6 things to do before hiring your first employee

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As a small business owner, it's likely you'll be hiring your first employee at some point. While hiring employees is a core part of running a business, the process can be intimidating — especially since the wrong hire costs both time and money. But the right hire will be a boon to your business, and play a pivotal role in your success. There are many unknowns in the world of small business, but hiring doesn't have to be one of them.

6 things to do when hiring your first employee

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The hiring process can vary from industry to industry, and even from role to role. However, there are best practices to put into place before, during, and after the process. Let's take a look at the questions you should ask yourself, legal obligations that come with hiring, and how to welcome your new hire to the workplace and ensure they have a great experience moving forward.

1. Determine what kind of employee you need

Employees are a significant responsibility for any employer. To avoid hiring someone you can't afford or don't need, you must determine what kind of employee you need in the first place. 

Take a step back and think about the tasks you have that require extra help. Track the amount of time you're spending on these tasks to determine which are the biggest time sinks. If you realize there are a few related tasks taking up 30 hours of your week, you might need a full-time employee. But if you're only spending 10-15 hours per week on select tasks, a part-time employee or independent contractor could work.

Next, classify the work. Ask yourself if you're busy because your business is new or because you're swamped with sales and you don’t have enough time to multitask. If you have numerous one-off tasks that come with launching a new business, short-term help from a contractor is ideal. If you have multiple tasks that aren't going away anytime soon — like stocking shelves and selling to customers — long-term help is likely a better fit.

2. Take care of the legal stuff

Now that you know what kind of employee you need, it's time to get your legal ducks in a row. Doing so involves paperwork and filing, but rest assured it's not something you'll have to do all the time. To avoid legal issues when hiring your first employee, take care of the following:

  • Obtain an employer identification number (EIN): Every tax-paying business in the United States must have an EIN, which allows you to submit taxes to the IRS. Apply for your EIN online with the IRS for the quickest results.
  • Set up unemployment taxes: While this isn’t something you need to do ahead of time, you will need to pay unemployment taxes for any new hires. Get ahead of this and locate the requirements with your local labor department using the State Labor Offices online directory.
  • Look into health insurance: Your business isn't required to offer health insurance, but it's an attractive perk to offer prospective employees. Keep in mind that if you have more than 50 full-time employees, you’ll be fined for each one if you don't at least offer insurance.
  • Register for workers’ compensation insurance: Most states require workers’ compensation insurance, which protects your business and employees in the event of an injury. Research your state's requirements and then shop around for insurance within your price range.
  • Familiarize yourself with Form I-9: Form I-9 is the employment eligibility verification form that verifies whether someone is eligible to work within the United States. You'll need to complete Form I-9 whenever you hire someone, so getting familiar with it early on isn't a bad idea.
  • Establish new hire reporting: New hire reporting tracks new hires by state. This process requires little input on your end once the applicant has completed the required paperwork. To complete new hire reporting, use the new hire reporting matrix and contact your state office.
  • Know federal laws: The U.S. Department of Labor is a great resource, and contains up-to-date information regarding hiring. If you have any questions or knowledge gaps, dig through the U.S. Department of Labor site or reach out for assistance.

Make a list with the above items and simply work your way through it. It might seem like a lot, but much of it only needs to be done once. Plus, it’ll become easier the more you do it. 

3. Get your finances in order

Having your finances in order is essential when hiring your first employee. New employees cost money, require tax withholdings, and entail some IRS paperwork.

Before you hire anyone, you need a payroll system in place. Your new hire will have to fill out Form W-4, which covers withholding taxes. This tax form also covers any applicable state taxes and medicare.

You should also have a business bank account set up, as this allows you to separate your personal and business finances and track spending more easily. Along with a business account, consider a business credit card. Getting a card will make it easier to send your new hire on any kind of work-related trips, or even a simple supply run.

4. Craft quality interview questions

Your interview questions should help you weed out job candidates who aren’t a good fit. Dig deep and think about any necessary skill sets you’re seeking. Depending on the type of job, a test is a reliable way to determine if a candidate has the required skills. For example, if you’re looking to hire a writer or design-oriented role, ask for samples or a portfolio of previous work. 

If you're having trouble coming up with questions, ask your professional contacts who have experience with this role. The goal is to craft questions that help candidates demonstrate their skill set during the hiring process. Interview questions shouldn’t be vague — focus on the applicant's experience and how it relates to the role you’re looking to fill. You also want to get a feel for their personality during the interview, so don't hesitate to include a fun question or two.

5. Post the job listing

When hiring your first employee, it's crucial to get the job title right. The wrong job title will lead to the wrong job applicants. Job listings aren't always free, and the last thing you want to do is waste your time going through applications that will never result in a job offer. Research other listings similar to what you're looking for and make sure you're using the right title and language within the job description.

Make sure your job description and job title are thorough — specify the exact skills and kind of person you're looking to hire. Mention if you’ll be performing a background check and other basics, like salary range, whether it’s in-office or remote, and benefits. Once the job listing is live on your site, you can promote it on social media or job boards such as Indeed and Flexjobs.

6. Prepare an enriching onboarding experience

Create an employee handbook that lists employee benefits, company culture, brand guidelines, who to talk to for help, and other necessary information that gives the employee a clear idea of what to expect. You want them to comfortably adjust to the company and answer any questions during their first day and early weeks.

Also, take care of any remaining legal documentation during the first day (or before, if possible). For example, complete the W-4 form, which designates how much federal income tax the employee wants withheld. Check with your state's employment laws to ensure you're not missing any regional forms, either.

Repeatable hiring success

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Hiring your first employee is a big deal. But it's very likely you’ll hire another, and another, and — well, you get the idea. Carefully document your first hiring process and take note of any hiccups you encounter. Doing so will allow you to improve your process as you continue to bring on new people.

Take your time hiring your first employee, reach out to the appropriate state or federal departments when in doubt, and don't panic if you don't find the right hire during your first round of interviews. This process takes time, but it's a process well worth the effort. Every corporation started small, and with your first hire, you're laying the foundation for a bright and big future.

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