Is it time to hire your first employee? Running a business by yourself can be overwhelming and while bringing on another person to help can be exciting and relieve some pressure, hiring your first employee can also prove stressful. I’ve laid out some of the considerations, processes and links to valuable websites here that I hope will provide guidance, ideas and value from my perspective as an HR (Human Resources) consultant.
A note to those of you that already have employees – scattered throughout this article there are tips and links to sites which may be helpful. It’s especially important for companies without a dedicated HR person to make sure you are in compliance with the myriad of rules and regulations.
Most entrepreneurs reach a point in their career when they have more business than they themselves can tackle. Though freelancers can relieve some of the burden, it generally requires hiring an actual employee to continue scaling the business and increasing your bottom-line.
It’s helpful to talk to others while making this decision, whether it’s other entrepreneurs, coaches, mentors, HR consultants, or people who already have employees. This is a big decision and understanding it from a variety of perspectives will be helpful. Often we don’t know what we don’t know! I’ve tried to anticipate some of those unknowns here for you to consider as you navigate this decision.
There are several steps to understanding the process for hiring your first employee. While much of this is practical advice, it’s also important to ask yourself if you are ready to be a leader. This person will look to you for instruction, guidance, accountability and importantly, a pay check! So, make sure you are ready to be a responsible manager who can guide them to success. Again, getting help from coaches and mentors is highly recommended. If you don’t think you are ready, look for ways to prepare yourself. There are books, courses, coaching and mentoring options. I offer a free consultation if you’re in doubt.
Prior to Hiring
Decide if You’re Truly Ready
Hiring another person to help you can require both additional time and money. Depending upon the type of role that you are filling, you may not see a return on your investment for a while. Because of this, it’s necessary that you ensure you have the finances to pay for this individual in the short run, and that you are well informed as to whether this position will be worth it in the long run. Between recruiting, interviewing, deciding, and onboarding them â€“ not to mention ongoing management and supervision — hiring an employee also takes an investment in time. This requires stellar communication skills.
It’s also important to ensure that you have enough work to justify hiring another person. You should ask yourself if you have any problems with obtaining new clients. Are you busier than you can handle? Are you unable to honor deadlines because you can’t keep up or want to expand but are unable to do so alone? Are you spending too much time on tasks that either aren’t easy for you or don’t help to bring in money, but are necessary? These are all good signs that you may need more help.
Understand Your Legal Requirements – Both State & Federal
Before you hire someone, it is imperative that you understand what your mandatory responsibilities are concerning him or her. Asking an HR management professional is a good idea. You can gain a good understanding of what the law requires by reading the Fair Labor Standards Act (FLSA). This includes what is required of the following:
- Federal Minimum Wage
- Overtime Pay
- Child Labor
It is also important to familiarize yourself with federal discrimination laws, OSHA safety regulations, and state requirements. For your convenience, you can find a list of valuable links to informational websites at the bottom of this blog.
Define the Position and Persona of the Person of Which You’re in Need
It is first important to figure out if you want to move into the hiring process slowly or quickly. It may be the best idea to start with a part-time employee in order to ease into all of the different responsibilities and investments that are involved.
It’s also a good idea to write out a detailed description of the job, including daily responsibilities, tasks, skills, experience, and desired traits. It’s helpful to start by looking online at other job descriptions for similar positions. This will also help you to figure out what a fair pay range would be. You can look at online salary sites as well, such as Salary.com.
While the skills may be easy to measure, the personality traits are harder to define and quantify. This is often overlooked. It’s easier to train someone how to do a job than it is to change someone’s personality. So, for example, if initiative or organizational skills are important, look for ways to see if your candidates are capable in those areas. I have helped design different tests to determine those traits.
You also need to know what types of benefits to offer your employee(s). This includes everything from flexible work hours to life insurance. It is necessary that your benefits offered adhere to federal regulations. Often, first-time employers will not have much in the way of benefits so offering flex time, training, or creating an opportunity for an unusual candidate can be handy alternatives to more robust benefits.
Recruiting Candidates & Using Due Diligence
With the job description created, you can then post an ad for it online. I’m using Indeed and LinkedIn more than any other sites. I have found that Indeed brings in greater numbers and LinkedIn tends to bring in higher quality candidates. It will save you time to pre-screen candidates by first looking at resumes and weeding out those who don’t meet your requirements. I have found it most helpful to ask for a cover letter. Tailor the questions to have the candidate reveal some aspect of his or her qualifications that match your criteria. This weeds out those that are just fishing from those that are really looking at your job seriously and gives you an early glimpse into their personality. If I find a qualified candidate who does not submit the cover letter, I contact them and ask them to send that. Again, it’s a great weeding out process. For the ones who meet your expectations and requirements , you can then conduct a remote interview. Interviewing remotely also saves you time, which saves you money. Once you establish your top candidates, then you can conduct an in-person interview.
You must ensure that you know what you are legally allowed and not allowed to ask of a candidate during an interview.
Screenings such as personality tests, skill tests, and aptitude tests may help to further minimize the application pool. Additionally, conducting background checks and checking references can aid in the process.
