How to hire employees for your small business

Isn’t business growth exciting? When you get to the point where you’re too busy to manage the day-to-day yourself, it’s time to think about expanding your team. Hiring employees for your small business is something you’ll need to do when the time is right — and timing is everything.

Small business owners don’t often have the luxury of time or vast resources, so working with a recruiter isn’t always a viable approach. If this is your first foray into hiring, we have plenty of actionable tips and advice to guide you through the process and get you to the finish line.

A successful hire advances your efforts and lets you focus on what you do best, but hiring mistakes can be costly. It’s best to go into the hiring process fully prepared and with your eyes wide open to reap the maximum benefits for your small business. 

Ready to hire your first employee? Here are some tips for doing it right and making the hiring process as smooth as possible.

1. Hiring employees vs. contractors vs. temporary help

It’s easy to get overwhelmed running a business on your own. But just because there’s a lot of work to do doesn’t necessarily mean you need an employee.

Think long and hard about what you envision a potential employee doing. Is there enough consistent work to warrant hiring someone? Is it just a matter of needing help to get caught up periodically? Or is it project-based? If you can’t provide consistent, ongoing work for an employee, you might do better by hiring a temp or a freelancer to fill the gaps.

When you hire employees, it means payroll, which means additional reporting requirements, payroll taxes, and time spent training them and managing their work. All of this can have repercussions for your bottom line. 

Employees work for you, and you supply them with the tools and resources they need to do their jobs. You pay them an hourly wage or salary for the tasks and duties you assign to them.  

Contractors and freelancers often have several clients at the same time. They have their own tools and software and are usually highly skilled, so they can hit the ground running. You won’t have to train them, and they’ll invoice you for the work done according to your agreement. Once they finish the project, they’ll move on – but that doesn’t mean you can’t re-hire them if needed. 

Temps are usually (but not always) hired through agencies. The agency employs them, so you aren’t actually “hiring” them. If they don’t work out, the agency will replace them with someone new. 

2. Can you afford to hire an employee?

Consider the ongoing cost of being an employer. You’ll need to pay not only wages, but also employment taxes, federal taxes, social security tax, Medicare, pension, unemployment tax, and other taxes, depending on your state employment laws. 

Payroll taxes can be anywhere from 5-10% of the employee’s wage, and they must be paid monthly. If you do your own business accounting, you’ll need to factor in extra time (and funds) to manage this.

You also need to consider health insurance and any other benefits you want to offer to your new employee. We’re in an uber-competitive employment market right now, so you’ll need to think about what you can offer to make your new employee happy — but it needs to make sense. If hiring an employee will help you do more, increase productivity, boost sales, and make your life easier, then go for it. But if it’s going to eat into your bottom line without adding any discernible value, maybe now’s not the time. 

3. Get an EIN

Once you commit to becoming an employer, you’ll need to make it official from a government standpoint. It’s critical to take care of the legal stuff before you hire, and the first step is getting an employer identification number (EIN). Think of your EIN as a little like an SSN, except it identifies your business on all documents related to paying your employees.

Check the IRS website for details on who needs an EIN and how to apply. It’s pretty straightforward. All you need to do is fill out a few forms and disclosures, and the IRS issues your number. You can apply online, and it’s free. 

4. Legal compliance

You’ll need to understand your tax and legal obligations as an employer. Most of the information can be found online, but you might want to speak to your accountant or a financial professional if you have any questions. Some of these requirements include:

• Obtaining workers’ compensation insurance
• Hanging Department of Labor posters according to state and federal guidelines
• Collecting and filing W-4 and I-9 forms from new employees
• Reporting and paying payroll taxes
• Withholding taxes from paychecks according to current guidelines
• Filing yearly W-2 forms for each employee
• And more, depending on your state 

5. Setting up your payroll

Payroll is a little more complex than just writing a check. You’ll need to decide how often you’ll pay your employees and set up your accounting system to help you track and manage the process. If you’re an Invoice2go user, you can integrate with Gusto and automate the entire payroll and reporting process. 

6.  Write a job description that kicks off an effective hiring process

Before you post your ad or speak to anyone about your hiring plans, you’ll need to be clear on what you want your new employee to do. While writing a job description might seem easy on the surface, there are many things to think about.

First, make a detailed list of daily tasks your employee will be responsible for. Describe the working conditions and think about job requirements beyond skills and experience. 

For example, is it a physically demanding job? How much will they need to lift? Will they be standing or sitting? Can accommodations be made for disabled individuals? Does it require travel? Certifications or certificates? Many of these issues are compliance-related, and though there’s no legal requirement for you to have a job description that outlines these factors, it’s the first thing a lawyer will ask for in case of a dispute. Better safe than sorry, in other words. 

The better your job description is, the easier it’ll be to attract the right people, so that’s always a good place to start. Avoid biased or discriminatory language and really think about what’s an essential skill (hard skill) versus what can be learned (soft skill). For instance, if you’re a restaurant hiring servers, don’t use “waiter” or “waitress” in the job description. This gendered language can cause prospective applicants whose gender identities don’t align with the job title to disqualify themselves from the hiring process. 

