Congratulations! Hiring your first employee is an amazing achievement.
Adding a person to your staff indicates you’ve grown your business. Still, it’s scary when you venture out into new territory looking for the ideal candidate.
That’s why we put together this guide to help you navigate successfully through the hiring process. You’ll learn what to consider when hiring your first employee, steps on what to do, and additional tips to make the employee hiring process go smoother.
By the end of this article, you’ll be able to tackle this important task with confidence.
Is it time to hire your first employee?
Use this checklist to help determine if it’s time to add an employee to your business.
- Do you turn down sales? If you can’t keep up with demand, customers will go somewhere else. If that happens regularly, hiring your first employee may be your next step.
- Do you feel like you can’t keep up? Going solo has its advantages until you can’t stay ahead of ongoing responsibilities. When you’re unable to give attention to details, the quality of the products and services you offer customers tends to fall by the wayside. If that’s already happening, it means there’s enough work to pass on to another person.
- Are you ready to increase revenue? Going to the next level usually means ramping up your entire operation. Adding more products and services means you’ll need more hands-on help to keep up with sales.
- Has business growth stopped? Hiring an employee could give you time to focus on growth. Perhaps you could hire someone adept in tasks you don’t particularly like such as sales and marketing. A skilled employee may be able to complete these tasks more efficiently to help you grow your business.
- Do customers complain they can’t reach you? If you’re spread too thin, this is a common complaint and a red flag that you’re over your head and need help.
Businesses suffer when employees don’t feel like they’re part of the team. Keeping an employee motivated is one of your new tasks as an employer.
How to hire your first employee
Once you decide that hiring your first employee is the way to go, you must become familiar with these hiring requirements.
We recommend that, before starting the process, you make sure that you need an employee and not a contractor.
1. Prepare beforehand
Create a job description outlining the employee’s responsibilities. Also, prepare an employee handbook detailing work policies to include a section on how to work safely. Likewise, you should purchase workers’ compensation insurance should an employee be injured while working (not all states require this insurance).
2. Get an EIN
Most sole proprietors use their social security numbers to operate their businesses. However, the government requires an EIN (employer identification number) to report wages and complete various tax forms. You also need an EIN should you offer employee benefits such as tax-deferred pension plans or health insurance.
3. Determine the salary
Determine how much you can pay your new employee based on their responsibilities, and your budget.
4. Learn about employee taxes in your state
Check with your state to determine if you’re required to register and pay state unemployment compensation taxes.
5. Prepare the required forms
Gather employment forms an employee must fill out:
- Form W-4 Federal and State Withholding Allowance Certificates
- Form I-9, Employment Eligibility Verification.
As an employer, you’re required to post U.S. Department of Labor notices relating to employee rights.
6. Decide how you’re paying your employee
A payroll software system simplifies calculating gross and net pay as well as deducting required Federal and state taxes, and other deductions. Additionally, using software streamlines completing payroll reports such as Forms 940 and 941.
7. Create a record file
Set up an employee record file to include signed employment documents, and other pertinent employment records. The U.S. Department of Labor recommends keeping these records.
8. Post your job description
Advertise the job opening in local newspapers and online employment websites to include the job title, responsibilities, required skills, salary, employee benefits, and other information relating to the position.
9. Find the top candidates
Review your top candidates and schedule an initial phone interview. Narrow down your list of candidates further by conducting in-person interviews.
Look for qualities that complement your company’s vision.
Before selecting a candidate, follow up with the references listed on their resume.
10. Run a background check
Some employers also require an employee to take a drug test prior to and during employment or may request an employee to sign a non-compete agreement.
11. Send a formal offer
Once a candidate accepts your verbal offer, send them a formal offer letter listing the terms and conditions of employment.
12. Train your new employee
Begin training your new employee on their first day on the job.
Are you concerned cash flow will suffer by adding an employee?
One consideration is to hire a part-time employee until revenue increases. Another way to avoid a cash crunch is to get a small business loan to cover increased costs.
Special Documents and Processes by State
Not all states have the same procedures, and, as an employer, you need to keep up to date with your locality’s hiring requirements. But because we want to help you, here are the legal documents and processes for several states.
An employer must offer the following forms to new employees:
- Time of Hire Pamphlet
- Wage Theft Prevention Act Form DLSE-NTE
- Sexual Harassment Pamphlet DFEH-185
- Paid Family Leave Insurance Pamphlet DE 2511
- Disability Insurance Pamphlet DE 2515
- Notice on the Rights of Victims of Domestic Violence, Sexual Assault, and Hiring
- Policy on lactation that complies with SB 142
Employers in Texas are not required to carry workers’ compensation insurance but they may opt to do so.
Additional forms must be completed by new employees:
- Workers Compensation Claim Form DWC1
- Disability Self Identification Form (for any government work completed)
- New Hire Employment Form within 20 days of hire
Provide these notices to employees:
- New York State Notice and Acknowledgement of Pay Rate and Payday
- New York City Pregnancy and Employment Rights Notice
- New York City Earned Sick Time Act Notice of Employee Rights
- New York Corrections Law Article 23-a (if performing background check)
- Fair Credit Reporting Act (if performing background check)
Tips to hire your first employee:
In addition to the information above, these tips will simplify the hiring process.
- Use KPIs (key performance indicators) as a recruitment tool to provide insights on how well you’re doing. You can use a KPI to track goals and objectives such as staying on task during the hiring process.
- Write a Job mission statement in a few sentences that spells out your vision for your business on a short and long-term basis. Find out your candidates’ opinions on the statement.
- If you’re too busy, consider using a recruiting firm to handle hiring your first employee. You will still need to meet with candidates but an agency can screen applications and answer questions about the hiring process.
- Be open to hiring remote employees who have a proven history of being able to work without constant supervision. Not only will you save overhead costs but the employee’s costs are reduced.
- Develop a training program to include your company’s history and mission, policies and procedures for your workplace, as well as the necessary computer/software training. Many employers offer elective training to employees interested in developing specific skills to improve job performance.
- Give your new employee a project as soon as they finish orientation and training. You’ll be able to observe how quickly they learn and access their skills to use their talents efficiently.
Hiring your first employee just got easier
You’re not likely to forget the day you hired your first employee.
Having the right team member opens doors to new business opportunities. Not only will you have more time to devote to business growth but the extra revenue could mean a raise in pay for everyone.
We encourage you to subscribe to the Camino Financial Newsletter to receive more business management tips and ways to strengthen your business. As a member of our community, you have access to articles like this one to help you run your business successfully.
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