I highly recommend checking professional only references and doing employment verification. By being diligent about this, I have disqualified several candidates who lied in the interview process. Become something of a detective here! I do my best to doublecheck the references. Again, I have found people using friends undercover to provide bogus references. I check LinkedIn and other methods, to find out if the references are truly professional. Background checks can also be helpful. Sometimes a professional background check is the only way to do employment verification for a large company.
Make an Offer
Once you decide who would make the best candidate, the next step is to create an offer letter. The letter does not need to be formal, but must be very clear. It should include:
- A very brief job description (job title, duties, responsibilities)
- Required hours/schedule
- Start date
- Salary/wages and benefits
- Next steps for how they may accept the offer
The offer may also be contingent upon certain conditions, such as passing a drug and alcohol test.
Fill Out the Paperwork
Federal law requires that you verify an employee’s eligibility to work in the United States within three days of hiring. You can do so by completing Form I-9, Employment Eligibility Verification. You can obtain a Form I-9 by going to the U.S. Citizenship and Immigration Services website or can ensure proper completion with the Form I-9 template. You are not required to submit the form to the government, but must keep it on file for three years after the hiring date or one year after the employee leaves the company (whichever occurs later).
Also, you should have the employee fill out a Form W-4.
Set Up Back Office Processes
Once you have verified your employee’s good standing to work in the U.S. and have received their Form W-4, you need to establish a payroll system. Employers are obligated to withhold part of each employee’s paycheck for tax purposes and must submit them to the appropriate authority. These taxes include
- State income tax (not required by all states.) Check out your state’s requirements here.
- Federal income taxxes can be overwhelming. That’s why it may be in your best interest to hire a payroll service to take care of all related issues. There are quite a few companies out there charging reasonable rates tailored to the small company. They will be the ones responsible for keeping up to date on all updates in the law. They will also withhold your employees’ taxes for you and send you reminders when it’s time to file your taxes. The IRS requires that you keep records of your employment taxes for at least four years after they have been paid. You also are required to keep a record of your employees’ wages and tips if your state so requires.
Report and Register Your Employee
You also have an obligation to report any new hires to the Office of Child Support Enforcement. This way, the state is aware if your employment status has changed for purposes of paying child support.
Ensure the Display of Mandatory Labor Law Info
While most startups may not have a physical location, if you do, be aware of the need to display notices. So long as you have even one employee, you are obligated to display notices, which contain information regarding labor laws, employer responsibilities, and employee rights. (Each state has its own requirements.) Regardless of whether or not they are redundant at all, employers have an obligation to display both state and federal notices. When state and federal laws changes and these posters are updated, employers have an obligation to remove outdated ones and post up-to-date ones. Those who fail to comply may face fines or even lawsuits.
Remember the IRS!
There are three IRS Forms that employers need to remember to file. (This is another good reason to hire a payroll service!)
Maintain Accurate Employee Records
Each employee should have three separate files:
- The Personnel File
- The Payroll File
- The Medical File
Generally speaking, the Employment Opportunity Commission (EEOC) requires that employment records be maintained for a year from the date of an employee’s termination. These files will prove necessary to access if charges are brought against you.
Resumes and job applications – whether or not the individuals were hired they must be kept for up to two years. If an employee or applicant should decide to bring a discrimination charge against the business, you will need to have them accessible.
I-9 forms must be kept for three years after the date that an employee is hired, or one year after date of termination (whichever is later).
W-4 forms must be saved for at least four years from the date that the taxes were either due or paid. This comes from federal guidelines under the Social Security Act and the IRS, but is dependant upon state law, which may vary.
Under the FLSA, payroll records for nonexempt (hourly) employees must be saved for three years. These include employer copies of pay stubs; evidence of paid overtime wages, and payroll deductions. This also varies on a state-by-state basis.
According to the FLSA, any personnel records that are related to wages must be saved for two years. This includes things such as performance reviews or work schedules, which can be used to justify a salary in the event that you are called upon.
When in Doubt, Ask Questions!
Although hiring your first employee can prove fairly overwhelming, if you follow these steps and suggestions you can make the process much easier. It’s better to ask questions than to assume, so if you don’t know something, reach out to the right source. If you don’t know what the right source is to ask, try researching online. Once you learn how to hire your first employee, you will gain the experience needed to learn how to scale your business.
I’m here to help you through this daunting process. As an HR management consultant, I’m available for a free consultation. Call or email me today to schedule a free information session.
- The Americans with Disabilities Act (ADA)
- The Age Discrimination in Employment Act (ADEA)
- The Equal Pay Act
- Title VII of the Civil Rights Act
- The Pregnancy Discrimination Act (PDA) of 1978
Each of these laws prohibit discrimination in all stages of employment. It is also important to know the OSHA safety regulations. Regulations from the Occupational Safety and Health Administration (OSHA) are in place to protect employees from work-related injuries. Though these rules vary dependent on industry, all businesses must follow general standards.
As with federal law, employer must also adhere to state requirements. This includes:
- State employment discrimination laws
- State unemployment taxes
- Workers’ compensation insurance
- Some states don’t require very small businesses from providing workers’ comp unless they have a minimum number of employees. Be aware of your state’s specific rules and exemptions
- Local regulations