Hiring the first employee is a huge step for a small business.
If your small business has reached the point where you need help because the assistance of family and friends no longer covers the gaps, you may have reached the point where you need bring paid staff on board. (A previous Small Biz Survival article focused on helping you decide when the time to hire someone had arrived – http://bit.ly/10eSmjl ).
Once you have determined you want to hire employees, the next decision is determining the amount of help you need.
Those decisions should be based on the type of help you need, how much or often you need that help, and the money you anticipate having available. As the owner you need to consider will the new employees be part time or full time, and will they be temporary or work year-round?
No matter what type of employee you need, certain steps must be taken prior to actually making your first hire. They include:
- Get an employer identification number (EIN) from the Internal Revenue Service if the business does not already have one.
- Understand the rules and develop systems for keeping records and making deposits for federal and state income taxes, the Federal Insurance Contributions Act (FICA or Social Security) and Medicare.
- Know where and how to do employee eligibility verification (Form I-9).
- Understand your state’s new hire reporting program.
- Find out about the federal and state workers’ compensation requirements.
- Become aware of and follow guidelines on equal employment, sexual harassment, medical insurance coverage, and wage and hour laws, among others.
- See your accountant and attorney for specific guidance.
A payroll service may perform some of these steps for you, but it is still your responsibility to know and understand all of them.
In addition to these legal, regulatory and internal process issues, small-business owners also must think through and perform the following tasks:
- Develop a clear understanding of what the job will mean in terms of skills, abilities, hours of work and ability to travel.
- Determine who might have the skills and abilities you need. As part of this process, know the areas where you can train someone and in what areas you can’t. For example, work attitude is a difficult area in which to make adjustments.
- Develop a recruiting program. Where you can find the people you need and how do you attract them. It does not help, and might hinder, your business to just fill a spot with a warm body
- Put together your salary and benefits packages. Be prepared to discuss opportunities for growth and policies such as vacation and work hours. Also be prepared for questions from prospective employees about local quality of life issues and job opportunities for a spouse or partner.
- Consider the interview process. What job-related questions do you want/need to ask? Who should be a part of the interview process?
- Do reference checks.
- Consider additional screening or testing before making an offer of employment.
- Once you hire someone, be specific about his or her initial job duties (but note that these can change), be prepared to train and let the person mature into the job. Stay in contact by giving the employee constant feedback.
As you consider your first, and future, hires, remember that it is not only what you see on paper but how you see this person fitting into your company.
Like so many other decisions, hiring employees can give the company a boost or become an anchor and slow you down or even cause your company to fail. These first hires are not something you should delegate.
Glenn Muske is the Rural and Agribusiness Enterprise Development Specialist at the North Dakota State University Extension Service – Center for Community Vitality. Follow Glenn on Twitter: @gmuske
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Trish Hallmark says
I believe that a small business owner can consider another option to hiring an employee. Is there room in this subject matter to inform folks about the virtual assistant?
Glenn Muske says
Thanks Trish for the additional thought. Working with someone not at your physical location might be an option depending on the needs of your business. If that person is an employee, you would still need to consider all of the information discussed above. If they are working in a contracted arrangement, then you should also check with your attorney and accountant as well as irs.gov on independent contractors. Appreciate your bringing this up this option.
Becky McCray says
Trish, we do have an interview with a VA here: How to work with a Virtual Assistant.
Rodney Weaver says
Isn’t it easier to start by hiring through a temp agency initially to limit the costs and burden? What do you see as the challenges using this method vs hiring outright?
Becky McCray says
Rodney, I would say that in most small towns, temp agencies are scarce. So that’s usually not a viable option in a small town. When it is available, often from a nearby larger town, total costs are usually not lower. The agency has to pass along the total cost of the employee to the small business. In the agencies I’ve observed, the hourly rates end up being much higher, but the total cost may end up about the same.
Another option I’ve seen available in most small towns is an accounting or bookkeeping service locally that handles all details of hiring. This can be a real lifesaver for businesses looking to hire without dealing directly with most issues. Still, you are responsible to be sure everything is done correctly, so pay attention to what the bookkeeper is actually doing for you.