Hiring your first employee is an exciting step towards your startups’ continued growth! How do you know when the time is right? What do you need to do when the time comes to hire your first employee?
Hiring Your First Employee Considerations
Before committing to hiring an employee, you will want to consider the workload, job responsibilities, financials, and employee laws and regulations.
Steady Workload
Every business has ups and downs. Is your business busy enough to support an employee? You want to make sure you will have enough work in the future to support a consistent workload. It’s tempting to hire during busy times; however, you want to make sure that you can still support an employee during the slower times. If you are concerned about a steady workload, it may be better to hire a part-time employee or outsource to an independent contractor who is available on an as-needed basis. If you have a consistent workload, then it may be time to hire your first employee.
Job Responsibilities
When hiring an employee, you will need to craft a job description with responsibilities. What will you delegate to the employee? How will you train them? What is the process? It is so important to be clear on the expectations of the employee, to delegate appropriate responsibilities, to set up the employee for success with training and resources, and to have a plan for the day-to-day operations. Defining this upfront will help free up your time later to grow your business.
Once you have a job description in mind, document it. Then, outline an onboarding and training plan as well as a day-to-day operational plan. With this information documented, you can refine it as you work through the process. In time, as your business grows, you can share these resources with future managers to streamline the process. If you cannot define a job description, it will be difficult to attract an employee.
Financials
Also, make sure to consider your financials and what you can realistically pay an employee. There are the upfront costs of advertising the job and investing in equipment for the employee as well as the cost of your time when setting up interviews, making the hiring decision, ultimately onboarding, and training the employee. There are also the ongoing costs of employee payroll, payroll taxes, payroll processing, benefits, etc. To run payroll and streamline payroll taxes, you will want to consider payroll software and speak to your accountant. Also, consider what you will do for holidays, vacation, and sick leave.
All of these ongoing costs need to be factored into your overhead. Cashflow needs to be consistent enough to cover these costs. Payroll will be due and paid to employees on a consistent basis. You can’t ask an employee to wait a few days because you are waiting on customer payments. Just in case, it would be helpful to setup a payroll reserve in case payments are late or business slows.
Employee Laws & Regulations
As an employer, you need to be mindful of applicable laws including federal anti-discrimination employment laws, unemployment laws, minimum wage requirements, workplace safety regulations, federal/state labor laws, and employee benefit regulations. Some employee benefits are required by law, but others are not. Also, you will want to know what employee records you are required to keep and for how long.
If you hire an employee besides yourself, you will likely need workers compensation insurance. You will also be required to display certain documentation and notices at your place of business.
To learn more about employment laws or regulations, you will want to speak with your attorney and may also reach out to state contacts such as the Department of Workforce Development or federal contact including the Department of Labor. The SBA also provides some helpful resources and links on how to hire and manage employees.
How to Hire Your First Employee
If you have a steady workload, defined the job responsibilities, have the necessary cashflow and resources, and are prepared to get familiar with the necessary employment laws and regulations, here’s a 7-step process to get you started.
#1 Get Payroll Ready
You will need an Employer Identification Number (EIN). Consult a professional such as your accountant and/or HR consultant. Together, you can develop a plan for running routine payroll and handling quarterly payroll taxes. Payroll taxes include federal income tax withholding, state income tax withholding, social security & Medicare, and unemployment insurance. Your professional can help you setup the payroll process and obtain any necessary state or local tax ID’s.
#2 Get Insured
Make sure your business insurance includes worker’s compensation insurance.
#3 Write the Job Description
Define the position in a job description that details the responsibilities, qualifications, how to apply, etc. Then, decide where you want to post the job and share the job with your network.
#4 Outline Interview Process
You will want to include instructions on how to apply in the job description. Once you receive a resume and/or application, what’s next? Often, it is best to start with a phone interview. That way, you can efficiently prescreen applicants before setting up an in-person interview. Also, take a moment to define which questions you will ask in the phone interview verses in-person interview. Consistency is important for a fair interview process where you ask all the candidates the same questions. Also, it is essential to know legally what questions you can ask versus what you cannot ask.
#5 Hire
Once you have identified the right candidate for the job, you will want to make a job offer and outline the next steps. Will your process involve pre-employment screening? Some employees make the employment offer contingent upon a background check, drug test, etc.
#6 Onboarding
As part of the onboarding process, make sure the employee completes all the necessary paperwork, including a W-4 form. Make sure you have all the necessary information on file. Once you have the necessary information, you will need to report new employees to the appropriate state department.
#7 Training
Once the hire is official, it’s time to start training! In addition to on the job-training, you will also want to create references, procedures, and policies to reference later and when questions arise.
Questions?
If you are considering hiring your first employee and have questions, we have an HR iMentor who can help guide you through the process and answer questions. Contact us for more information!