Whether you’re hiring your first employee or your tenth, it’s important to take great care when choosing someone to join your staff. On a small team, each person must be a strong contributor and have unique strengths in order to help drive the business forward. Choosing the wrong person can lead to headaches, lost income and conflicts on the job. Choosing the right person can mean a big lift to your productivity. Whether you’re hiring a family member, friend or someone new to you, these are steps you can take to choose the right person for your business and set that individual up for success.
1. Decide when to hire an employee
In a few cases, like in a restaurant setting, hiring employees may be necessary from your first day in business. More often, a business owner will handle all aspects of their business until they realize it’s too much for one person to manage. Here are some questions to answer when considering whether to add an employee.
- Do you want help? For some business owners, keeping the business small and manageable is a top priority. Others may be struggling to manage workload or have opportunities they can’t take advantage of because they don’t have the time. These are signs it’s time to hire someone.
- Can you afford help? Remember that the actual cost of an employee isn’t just the amount you pay that person per hour. It also includes any paid time off, health or retirement benefits and other expenses. Sit down and take a look at your budget; decide how you expect your profits or productivity to increase if you bring on someone new; calculate the salary, benefits and overhead you’ll need to pay if you hire an employee, then see whether you have room in your budget to cover the costs.
- What type of employee do you need? You may be able to hire a part-time or temporary employee to help out for a few hours a week or during a seasonal rush. As you grow, you may need full-time, permanent employees.
2. Know the laws
Before you hire your first employee, it’s important to learn about legal requirements around choosing employees and how you treat employees once they’re part of your team. Some laws only apply to businesses with a certain number of employees, so get familiar with the requirements that apply to yours. Even if you have a small team now, it pays to know the laws so you’re ready if your business, and your number of employees, grow.
3. Write a great job description
Even if you’re hiring someone you know, it’s important to write out a clear job description. This will help you make sure that you and the employee agree on the responsibilities of the job. If you’re hiring someone outside of your company, the job description is also an important opportunity to attract great candidates. For this reason, you should make sure it’s clear, thoughtfully written and easy to understand. Start by choosing a job title that describes what the role will be. Speak directly to the candidates in the description, being clear and relatable. Also, make sure to communicate the positives of your business. Job seekers will look for tasks, experiences and responsibilities that line up with their skills, so add as much detail around these points as possible. Finally, reach out to friends, family and business contacts to let them know you’re hiring, and advertise the listing where you think you’ll reach your ideal candidates best: through a help wanted sign in your business window, via online job sites, with flyers, at local events, on social media sites or through community job boards.
4. Start interviewing
If you’re considering more than one candidate for a job, you’ll need to set up interviews with your top applicants to find out more about their interests and experience. If you have many applicants and want to filter out the least promising ones quickly, you can conduct a first round of phone interviews to determine which ones you want to meet face-to-face. When deciding who to interview, consider how well each candidate’s resume is presented, whether their skills match the job description, educational background and how long they stayed at previous jobs. You’ll also want to try and determine whether the person is dedicated to their job and takes pride in their work. A sense of character and commitment can be even more valuable to your business than a particular set of skills. Here are more tips for ensuring a smooth interview process:
- Prepare a list of interview questions. The answers candidates give you should provide you with the information you need to make a decision on which one to hire. Questions should cover experience, skills, strengths, likes/dislikes and even personality traits to help you find the right fit for your team. Many sites offer lists of important questions to ask, which you can use to create yours. Note that there are some questions that are illegal to ask candidates during an interview, including questions about their race, sexual orientation and age. Get familiar with the laws around pre-employment inquiries provided by the EEOC and local law.
- Take notes on their responses. Their questions can show what they know about your business, how interested they are in the job and any concerns or ideas they may bring to the business.
- Ask what questions they have for you. Their questions can show what they know about your business, how interested they are in the job and any concerns or ideas they may bring to the business.
- Be clear about expectations and goals for the business. In some cases, a candidate won’t be that excited about the business or will disagree with your overall goals; it’s helpful to have this information upfront when choosing the right fit.
5. Make your choice
You’ve spoken to a range of candidates and you’ve found that needle in the haystack. This candidate seems excited about the position and has the skills, experience and personality your company needs. Before you formalize the offer, you'll need to:
- Offer compensation and other possible benefits in a written letter
This document will give the potential employee a clear picture of all that you plan to provide them in exchange for the job. The benefits you outline in the package may include paid days off, sick leave, retirement benefits, health benefits, maternity and paternity benefits or a discount on company products. You’ll want to be sure that the salary you offer aligns with what others in your industry are offering for similar jobs. This will help you attract strong employees and ensure that they’re happier on the job. To research average salaries in your area, there are several resources available online that provide salary information. If you are hiring someone you know, it’s just as important to make sure you both agree on these details and have them in writing, as it will save you from any miscommunications regarding pay, days off or other compensation-related topics later.
