is 8 years, as well as some of the average benefits employees are expecting.

Take the time to plan and look for someone who can perform what’s needed accurately, without a lot of training and management, and can be versatile enough to possibly fill other needs in the business at least short-term.  Although an incredible resume may be enticing, they could easily not be your optimal company culture’s candidate.

The Where and the How

  • Create a hiring checklist to easily indicate the best employee, as well as a job description full of keywords that will pull up your posting when others search on job boards.
  • Use networking, referrals, and word of mouth as your primary job advertising.  Someone sent to you is much more likely to stay, plus it’s free (or pay a small referral incentive after new hire’s 90 days, especially if you have a few existing employees).  In addition, a lot of your screening has been done, as people are not likely to put their own reputation on the line for a questionable employee.  Use your social media, vendors coming in, and mention it to trusted customers.
  • Post on niche and industry job boards, websites, and blogs, if you can.  These places are already seeing the exact traffic you are looking for in a new employee, so you’re avoiding random applications being submitted.  People found through these will likely have similar interests to your business, and can assimilate into your culture easier.
  • For many industries, it’s free to post on Indeed – although some will require sponsoring.  However, you can set the daily spend limit, if sponsoring is needed.  Often, Indeed postings are taken and automatically reposted to other job boards online, so word also spreads without much help from you.  Many states also have statewide job boards, LinkedIn has a fairly affordable posting database, and you could also outsource to an HR company (like Pivot) or a staffing company like Robert Half.
  • Do background work and check references, after gaining a candidate’s permission.  Records like education, military service, and medical can only be granted by a candidate, while identifiers such as sex, race, color, national origin, or religion are always off-limits (CRA TITLE VII).  Further, a candidate can’t be cast out of consideration based on their age, a disability (that they can still perform the job with reasonable accommodation), or medical/family leave status.  Ask for at least 3 references, two being professional and one being personal (to help determine character), and ask those references objective questions.  Employers must give a candidate the ability to refute any negative findings on a background check, if one was done on them.  Some industries mandate drug screenings, and it’s always a great idea to screen for unwanted behavior (or to ensure they’ll fit within the company’s existing culture) by using assessment tools.

Get Taxes Right on the First Try

  • Before you start the process of finding your new employee, make sure you have obtained an EIN (employer identification number) from the IRS (Form SS-4).  You will need it when you write the first paycheck to withhold their social security and medicare funds, and even some state job boards will ask you to prove it before you can post.  It has two numbers, followed by a dash, followed by seven numbers…it is basically your business’s social security number, so treat it as such.
  • Save the portion you will need to pay the employer’s part of the employee’s taxes, Medicare, and Social Security.  Don’t get caught having to write a check to the IRS that you don’t have the funds for.
  • Your business will have to Federal file taxes quarterly (Form 941), instead of yearly, when you bring on an employee.  Check needs for your individual state.  For instance, in Minnesota, the state also wants withholding taxes quarterly.
  • You will need to consider your new employee’s classification, so taxes are taken correctly.  Most employees will either be common-law (on-site, uses business’s supplies, uses a W-4 form), while some others may be contractors (a third party performing work for you off-site, uses a 1099 form).  When asked if your new employee is Exempt or Non-Exempt, chances are they are the latter – it refers to them not being exempt from minimum wage and benefit standards.  Exempt employees, essentially, do not receive overtime pay – think of executives and other employees on a salary (not hourly wage).
  • File an I-9 form for every employee, it makes sure they are able to work in the United States.  This is the form that asks for copies of two pieces of ID, with options given on a list on it’s second page.
  • You will need to report your new hire within 20 days of their first day to the government.  Reference the Personal Responsibility and Work Opportunity Reconciliation Act.
  • Make sure the business carries Worker’s Compensation insurance, which you can get added to your business’s insurance through your broker.
  • Post required signage in an obvious area, even if you only have one employee.  Many businesses have a bulletin board for this purpose.  You can find these on the Department of Labor’s Advisor page.

Congratulations on your growing business, and I hope this has been a great resource to you!  If you have any further questions, don’t hesitate to contact Pivot Employee Management, LLC.  If you have hired several employees, is there any additional advice you would give?  Let us know in the comment section!

See also: How to Know a Great Interview and 22 Common Hiring Mistakes Small Businesses Make, and How to Avoid Them

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