The following questions cover just about everything you need to ask yourself before hiring your first employee.
Do you really need employees?
This question may seem pretty obvious to you, but, do you actually need an employee?
There are lots of reasons for hiring your first employee–if you have more work to do than you have hours, if you’re growing fast and you can’t keep up, if there are jobs you dislike, or if there are jobs that someone else could do better. However, just because you have a lot of work doesn’t mean you need to hire an employee to help you take care of all of it. There are lot of other options to help you shed work, like a 1099 subcontractor, virtual assistant, or even software.
If you’re sure that the best way forward is going with a hired, full-time employee, then it’s in your best interest to know exactly what kind of help you need. “Someone to do my extra work” is too vague.
Break down what you need into roles that you can clearly advertise: help in sales or operations, a programmer, or even something as simple as a full-time cashier. The more you can break down your needs, the easier it will be to outline the job’s roles and responsibilities and advertise the role to potential hires.
Who will hire, fire, train, and manage?
Speaking of hiring new employees, who will be doing your hiring, interviewing, and official job offering? You?
How about your firing and managing? Take some time to flush out what that process might look like and decide if you’re ready for it or not.
In my experience, most employers don’t want to fire because they don’t want to hurt other people. Ironically, they forget that one of the biggest ways to avoid firing an employee is to set high standards when hiring. Hiring right is the best way to avoid that uncomfortable firing process—which, in my 30 years of business, has never gotten any easier.
Of course, there are a lot of steps between hiring and firing, and for that you’ll need a good manager. And if this is your first employee, that manager will be you.
Keep in mind that your first employee will not come into your operation knowing exactly what to do. You’ll need a plan for onboarding new employees and continually training them. How good are you at explaining why and how your business runs, or the processes that go into making it successful? If that’s not your strength, you may want to change your hiring process to reflect this, targeting applicants with years of experience. Or, perhaps you’ll need to break down the jobs for which you’re hiring into smaller, more easily understood and managed roles.
How will you begin the search for your first employee?
Finding employees isn’t hard. Finding good employees is.
Marketing 101 is all about knowing your customer and where to find them. The same is true for hiring employees. Finding good employees is all about knowing what your work environment is, what you do, what your values are, and where the people who fit those criteria look for jobs.
There are many ways to go about posting jobs–from specialty job boards to resume aggregators to recruiters. The option you choose will be dictated largely by the kind of job you want to fill, and there may be associated barriers. You will need to know how to write a job ad, and you will need to keep in mind that there is an expense associated with posting a job. Depending on the specialty talents you want, the expense may be worth it.
An emerging source of employee talent is social media. You’d be surprised how valuable LinkedIn, Facebook, and even Twitter are at helping to fill jobs or source potential applicants. One added bonus of having a strong social following, at least when it comes to filling job openings, is that the people already tuned into your social feeds often value what you do and why.
How are you going to track your employee’s time and attendance?
My dad has a saying, “Inspect what you expect.” That’s true whether you’re buying a car, having work done on your house, or hiring an employee.
Maybe you feel that measuring your employee’s workplace performance can be a bit invasive. But lost productivity in the workplace is a major issue. A 2013 Gallup poll found that 70 percent of the American workforce is either disengaged or actively disengaged. In today’s business landscape, there are so many ways to track performance metrics that employees can feel a little like they’re always being watched. Yet if you’re paying an employee, don’t you want to know that you’re getting 100 percent of what you’re paying for, not 30 percent?
You may not want to install cameras or keyloggers at your company, but you will want to track employee time and attendance at work. You need to know what hours you’re paying for, if your employees are showing up during those hours, how much time they’re missing–and you need to ensure you’re staying compliant with their legal rights as employees. Logging time and attendance is crucial for this, and, in order to make sure your employees are doing it, it needs to be as simple as possible.
If you’ve not yet hired an employee, consider how you’ll track their time and attendance, as well as other forms of productivity. This can be done using mechanical time punch, spreadsheet, or online time and attendance software. In all cases, you’ll want to know what you’re paying for, and this is an area you can automate and train an employee to do on day one.
Who will run payroll and calculate payroll taxes?
Running payroll as an employer is one of the bigger departures from doing a model like contracting, wherein you simply pay for hours or services via invoice. Paying an employee is not so simple. As the employer, you are responsible for the filing and remittance of local, state, and federal payroll taxes. You’ll also need to make insurance deductions and any benefits-related contributions. Calculating all this can be complicated.