- Verify information
Call past employers and other references the candidate has provided to see what they have to say about the individual. What were her strengths and weaknesses? What did he bring to the job? In businesses across many industries, employers run background checks to ensure the person they’re hiring has represented himself or herself truthfully. In some situations, such as a job requiring the employee to drive or operate machinery, drug testing may be done to ensure the candidate is safe to carry out the required tasks of their job.
- Be prepared to negotiate
Negotiation about salary is often a normal part of the hiring process. In order to negotiate well, you’ll need to know the salary range for similar businesses in your area, the value the employee will bring to your business, your budget for the position and how high you will be willing to go for this particular candidate. Make sure to calculate the value of any paid time off or benefits you provide, as these are an important part of the overall package you are offering. In most cases, you and the candidate will be able to settle on a number. If you can’t reach an agreement, you may need to consider other, more affordable candidates.
- Sign the final offer letter
To formalize the offer, you’ll want to outline compensation, job description and benefits in a final document, called an offer letter. Even if you make the offer verbally, it’s important to follow up with a formal, signed document that solidifies the agreement.
6. Prepare for your new employee
Once an employee has accepted your offer, you can set a start date and begin tasks like getting paperwork in order. This is an important way to ensure a smooth transition before the first day on the job. If this is your first employee, you will need an Employer ID, which you can apply for through the IRS. When it comes to your employee or employees, these are some of the required forms you’ll need to have on hand.
- Job application form
This can be collected during the hiring process or before the employee begins. It includes education and work history information, and protects you as an employer if the person has provided any fraudulent information that led to their hire.
- Form I-9
This form requires the employee to prove his or her identity and work eligibility. Once you receive their completed form and documentation, you must review it and keep it on file.
- W-4 form
This form calculates federal tax withholding, and all employees must complete it before receiving their first paycheck. Employees may change their withholdings over time; you are required to keep only their most recent W4 on file.
- State withholding and registration
Many states in the U.S. collect income taxes and require a form to calculate state tax withholding; employees must complete the form before receiving their first paycheck. Contact your state department of revenue to find out the requirements for your state.
Note that there are some differences in tax employment rules for employees in your family. You can learn more about those here.
In addition to these forms, you’re also required to maintain the following records for every employee. As you incorporate a new employee into your business, collect any of these details you don’t have and create either a physical or digital folder where you keep them on hand and up-to-date:
- Employee’s full name and Social Security number
- Address, including zip code
- Birthdate, if younger than 19
- Sex and occupation
- Time and day of the week when employee's work week begins
- Hours worked each day
- Total hours worked each workweek
- Basis on which employee's wages are paid (per hour, per week, by project, etc.)
- Regular hourly pay rate
- Total daily or weekly earnings
- Total overtime earnings for the work week
- All additions to or deductions from the employee's wages
- Total wages paid each pay period
- Date of payment and the pay period covered by the payment
Check with your local department of labor to determine whether there are other documents you are required to maintain.
7. Consider an employee handbook
Even if you have just one or two employees, documenting your policies and expectations in a short list or an employee handbook can be a great way to make sure you have communicated business procedures clearly. For a very small business, this may be just a one-page document calling out important details about your business, which you can expand on as you grow. For a slightly larger business, you may want to put more time into creating a longer, more in-depth handbook. Whatever your business size, consider having a human resources specialist or attorney take a look at your employee handbook to make sure it meets state requirements, such as a list of employee rights. Here are some of the items employee handbooks usually include:
- The company’s mission statement
This is a formal statement that sums up the goals of your business. By including this, you will communicate your business identity to all employees up front.
- Paid time off, if you provide it
Explain how many paid days off employees will be provided with per year, if any, including both sick and vacation days. Spell out how much of the time, if any, rolls over into the next year if unused. You may also include information around overtime.
- Rules around behavior
Cover overall rules, such as workplace cleanliness, dress code, late policies and requirements around interactions with other employees. Consider including a list of workplace rights as well.
Indicate when employees can expect to be paid each month, along with any practices or requirements around tracking time and payroll.
List which holidays employees can expect to get off and whether they’ll be paid for these days.
- Maternity and paternity benefits
If you have 50 or more employees, you will be required by the Family and Medical Leave Act to provide employees with 12 weeks of unpaid maternity or paternity leave in the event they have, adopt or foster a child. Although it isn’t required of them, some smaller employers also offer paid maternity and paternity leave. This can be an important factor for employees, so consider whether providing leave will be something your business can afford. There are differing laws related to leave for parents in every state, so you’ll also want to familiarize yourself with the laws in your state.
Make sure to include a line for the employee’s signature and, once it’s signed, keep a copy on file for every employee.