How to hire an employee for your small business in 11 simple steps
You’re swamped with work and ready to hire someone to help you get things done. That’s great! A new hire can elevate your business, but only if you find the right match for your company. Luckily, we’re here to help—this guide will walk you through how to hire employees.
From legal compliance and recruiting to interviewing and onboarding, these 11 simple steps will help you hire a great employee for your small business.
1) Decide if it’s time to hire an employee
You don’t want your existing staff to suffer from burnout or low productivity that comes from being stretched too thin. But before you put in the time and resources to hire an employee, consider if you need one.
The more specific you can be about what you need, the better. For example, if you need to hire someone for your Georgia business to help with some admin work, you should:
- Add up how many hours per week it takes to do the tasks
- Estimate the number of hours for tasks you want to do but don’t have time for
- Consider if you need temporary or permanent help
Temporary help might be the better option if your business is having a busy season and you anticipate things slowing down. In that case, a part-time employee or an independent contractor might be a better solution.
However, a full-time employee is a fantastic option that can take your business to the next level, free up time for you to focus on key projects, and boost inspiration, creativity, and innovation. But you must also consider if you can afford the ongoing costs of a new hire, including wages, employment taxes, payroll service expenses, and employee benefits.
2) Register for tax IDs
You must prepare your business to take on a new employee before completing the hiring process. Your business will need to register with the IRS to get an Employer Identification Number (EIN).
The EIN is an important step—it acts as a federal tax identifier for your business, tracking tax filing and reporting. Visit the IRS website to apply for an EIN online, by fax, or by mail. The online application is usually the easiest, and you can get your number instantly.
You might also need state or local tax IDs. It varies by area, so it’s best to visit your state’s website to determine whether you need a state tax or local ID number. For example, you won’t need to worry about filing for employee state income tax if you’re hiring in Texas because it’s one of seven states with no income tax.
3) Follow labor laws
The U.S. Department of Labor (DOL) requires you to display several notices about employee rights. The requirements vary—not all employers fall under the DOL’s federal laws, so some employers don’t have to post specific notices. You can use the Poster Advisor tool to find and print the posters you need.
The DOL also has information on state labor laws. Your state labor office can tell you the minimum wage you must pay employees and the rules for hiring staff under age 18.
4) Create a plan for employee benefits
An excellent benefits package is crucial to attracting and retaining the right candidates. But you might not know which employee benefits are mandatory and which are optional.
The law requires you to provide several employee benefits:
- Social Security taxes: Even small businesses must pay Social Security taxes at the same rate as their employees.
- Workers’ compensation: You might do business in a state with a state workers’ compensation insurance program. Otherwise, you can buy an affordable workers’ comp policy.
- Disability insurance: Not every state requires disability pay, but you need it in California, Hawaii, New Jersey, New York, Rhode Island, or Puerto Rico.
- Leave benefits: Most leave benefits are optional. However, the Family and Medical Leave Act (FMLA) mandates you provide some employee leave benefits.
- Unemployment insurance: It varies by state, so check with your state workforce agency to see if you need to register for state or federal unemployment insurance.
You might want to sweeten the pot by offering your employees a group health plan. According to the Kaiser Family Foundation, only 30% of small businesses with fewer than 50 employees provide health insurance. This benefit could set you apart from other employers and draw in quality applicants.
Other benefits to consider include a 401(k) or another retirement plan and additional options for paid time off such as holidays, vacation, and flex time.
5) Research the type of support you need
You might have a list of tasks you need help with, but coming up with a job title and job description can take a bit of research. Start by looking at job boards to find similar job descriptions—this will give you an idea of the skills and experience job seekers may need.
Before drafting your job description, monitor job postings in your area to:
- Identify popular job titles
- Discover industry keywords
- Compare wages and salaries
Then you can think about the specific job duties you want your new employee to handle and make a list of characteristics and skills your ideal candidate will have.
To create your job posting, start with a job title that best describes the role. Indeed, the #1 job site in the world, recommends avoiding buzzwords like “wizard,” “rockstar,” or “ninja” because job seekers aren’t likely to search for those terms.
Your job description should clearly outline the job’s responsibilities and requirements. Think about the keywords and phrases a potential candidate might search for, and use them in your description to increase the chances of your posting showing up in a job seeker’s search results.
Consider putting the salary range the job pays in your job description, too. The head of product for LinkedIn Jobs told the Society for Human Resources Management that more than 70% of candidates want to know the salary right off the bat.
6) Attract the best candidates
Now that you’re on track with your legal requirements and have your job description in hand, the real work can begin—it’s time to start attracting the best candidates!
