November 20, 2014 Starting and Managing a Small Business

Increased sales and more customers are always welcome, but it can get overwhelming without the help of a few extra hands. Hiring an employee usually becomes necessary at a certain point for most successful businesses, and this article will walk you through hiring tips, the hiring process, and your responsibilities as an employer.

When Should You Consider Hiring an Employee?

If you’re a solopreneur, an entrepreneur who is running your businesses without help, you’re probably comfortable with your independence and you may not feel the need to hire an employee. Or perhaps you’re getting the help you need from your family members. However, depending on the type and speed of growth of your business, hiring an employee might be a good investment.

Here’s when you should seriously consider hiring an employee:

  • When your business is flourishing and you find it more and more difficult to carry out your plans on schedule.
  • When demand is greater than your production on a consistent basis. For instance, when you’re putting limits on the quantity of your product that can be ordered because you can only produce “x” amount a day, but the demand exceeds the “x” amount.
  • You need help in a specific area that is crucial to your business and you’re either not qualified for the task or you dislike it. For example, if you’re not tech savvy and you want to organize your inventory, invoicing, or general bookkeeping  using software, or if you want to start using Facebook or Instagram to promote your business, hiring someone who’s more skilled at these tasks may be worthwhile.

Employees are valuable assets, but like anything valuable, they come with a price to pay. Before hiring, thoroughly think through all of the costs associated with hiring and training, plus the approximate return on investment you expect. Make sure you’re ready to be a manager to somebody and consider all of the responsibilities that come with that. If you think you’re ready, then read on for information about how to hire an employee.

7 Things to Do Before You Hire Your First Employee

Now that you’ve determined your business would benefit from hiring an employee, it’s time to start the process:

  1. Apply for an Employer Identification Number (EIN) or Employer Tax ID Number.

    This number is necessary for reporting taxes to the IRS. If you have a business bank account, chances are that you already have an EIN.

  2. Complete Form I-9.

    This is a form that you as an employer need to fill out to verify that the employee is legally allowed to work. Look over the necessary documents to confirm your employee’s eligibility to work in the United States.

  3. Have your employee fill out a W-4 form.

    This is an important tax form that you need to submit to the IRS. This form is used to evaluate an employee’s personal tax situation and to calculate the amount of federal income tax that should be withheld from their pay.

  4. Report your hired employee to your state.

    Within 20 days of hire, gather required information about your employee and report it your state. The information needed varies from state to state, but in general, it’s information like your employee’s name, address, Social Security number, and your EIN. To find out how, google “new hire reporting” and your state’s name.

  5. Attain Workers’ Compensation Insurance.

    Workers’ comp insurance provides coverage for any medical condition or injury that can happen to your employee during work or doing job-related duties outside of work. You must carry this insurance through a commercial insurer. This is an essential insurance that you must have before hiring employees.

  6. Put up required notices.

    Federal and state governments require employers to display certain posters or notices that inform the employees of their rights and the employer’s responsibilities to its employees. Check out your state’s Department of Labor for the required notices.

  7. Responsibilities as an Employer.

    Organize a file for your employee(s). Have copies of all the forms mentioned above, and include their personal information, payroll deductions, records of hours worked, and records of compensation.

These are general guidelines that cover many of the major requirements. However, there may be other requirements based on your state and type of business.   

The Hiring Process

Now that the decision is made and you’ve got the basic requirements covered, it’s time to start hiring! Here are few steps to help you find the right person:

Write a job description.

Identify the areas and tasks you need help with and what skills and experience your employee should bring to your business. Write down the expertise and characteristics you’d like for your potential employee to have. It can be anything from, ‘must be bilingual in English and Spanish’ to ‘must be energetic and outgoing.’

Decide how much the job pays and what the hours are.

Scheduling is an important factor since your employee must be able to work during the busiest days and hours of the day. Along with hours worked, the experience and skill level of the employee can factor into how much money you choose to pay.

Advertise the job opening.

Determine the right place to look for your employee. You can ask family, friends, and professional contacts for recommendations. If you want a wider range of candidates to choose from, post the job on employment websites. Two options to consider are indeed.com and monster.com.

Prepare to interview candidates.

Come up with questions that will help you get to know the candidate better, assess their experience, knowledge, and skill base, and their level of interest in the position.

Create a business description.

Make sure you clearly explain your business and its culture to the candidates. Include the tasks they’ll be required to carry out, and the work ethic that you expect from your employees.

Remember that two of the most important qualities of an employee should be trustworthiness and likeability. Having desirable skills are important, but personality and character are crucial. After all, you will be spending a lot of time with your employee and you should be able to enjoy his or her company.

 

Top Articles on Growing Your Business

What Is a Marketing Strategy?

Small Business Saturday 2014

Let's Get Started

In just 15 minutes, you can be on your way toward applying for a small business loan. Start by telling us a little about yourself.