If you’re ready to hire your first employee, you might be feeling a little overwhelmed. After all, there are a lot of steps to the process, and a seemingly endless list of hoops to jump through.
But when you break it down, it’s really not that complicated. You just need to get organized, and know what you’re dealing with from the beginning.
Before you start interviewing candidates, there’s a bit of legwork you’ll want to take care of first. Here are the points to cross off your list before you actually start meeting with potential new employees.
1. Get your EIN
Before you hire your first employee, you’ll need to set up your EIN, or Employer Identification Number. Also known as a federal tax ID number, this will allow your business to be recognized for tax purposes.
You can read all about the process of getting your EIN in our article: How to Apply for a Federal Tax ID Number.
2. Register with your state’s labor department
You’ll need to register with the labor department in your state before you begin taking on employees. Check out the U.S. Department of Labor page to get started, which has a state-by-state breakdown.
Additionally, when you have employees, you’ll be required to pay state unemployment compensation taxes. To report your federal unemployment tax, you’ll need to fill out IRS Form 940.
Whether or not you’ll have to pay this tax is dependent on the size of your business (though all but very small businesses should expect to pay), so read up to make sure you know where your business stands.
3. Set up your worker’s compensation insurance
You’ll need to set up worker’s compensation insurance, in case an employee is injured on the job. While some states exempt very small businesses from having worker’s comp, it’s generally a good idea to assume that you’ll need it, and look into the options for your business early, before you begin hiring.
You can likely bundle worker’s compensation insurance through your current insurance provider, but it’s still a good idea to shop around.
Remember, as with many of the legalities of starting a business, laws vary state to state, so make sure you research worker’s compensation insurance in your own state. The U.S. Department of Labor’s subpage on worker’s compensation is a good place to start.
4. Choose a payroll system and familiarize yourself with employer tax withholdings
Once you start paying your employees, you’ll be responsible for withholding a portion of their income and depositing it to the IRS, as well as making Social Security and Medicare tax payments.
The IRS page on Depositing and Reporting Employment Taxes gives you a rundown of the forms you’ll need to fill out. You should also be aware that your state may require you to withhold taxes, so make sure to research your state specifically.
In terms of choosing a payroll system, you’ve got plenty of options. At Palo Alto Software, we’re fans of Zenefits, but the program you choose ultimately will depend on your needs.
Check out the “human resources” section of our article 85 of the Best Business Tools For Startups for more options and info.
Prepare to hire:
Okay, there’s the boring part out of the way.
Now comes the fun part—actually meeting potential candidates.
Your new employees will help you grow and shape your business, and in turn contribute a great deal to your culture and company as a whole, so make sure you can invest some serious time and energy into making sure you find the perfect fit.
5. Write a job description
First thing first: You’ll want to write out a clear, focused job description for the position you’re hiring for.
Not only will the job description serve as a way for qualified candidates to apply for your position, but it also serves as a benchmark that you can measure your employee against in the future.
Wondering how to write a job description? You’re in luck—our managing editor Candice Landau recently wrote a great, in-depth article on that very subject. So before pressing on, make sure to read How to Write Your First Job Description.
6. Post your job opening
Once you’ve written your job description and created a great ad for your open position, you’ll want to post it to relevant classified sites. Indeed and Monster are the most well-known, but sites like CareerBuilder and Craigslist shouldn’t be overlooked, as well as any industry-specific sites.
Don’t forget to post your open job on your business’s LinkedIn page as well; using LinkedIn can make your employee hunt even faster, as you can check an applicant’s experience and references easily.
7. Know what questions you can and can’t ask
You want to get a well-rounded understanding of the person you are about to hire, but it’s important to note that some questions are legally off-limits.
The reason behind this is largely related to discrimination, so it’s a good idea to brush up on what is and isn’t okay, and keep this in mind when coming up with a list of questions you plan to cover.