Some employers hire CPAs to do all their business’s taxes and manage payroll. But CPAs aren’t cheap! So why do employers hire them? Because making tax mistakes is very costly, and spending the hours required to learn payroll can be incredibly time-intensive.
Payroll is a cost center operation that, if you’re not familiar with it, can eat up a lot of your time and money. There are payroll software solutions out there that expedite this process for a fraction of the cost of a CPA, and offer hands-on control for the employer. Some even feed time and attendance into the payroll system, saving you even more time.
If you really want to keep the time and money that hiring an employee is intended to help you keep, it would be in your best interest to consider a software-based solution for payroll.
What employment forms will you need to deal with?
Paperwork is never fun, and the extra administration that you’ll deal with after hiring your first employee is something you should factor in when you decide to bring one on.
What employee data will you need to keep in each employee’s file?
This topic may open your eyes a bit. Simply put, think about anything that could get you sued if you do, or do not, have the right paperwork on file according to IRS requirements. You may not be thinking about getting sued now, but you need to. Oftentimes what you keep on file about your employees ends up getting used in legal situations.
On the other side of the equation, you’ll also want to keep work performance data in your files so you can track whether your employees are meeting their performance goals, improving, or falling behind.
Do NOT keep personal information in an employee file, such as political views or religious beliefs. That stuff can help build arguments against you.
Here is a short list of mandatory items you should keep around courtesy of FindLaw:
- A job description for the position that the employee holds.
- The job application and resume of the employee.
- Your offer of employment to the employee.
- The employee’s Form W-4 (Employee’s Withholding Allowance Certificate).
- A receipt or signed acknowledgement of the employee receiving the company’s employee handbook.
- All performance evaluations.
- Any forms relating to benefits that your employee enjoys.
- Emergency contact and next of kin information.
- Any written complaints from customers or coworkers.
- Awards or certificates of excellent performance on the job.
- Any documents pertaining to completed training programs.
- Records and notes of any disciplinary proceedings taken against the employee.
- Any notes or warnings on bad attendance or tardiness.
- Any employment contracts, written agreements, or acknowledgments between the employee and the employer (including but not limited to non-compete agreements, agreements about company vehicle, etc.).
- Any documents that relate to an employee leaving the company (such as an exit interview, or a document that lays out clearly the reasons why an employee was terminated). In addition, this can include documents related to continuing benefits (such as COBRA), or agreements about future filings for unemployment benefits.
What employee benefits are you going to offer (if any), and what are they going to cost you?
If you can’t answer the question, “How much does an employee cost?” you might want to get familiar with the answer. It’s the reason some businesses, while they pay their employees more, can’t compete with other businesses that pay less but offer better benefits packages. Total compensation is the pay amount, plus the value of all the benefits you offer an employee. Creating the right total compensation package is crucial to landing the right employees and making them stick.
Let’s start with what you’re not required to provide, but will most likely want to provide just to stay competitive: retirement plans, health plans (unless you’re in Hawaii), dental or vision plans, life insurance plans, and paid time off (PTO).
Now, be honest. Do you know anyone who doesn’t offer any of those things? If so, do people work at those places for long periods of time? Yes, offering fewer benefits may save you money in the short term, but it will increase your employee churn rate, which can really hurt productivity.
As for the items you’re required to provide for employees, you must:
- Give employees time off to vote, serve on a jury, and perform military service.
- Comply with all workers’ compensation requirements.
- Withhold FICA taxes from employees’ paychecks and pay your own portion of FICA taxes, providing employees with Social Security and Medicare benefits.
- Pay state (SUTA) and federal unemployment taxes (FUTA), thus providing benefits for unemployed workers.
- Contribute to state short-term disability programs in states where such programs exist.
- Comply with the Federal Family and Medical Leave (FMLA).
Keep in mind that the more benefits you offer, the more expensive it gets. Not only for the cost of total compensation, but also the expense of all the tangential tasks related to the benefits. For example, spending time to explain benefit options to a part-time employee, and then finding the time to discuss and change their total compensation package if they move to full-time work.
What about figuring out all the health care plans that are out there? How do you pick the right one, and figure out if it is the best price? And, is it a plan your employees even want?
Hiring your first employee is a major step in the growth of your business, as well as a major transition. The important thing to remember is you can do it. If you’ve made it this far with your business, you can take this next step without too much trouble.
One word of advice: document everything you do during the hiring process. Documenting the process–and lessons learned from completing that process–is especially useful when hiring your first employee. Why? Because many of the materials and steps you take now will be used again when you hire your next employee!