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The Small Business Guide to Hiring Your First Employee

May 17, 2016

If you’re hiring your first employee – congratulations! This move signifies that your business is really taking off. In fact, you may be finding that it’s getting to be too much for one person, no matter how much you love it. If you find yourself working nearly every waking hour, it’s time to hire someone to take on some of the work.

But first…

Keep in mind that if you’re hiring a first employee, you should already have crossed other important milestones like securing liability insurance for your small business. General liability insurance protects your business from another person or business’s claims of bodily injury, associated medical costs and damage to property.

Now, here’s a handy guide to hiring your first employee:

Step 1: Determine where you need help
It can be tricky for a small business owner to determine exactly what a new hire would do. Often, it’s a little bit of everything. Since you can’t clone yourself, you’ll need to think about what you can take off your plate.

A common mistake is to hire someone to do the things you don’t like to do. Instead, consider which tasks you are not good at. These may be the same things—if you’re lucky—but they may not. You should continue to do the things that you are good at, even the ones you don’t like so much.

Next, try to group the tasks you’d like to hand off. They will probably fall into a few broad categories, like administration, marketing, accounting or inventory, for example. This will direct you to the skill set you’re looking for. Create a job description that outlines the tasks that will need to be done and the skills and experience you want in a new team member.

Step 2: Seek out candidates
For small businesses, it is often helpful to seek referrals from colleagues, friends, even customers or vendors. These are people who know you and your business, and they’re likely to recommend people who will be a good fit.

If you can’t find someone through word of mouth, you’ll have to advertise for the position. Try to find a job board that is specific to your industry or to the type of position you want to fill. Posting on SimplyHired.com or Indeed.com will likely produce such a large volume of resumes that you will not be able to review them all.

A note about alternatives to a full-time, direct hire employees…

If you think you may not have enough work to keep someone busy 40 hours per week, or if  you think your needs will fluctuate, consider other options. You may be able to hire a contractor or freelancer to work on a project basis, or bring someone in from an agency on an as-needed basis. If there is a college or university nearby, you may be able to bring in an intern on a part time basis, providing experience in the working world in exchange for a reasonable wage.

Step 3: Interviewing and making an offer
Once you have a few qualified candidates, you’ll need to set up interviews. Have some questions ready ahead of time, and make sure you cover both qualifications and logistics like hours, vacation time and, of course, salary. Jot down any specific questions you have for a candidate based on their resume.

Remember that a candidate can look great on paper, and can interview perfectly, but that doesn’t mean you’re going to want to work with them day in and day out. In the end, you’ll want to hire someone you can get along with. Trust your instincts on this.

Step 4: Making it official
Once you’ve decided on the perfect new hire and made an offer that’s been accepted, it’s time for the paperwork.

You’ll need an EIN, or employer tax ID, from the Internal Revenue Service. This is like a social security number for your business. You’ll need it to provide tax and other information to the IRS and state agencies.
As an employer, you’ll need to pay close attention to taxes. The IRS Employer’s Tax Guide  can tell you everything you need to know, and then some, but here are the basics for first-timers:

      • Federal Income Tax Withholding, including a form W-4 from each employee before they start.
      • Federal Wage and Tax Statement, which is the W-2 form you need to provide to the employee so they can file their taxes.
      • Any forms your state requires.You have to keep records of the employment taxes you withhold, and you’ll need these forms:

You’ll also need to file IRS Form 941, Employer’s Quarterly Federal Tax Return if you pay wages that are subject to income tax withholding, Social Security and Medicare taxes.

Verify that your employee is eligible to work in the U.S. You’ll need to complete a Form I-9 which asks that you see documents that identify the employee and their citizenship, such as a passport or driver’s license and birth certificate. This needs to be done within three days of the hire date. Use E-Verify  to determine if your employee can legally work in the U.S.

Step 5: Don’t Forget the Details

Report your new hire to your state’s New Hire Reporting System with 20 days of their hire date. Also, post required notices about workers’ rights and employers’ responsibilities. The Department of Labor provides these to businesses.

Get worker’s compensation insurance. This is a requirement in every state. You should also check to see if you need cyber insurance as well as any specialized coverage for your specific type of business.

Step 6: Stay Organized

Stay informed and organized. Stay on top of changes in employment law, tax laws and recordkeeping requirements. Some regulations, like those surrounding the provision of health insurance, don’t apply to businesses with only a few employees, but you should know when they will impact you.

What surprised you when you hired your first employee? Tell us in the comments below.