Hiring Your First Employee And What to Know

Hiring your first employee can be incredibly overwhelming. You’ve made the decision that you need additional help, and perhaps outsourcing to freelancers just isn’t enough any longer. But, knowing you are responsible for someone else’s livelihood can certainly be enough to keep you awake at night. That’s why it’s exceedingly important that you’ve explored everything that goes into bringing another person onboard.

Get Organized

While you may be tempted to jump right in and start searching for applicants, you need to make sure you have your ducks in a row. First, you should visit the U.S. Department of Labor to understand all of the information that you must keep on file for your employee. You need to know how long you’re expected to keep permanent records, especially after termination.

You will also want to determine a salary. This can be flexible, but if you’re sticking with minimum wage, then you need to be familiar with the laws in your state. Will your employee be part-time (20 hours or less per week) or full-time (30 hours or more)? When are you required to provide benefits, and what should those be? Your local department of labor is a good resource.

Don’t forget about taxes. If you don’t already have an Employee Identification Number, you’ll need to get one. The purpose of the EIN is to allow the IRS to track the wages to your employees. Initially you need to determine what the appropriate category is for your employee – independent contractor, common-law employee, statutory employee or statutory non-employee. You don’t want to classify them incorrectly, so visit the IRS website to help determine what type of employee you’re looking for.

It may be wise to hire out your payroll services. There are companies that focus solely on preparing payroll for small businesses and they are familiar with the state’s rules and regulations. They will make sure your employees fill out the proper forms (W4, W2, I-9 etc.) and everything will be in place for reporting to your state’s department of taxation.

Finally, determine your insurance needs. Do you need worker’s compensation insurance? Should you have disability coverage (short-term is 12 weeks to one year and long-term is anything over one year).

Know Your Expectations

Before you begin to recruit for your position, it’s important you have a clear idea of the responsibilities required for this role. Think about what you need. Is it someone to answer the phone and pay the bills, do you need to create an advertising campaign, or is packing and shipping where you are falling behind? Putting out a request for a jack-of-all trades will likely result in a pile of applications that don’t really meet your needs. Writing a clear job description and outlining expectations is helpful for you to determine the skills and abilities you’re looking for, and will also help your potential employee clearly understand what the job expectations are.

Recruiting

The best resources for finding new employees are people you already know. Referrals from friends, advisors and other colleagues in the same industry can provide excellent leads on potential employees. Consider looking for candidates that have experience with small businesses – if they are used to a big organization, they might not be interested in the building process for small start-ups.

Once you’ve gotten a few candidates, set up interviews. Never take on an employee without asking questions to determine if they are the right fit for the job. Keep in mind that some people are very skilled at answering questions in an interview; they exude confidence and can wow you with their words.

Instead of relying solely on how they answer your questions, ask them to demonstrate a skill that is relevant to the position. For example, if you need a salesperson, ask them to sell you a product. If they are doing computer work, test their skills building spreadsheets or proofreading documents. Whatever your need, asking them to demonstrate the skill is going to provide an instant determination of their capabilities.

Know What to Avoid

Just as important as the questions you are asking are the questions you cannot ask. As this is your first employee, you likely do not have a Human Resources department to guide you. Questions regarding age, sexual orientation, marital status, religious affiliations or race are simply not allowed. Familiarizing yourself with the following federal laws will help you have a better understanding of the legalities behind these kinds of questions.

Before You Hire

While you may be tempted to “go with your gut” and hire the person who seems the nicest, the best thing you can do for yourself and your business is get a background check. Background checks help confirm things like prior employment, criminal records, drug tests, driving record, credit history and even current worker’s compensation claims.

In addition, asking a potential employee to take a drug test before offering them the position is reasonable. In fact, employers can retract or deny an offer based on the results of a drug test. Workers who abuse drugs are likely to be less productive and could put you and your business at risk.

Finally, ask for and follow up with references. Typically, potential employees provide three references – two professional and one personal. Ask pointed questions that will help you determine their character and their work ethic. Would they hire this person? Why should you?

Outside References

Making the decision to hire your first employee is a big one. The best thing you can do for yourself and for your business is do the research. Take advantage of the tools at your fingertips – study the labor laws, talk to your mentors, and make sure you are armed with all of the knowledge you need to make your first hire a successful one.

Here are a few websites that could make the hiring process a bit easier for you:

Internal Revenue Service (IRS)
US Department of Labor
US Citizenship and Immigration Services (USCIS)
US Equal Employment Opportunity Commission (EEOC)
Federal Trade Commission (FTC)
National Labor Relations Board (NLRB)
Occupational Safety and Health Administration (OSHA)
U.S. Small Business Administration
State Departments of Revenue
Labor agencies of the 50 US states

What to Know When Hiring Your First Employee