For more detail on the subject, check out our article, Things You Should Never Ask Job Applicants.
8. Interview and hire
Congratulations—you’re nearly there!
Now it’s time to set up interviews and hire your employee.
Though much of the hard part is now over, hiring can be tricky—should you be looking for the candidate with the most experience, or one with less experience, but a great attitude?
To answer this question, I turned to members of the Young Entrepreneur Council in my recent article, How to Hire Your First Employee. Be sure to check that one out before you start interviewing, to get input from other entrepreneurs who have successfully navigated the hiring process.
Do the paperwork:
Once you’ve found that special someone, it’s time to make it official.
You knew right away that they were the one, and you’re ready to sign on the dotted line.
Wait—am I talking about relationships or employees? Well, it turns out hiring an employee is a bit like a marriage: it’s a relationship that will benefit you both, and it requires a little bit of paperwork to be official.
9. Have your employee fill out a W-4 and an I-9
Before they start working, your employee will need to fill out a W-4 and an I-9 form.
What does this mean for you?
You guessed it—you’ll need to cozy up to the IRS website again. Check out their page on Hiring Employees for the full rundown and the forms.
10. Report each new employee to your state’s new hire reporting agency
In response to the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, all employers are required to report new hires or rehired employees to their state directory within 20 days of hiring.
This enables the Department of Health and Human Services Office of Child Support Enforcement to locate parents who owe child support. To find your state’s reporting agency, visit the New Hire Reporting page of the Office of Child Support Enforcement, or check out their interactive state-by-state map version.
Set up your workplace:
Once your employee is officially hired and all paperwork complete, you need to make sure your workplace is employee-ready. This means making sure your employees know their rights, and are given safe working conditions.
11. Post required posters and notices
You’ll be required to hang up a few federal posters, alerting employees of their rights as workers. Check out the Department of Labor’s FirstStep Poster Advisor page to make sure you know how to comply.
States have their own poster requirements too, so make sure you research your state’s specific requirements.
12. Adopt workplace safety measures
In order to make sure that your workplace is hazard-free and allows employees to do their jobs safely and effectively, you’ll need to comply with the requirements set forth by the Occupational Safety Health Act (OSHA). To make sure you know how to comply with OSHA standards and rules, visit OSHA’s employer page.
Get your employee ready:
There’s just a few more i’s to dot and t’s to cross before your new employee is ready to work.
13. Onboard your new employee
You want to make sure your employee has the tools to do their job to the best of their ability.
How can you make this happen? By making sure they know what is expected of them, and what is and isn’t okay within your office.
Writing an employee handbook can be time-consuming, but it can potentially save you hardship down the way, so it’s a good thing to consider.
If you’re a smaller operation and you’re just taking on a single employee, you can always go with a bare-bones version, and make sure you cover the basics like dress code, your stance on timeliness and remote work, and so on.
14. Keep a personnel file on your new employee
Make sure you’re keeping track of all important employee documentation. This will include everything from their application, resume, new hire documents, their W-4 and I-9, performance evaluations, and so on.
When it comes to employee access to personnel files, laws vary state to state, so check out your state’s specific laws. It’s also a good idea to keep these files in a locking cabinet, to make sure they aren’t easily accessible to anyone.
15. Set up employee benefits
If applicable, you’ll need to meet with your employees so that they can sign up for health insurance and a 401(k) plan.
If you’re looking for more information on how to determine what your healthcare obligation will be to new employees, check out our articles on the topic: 5 Ways Small Business Owners Can Save on Healthcare Finances, and Offering Health Insurance? Questions Small Businesses Should Ask.
You might also be interested in starting a wellness program or offering incentives to your employees for healthy habits, and in that case I’d recommend my article, Do Corporate Wellness Programs Really Work?
While it may feel a little daunting at first, hiring employees is pretty straightforward; when you break the process up into manageable steps, it becomes much more doable.
Good luck, and happy hiring!