All Articles Leadership Small Business Small-business growth: How to hire your first employee

Small-business growth: How to hire your first employee

4 min read

Small Business

Looking for hiring tips? Here’s what you need to do before hiring your first employee:

  1. Develop the job description. A detailed job description helps you and candidates find the right match. Core elements include: Reporting relationship (how the employee will interact with you), key day-to-day responsibilities and how those affect the operation, qualifications (experience, education, certifications, licenses, etc. that are required to do the job), short- and long-term objectives, success metrics and compensation. Consider including experience in startups or micro-enterprises as a requirement — candidates with only big-company experience may not be able to adjust to the requirements of an extremely small business.
  2. Research appropriate wages and salaries. Research wages/salaries for similar positions in your area. Your local economic development office or small-business technology-development center can help you with local wage data. Ask your professional network about the compensation and benefits they offer similar positions.
  3. Understand benefits and insurance. There’s a lot of confusion around the Affordable Care Act, but other types of insurance and benefits also are required. Talk to your attorney or a benefits specialist to understand your options for health insurance, disability coverage and workers compensation. It’s also important to understand if and how the Americans with Disabilities Act and the Family Medical Leave Act apply to your business.
  4. Verify your working capital. Make sure you have enough revenue and cash flow to cover salary and related expenses like payroll taxes, benefits, etc. A quick visit with your CPA will yield the information you need.
  5. Prepare for record-keeping. Even one employee creates a lot of required paperwork. Here’s what you need to have, according to the U.S. Department of Labor and Internal Revenue Service:
    • Personal data: Employee’s full name, gender, birth date (if under 19), Social Security number, mailing address
    • Job data: Day of week and time of day employee’s work week commences, daily and weekly hours worked, pay frequency (weekly, monthly, etc.)
    • Payroll data: Hourly or annual pay rate, total daily or weekly earnings, total overtime earnings, deductions or additions to wages, total wages paid each period, date of payment and period covered by each payment.
    • Tax data:  Business tax forms for FICA/Social Security (W2 form), withholding (W4 form), Eligibility (I-9 form); unemployment taxes paid, workers compensation proof

Check with your attorney and CPA to verify the data you need to track to meet your state and federal employer obligations.

  1. Set up payroll. It’s more than cutting checks. Set up and test a payroll system before you place the ad. Make sure it meets state and federal tax and reporting requirements. If you’re handling it yourself, your CPA can help you. If you outsource, make sure to test and verify before running an actual paycheck.
  2. Search for candidates. Place ads in the local media or online, and access your network. Share your job description with colleagues and ask them to suggest or refer candidates to you. Remind them you want people who are accustomed to working in businesses of your type and size.
  3. Do interviews. Develop a list of questions that help you verify each candidate’s skills and experience, and include a few that help you learn about values and work habits. You also want to know why the candidate wants the job and what, if any, hesitations s/he has about joining you. It’s critical your questions don’t run afoul of state and federal laws, so ask your attorney to look them over. Also, familiarize yourself with nondiscrimination laws.
  4. Perform due diligence. Once you decide to make an offer, check references (again, consult your attorney about what you can and can’t ask about). Some employers hire a company to do a background check — particularly important if the employee will handle cash or finances, operate a vehicle for business purposes, or work with minors. It might also make sense to do drug-testing if the employee will operate heavy equipment, drive or if it’s required for the occupation. The U.S. and state departments of labor can verify which occupations require background and drug testing.
  5. Make an offer. When everything checks out, make the offer. Give the candidate time to consider your terms, and expect that s/he may come back with questions, requests or counter-offers. You should be willing to negotiate with a strong candidate — and the experience will show you how they handle communications of this kind.

Good luck!

SmartBrief is featuring an ongoing Small Biz Q-and-A series, and we offer free e-mail newsletters on small business and entrepreneurialism. Sign up today.