Active job seekers will likely see your posting because they’re regularly looking for work. But getting your ad in front of passive candidates is crucial. After all, the perfect candidate is usually already employed. Whether they’re actively looking for a new role or not, here’s how to find your ideal applicant:
- Post your job description on online job boards.
- Use LinkedIn, Facebook, Twitter, and other social media sites to find passive candidates.
- Ask quality employees if they know someone who might be a good fit.
- Attend career fairs to network and collect resumes.
- Hire a recruiter for professional help filling your position.
Getting your job ad online is crucial. Pew Research found that 79% of Americans looking for work use online resources. Monster.com, Indeed, Glassdoor, ZipRecruiter, and LinkedIn can help you get your posting in front of the right people. But don’t overlook employee referrals or networking opportunities—you never know where your next hire might be hiding.
And remember: Employee diversity can drive profits and performance. A business with ethnic and cultural diversity can outperform other companies by 36%, according to a study by McKinsey and Company.
7) Narrow your list of potential hires
Reviewing your list of job applications and identifying the top candidates can feel overwhelming for business owners. You can narrow down the resumes by asking questions like:
- Are there any spelling errors in the cover letter or resume?
- Did they address the requirements in the job description?
- If you asked for specific criteria in a cover letter, did they include it?
You could schedule a quick 15-to-30-minute phone screening for your top job candidates to learn more about their skills and qualifications. Ideally, you’ll trim your list and only invite two or three applicants in for an interview.
Some of the best interview questions that are appropriate for any position include:
- What can you tell me about yourself?
- Why are you interested in this position?
- How do you approach problem-solving?
- What are your strengths and weaknesses?
- What professional achievement are you most proud of?
- How would you describe your ideal work environment?
Before picking your top contender, check the applicant’s references. Request at least 3 references from each candidate—it can help you verify skill sets and gain insight into the person’s work experience and qualifications.
8) Choose your perfect candidate
After the interview process, you can choose your top qualified candidate and make a job offer. The decision might be difficult. But think about each applicant’s skills, personality, and experience and how it could fit with your team and company culture.
Once you pick your top contender, email them to set up a time to talk on the phone. Let them know how excited you are about having them join your team, and present the salary, benefits, start date, and other details of your offer.
Whether you’re hiring your first employee in California or finding a candidate for your small business in a rural area, you’ll likely negotiate things like pay and benefits. Once you arrive at a verbal agreement, send an official offer letter—visit Indeed for an offer letter template you can follow.
The rest of your onboarding process should include:
- A background check to keep your business, employees, and customers safe
- An I-9 form to verify eligibility to work in the U.S.
- An IRS form W-4 for tax withholding information
Keep in mind that running a background check comes with complex legal requirements and red tape. Restrictions can vary by state, so you may want to use a third-party agency familiar with the regulations.
You’ll also need to contact your state’s labor agency for new hire reporting. The Small Business Association (SBA) has a New Hire Reporting Requirements guide for more information.
9) Choose a method for payroll and recordkeeping
If you’re hiring your first employee, you need to set up a system to handle their paychecks and employment taxes. You have three options to take care of payroll:
- Do it yourself
- Use an accountant
- Go through a payroll service
You might be able to take a DIY approach to payroll and recordkeeping if you’re tax savvy. However, it’s time-consuming and easy to make errors. Outsourcing it to an accountant or a payroll service might be more expensive, but it can be worth the time (and mistakes!) you save.
10) Plan your employee’s first day (or week)
Your new employee’s experience during the first few days will set the tone for your company—it’s your chance to make a good impression. You want to keep them engaged and make sure they feel welcome.
Your new hire should get logins and passwords, access to Slack channels or IM networks, and a copy of the employee handbook. To help them feel like they’re part of the team, you might also:
- Schedule a team lunch during the first week to introduce team members
- Give them swag—a branded t-shirt, mug, pens, or notebooks
- Set up a mentor who can help the new employee transition into their new role
11) Review your new-hire onboarding process
There are things you can do to check up on your small business every month, but reviewing your onboarding process probably isn’t one of them. However, after you successfully hire your new employee is the best time to review your onboarding process.
Small business owners generally don’t hire frequently, so your onboarding process is likely very simple—and that’s okay! The best systems are easy to follow.
You likely learned a few things or experimented with new systems during this most recent hiring experience. So, update your written hiring and onboarding procedures with any process changes you made.
Whew—you did it! You successfully hired a new employee. But remember: Employees bring a new level of liability into your small business. A small business insurance policy can make sure you have the proper protection. Contact Huckleberry and get a quote in about 5 minutes. (Plus, it’s all online.)