Hiring Your First Employee: 5 Important Things You Need to Do

By Matt Straz

Chris is an ambitious guy who is finally getting his startup off the ground--and he couldn’t be happier. He thinks he’s ready to start growing his team. While Chris might have had his company’s first bright idea, one thing he doesn’t have is a background in human resources.

Just having the resources available to add someone to your team means you’re on the right track. However, as a first-time, growth-driven business owner, there are a number of things to consider before you write that first offer letter and extend that firm handshake.

Tackling these five HR tasks before bringing employees on board will put new business owners, like Chris, in the best possible position for sustainable startup success:

1. Register for an Employer Identification Number.

While this might not be the most exciting first step to becoming the boss man, it’s a necessary one. An Employer Identification Number (EIN) means that you are legally allowed to hire employees and is used to identify your business for tax purposes.

If you don’t already have an EIN--and you might, depending on the type of business structure you registered for--register for one through the IRS website. Not sure whether you need an EIN? If you answer “yes” to any of the following questions provided by the IRS, you do:

• Do you have employees?
• Do you operate your business as a corporation or partnership?
• Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
• Do you withhold taxes on income (other than wages) paid to a non-resident alien?
• Do you have a Keogh plan?
• Are you involved with any of the following types of organizations?
  • Trusts, IRAs, Exempt Organization Business Income Tax Returns
  • Estates
  • Real estate mortgage investment conduits
  • Non-profit organizations
  • Farmers’ cooperatives
  • Plan administrators

If this isn’t your first rodeo as a startup owner, you may still be required to obtain a new EIN or even multiple EINs. Be sure to check out the IRS website to find out if you’re in need of a new one.

2. Understand tax and classification reporting.

To avoid unnecessary fines and ramifications that result from improper tax filing or misclassifying employees, it’s crucial for new business owners to fully understand tax and classification reporting requirements.

In addition to salaries and wages, you’re also responsible for a number of other payroll-related expenses, including federal income tax, Social Security tax, Medicare tax, state income tax (where applicable), and various other local tax withholdings.

To stay on top of these employment taxes and ensure their timely and accurate calculation, filing, and deposit, consider automating the process. Not only will it save you time, but it will also keep you in line with ever-changing state and federal regulations.

When it comes to classifying employees for tax purposes, you must determine whether the person you’re hiring would be considered a traditional employee or an independent contractor. The IRS outlines the criteria for each classification, but, in general, worker classifications are based on the degree of control and independence an individual has.

3. Research employee benefits.

Startup benefits should ideally go beyond the ping-pong table and fully-stocked fridge. While those things are nice to have, the most attractive benefits are the ones that take care of employees.

Small businesses (those with fewer than 50 employees) may not be required to provide health-care coverage, but when it comes to attracting job seekers, having basic insurance such as medical and worker’s comp can make you stand out from the competition.

To choose the right offering for your startup, work with benefits experts (e.g., licensed brokers) to design a benefits plan that’s both affordable and has the right deductibles and premiums for your people.

4. Design an onboarding program.

Startup or not, you need to have an onboarding program designed to get new hires off on the right foot. While newly-launched startups might not have the most exciting company tour, the onboarding process is necessary nonetheless, as it prepares new hires for early success.

At the very least, create a welcoming environment for your new hires—set up their desk space, have their computers ready, and take them to lunch. While these may seem like insignificant things, they can make a world of difference when it comes to making new hires feel welcome.

Additionally, make the most of a new hire’s first day by showing them everything from how to work the printer, to how to use the office phone, to where the bathroom is. The key is to anticipate their questions and have the answers ready for them beforehand.

As you bring more employees on board, develop your onboarding process based on feedback from your first few hires. What did they find most useful? What was most confusing for them in the beginning? What did they think the process was missing? This feedback can help you create an onboarding program that will better prepare new hires for the road ahead.

5. Assess your hiring needs.

Once you’ve taken care of all of the nitty-gritty human resources requirements, determine exactly what you’re looking for in an employee. The first few employees at your startup are crucial. They set the tone for your company and can either make or break your startup’s chance for success.

First and foremost, determine who you need. If you’re like Chris, you’ll probably only be able to hire a couple of employees to start. Hiring well-rounded individuals who can wear multiple hats is a great way to fulfill (and afford) more roles.

Additionally, create clear job descriptions and expectations. Not only will these help you better evaluate potential candidates, but also it helps attract the right candidates.

So how do you hire for a corporate culture that doesn’t yet exist? The key is to hire based on your values. Your values will determine what your business stands for, so employees need to hold similar beliefs. Ask value-based questions during the interview to help better determine if a candidate is predisposed to sharing what you and your company value most.