7. Attracting and hiring employees that are a good fit

A successful hire not only has the right skills but also fits with your company culture. How do you describe your company? What are your values? Establishing an employer brand based on these ideas helps you attract like-minded people.

Job-seekers today are looking for more than just a decent wage. They want to know that the work they do has meaning, and that the company they work for shares their values or stands for something besides shameless commerce.

Besides being the equitable thing to do, commitment to diversity also widens your talent pool, gives you access to a broader viewpoint, and could help you expand your market share. You might even want to state outright that you’re  an inclusive employer, offering job accommodations for moms, flexible hours, and/or a hybrid (or remote) work environment.

It’s a lot to think about, for sure, but putting the thought in at the outset supports more sustainable results. 

8. Spread the word: let your network know you’re hiring

Before you post anything online, let your network know you’re hiring. Some of your best candidates may come as referrals from colleagues, competitors, suppliers, vendors, or neighbors.

9.          Post your ad

There are a bunch of job boards and marketplaces to post your ad, but beware — if you haven’t put the work into your job description, you’ll likely get a lot of unqualified applicants. Be sure you’re clear on what you’re looking for and tell candidates what they need to do to apply. 

Going back to the topic of your employer brand, think about your website, social pages, any online reviews, etc., since many job candidates will search that information before they apply. What does your employer brand say about you? If you need to tidy up some of this information, get it done before submitting your job posting. If you find anything negative out there that you can’t change, be prepared to answer questions about it. Better to be prepared than blindsided. 

10.      Prepare for your interviews 

You’ll want to be prepared for the interview process with a potential employee. Review each resume with care and make notes on questions you’d like answered, such as why there was a gap in employment. Considering how many people left their jobs during the pandemic, there are likely reasonable explanations for things like that. Still, it’s good to ask as it helps you understand the person and their motivations.

Say the position you’re hiring for requires a specific (soft or hard) skillset; frame some behavioral questions around that. For example, you might want to ask the candidate about their most significant challenges and how they overcame them. If the position is more technical, you could ask them questions specific to the work they’ll be doing or the tools they will need to use. 

Keep in mind that some things can be learned. You might be faced with a few suitable candidates, but if it came down to choosing between a highly skilled person who doesn’t fit in with your vibe and a less-skilled person who is smart, eager, and genuinely wants to work for you, you’d be better off choosing the latter. Go with your gut!

11. Invite them to ask you questions

Interviews should never be one-way. Your candidate will probably want to know things about you, your company, and its culture, so encourage their curiosity. Some of the more common questions you’ll be asked will revolve around hours, days off, and work environment. If you haven’t considered whether some or part of the job could be done remotely, be prepared to answer that question, since chances are, it’ll come up.

You might be asked about career paths and advancement, skills training, or even apprenticeship. Be clear about your ideas around this, since it may influence the candidate’s decision.

If you’re hiring for a new position, think about what the workday will look like. Or, if you don’t know, don’t be afraid to say so. You can tell the candidate it’s a new position, but x-y-z is what you’re hoping for. Showing potential lights the way forward.

12. Making the offer

Setting the right salary for qualified candidates is critical. You don’t want to bankrupt yourself, but you can’t shortchange your employee, either. Look at market rates for the job category and the cost of living in your area. You should also think about pay ranges if you need to negotiate with a highly-skilled individual.

At the very least, ensure you’re offering a living wage. To sweeten the deal and get an edge on the competition, you might also want to consider job title, employee benefits, holidays, and family leave allocations. Bonuses are also nice to offer. When you can tie them to performance or specific milestones, they’re a win for you, too! 

13. What about background checks?

If you feel you should run a background check for your job candidates, be sure to check out the current state and federal laws around that. It’s not illegal to ask for a background check, but you need to comply with EEOC guidelines. Asking for specific information on race, ethnicity, nationality, religion, disability, medical history, age, financial history, or criminal record is considered discriminatory and can’t be used to make an employment decision.

Of course, if there are reasons why a medical condition or criminal history might interfere with doing a job, you’re allowed to “go there.” Still, you must disclose that to the candidate before you run the check and obtain their written permission. You can learn more about EEOC standards and background checks here.

14. Get ready for your first day! 

Once a candidate accepts a job offer and signs their paperwork, get ready to welcome your new employee. A top-notch onboarding experience can increase employee retention by 82%, and that’s exactly where you want to be. 

• Provide new employees with written copies of company policies, such as emergency procedures, IT security policies, etc., and give them enough time to review before their first day on the job
• Create logins for them for systems and software they will need to use
• Assign keys or passcodes to access work areas, if applicable
• Order business cards in advance, if needed

On their first day:

• Set your new employee up with workstations, devices, computers, or equipment they’ll need 
• Introduce them to their colleagues and assign them to shadow a trusted employee for a couple of days, if applicable
• Show them around the office or shop
• Let them know about break times and where they can take their breaks
• Do a check-in with them at the end of the day to see how they fared
• Celebrate the win for your small business!