How to hire employees for a small business: 15+ steps for success
Wondering how to hire employees for a small business? Growing a team is an exciting milestone, but it can come with its fair share of challenges.
Attracting the right talent takes time and effort. And it’s not as simple as posting a job description and waiting for the applications to roll in.
On top of that, retaining those newly-hired employees is essential for maintaining productivity—and crucial to avoiding going through the cumbersome hiring process again and again.
In this guide, you’ll learn:
- How to hire employees for small businesses, including what to consider before you post the job
- 4 strategies to attract applicants
- Your responsibilities as a small business owner in the hiring process
- 3 tips for retaining excellent employees long term
- Frequently asked questions about hiring for small businesses
- How to get workers’ compensation to cover employees—without all the extra paperwork
How do small businesses hire employees?
If you’re a business owner hiring help for the first time, you might be staring at a blank word document asking yourself, how do I hire employees for a small business?—all while attempting to write your first job description.
But before you post your open position on job boards, hold your horses. You need to take a few important steps before advertising your job opening to the public.
Clarify your hiring needs
Do you need to hire just one full-time employee? Or multiple part-time employees? Should you hire on a contract or temporary basis? Determine how much work there and how many hours you need to be covered per day, week, and month.
Decide on the job position and budget
Once you’ve clarified your specific needs, decide how you will meet them and budget accordingly. If you’re hiring a full- or part-time employee, you must account for all taxes, unemployment, and the cost of benefits—like health care and paid leave.
Will your employee be paid by the hour or on a salary? Will you run payroll monthly, bi-monthly, or every two weeks? Are bonuses available based on performance? Have answers to these questions before you start the interview process.
Create a clear job description
What tasks do you need assistance with in your business? Make a detailed list of everything you can think of that you’d like your new hire to help with—and brainstorm any additional steps or “hidden work” it takes to get the job done.
This detailed list can be simplified for your public job post, but hang on to it because it will later help you during the onboarding and training process. Research job titles based on your list, and choose one that accurately represents the role and industry standards.
Develop a system to stay organized during the hiring process
Hiring can be stressful—staying organized can help simplify the interview process. How will you store applicant information and paperwork? When and where will you complete interviews? What criteria will you use to make the best hiring decision?
Create templates and spreadsheets to keep up with the rollercoaster of the hiring process in an organized way. (Bonus: You can use these same templates again in the future as you grow your team.)
Have the right small business insurance in place
In most states, you must have workers’ compensation insurance in place before hiring employees. There can be big consequences (and big fees!) if it’s required and you don’t have it.
Hiring help will increase your business’s productivity, but it can increase liability, too. You need the right insurance coverage to protect your small business from loss or damages due to accidents.
Brush up on legal requirements
Before you post your job, make sure you’re following all legal requirements and hiring laws for your state, including meeting minimum wage, workplace safety, and anti-discriminatory requirements. Check the Department of Labor (DOL), including their state labor offices, for details.
Post the job and start the hiring process
Once you have everything ready to go, including following state or federal requirements, choose where to post your job. This can be as simple as a sign in the window or as detailed as hiring a recruiting agency.
Online job sites, such as Glassdoor or Indeed, or local community job boards, like your local Chamber of Commerce job board, can be a smart place to start. If your business uses social media to connect with customers, post links to your brand-new employment opportunity there, too!
Narrow down your list of potential hires from your applicant pool
Screen applications and set up initial phone interviews to narrow down who you’ll consider for final interviews.
Invite 2–3 of the best applicants for interviews and contact all references. Ask thoughtful and engaging interview questions to help you determine if they’re the best fit. After the interview process, you can choose your top qualified candidate and make a written job offer!
Now that you have a better understanding of how to hire employees as a small business owner, let’s dive into how to encourage great job candidates to apply to your posting.
How to attract employees to work for you: 4 leading strategies
Use these 4 proven strategies to start your hiring process off on the right foot.
1. Match the going rate for the position
While the salary or hourly rate that works for your budget won’t always match what all candidates are looking for, you’ll need to match the going rate in your market for the open position. For example, if the average hourly rate for a server in your area is $10 an hour plus tips, you can’t offer $7.50 an hour and expect to have top talent knocking on your door!
Check out online job boards and other job openings for similar positions in your area to understand what other businesses offer. Once you have a better idea of the going rate for the position you’re hiring for, work to match that rate—through both the wages and benefits offered. This will help your business attract a competitive applicant pool.
2. Offer a robust benefits program (if you can)
Employees expect a strong benefits program from their employers. If you want to attract (and retain) great employees, try to offer as many employee benefits as possible.
For new and very small businesses, a large selection of employee benefits may not be affordable for you to offer—and you may not have a formal human resources team to maintain and administer those benefits.
Think outside of the box and determine what job perks could be creative solutions or be appreciated by employees in your industry.
For example, let’s say you own a small cleaning business with 8 employees. You offer competitive pay, but you don’t have the budget to provide full health coverage or retirement benefits. Perhaps your business can allow employees to set their own work schedule. This is a creative perk that can help your employees maintain a work-life balance, one that could help attract competitive applicants to your team.
Whatever you come up with to offer as added perks, don’t forget to advertise the benefits in your job descriptions.
3. Offer referral incentives
Consider tapping into your existing employees’ networks to find and attract top talent. If you’re trying to hire your first employee and don’t have an existing base of employees to work with, you can still offer an incentive to your own professional network if they send applicants your way.
Let friends, colleagues, or other business owners in your area know you’re hiring, and offer a finding fee for those who send qualified candidates.
4. Use social media
Having an active social media presence can be key for attracting potential employees while showing why your company is a great place to work.
You can also participate in relevant hiring conversations on social media to find employees on platforms like LinkedIn and Facebook. Try searching for hashtags like #NYChiring or #restaurantjobs.
Once you’ve got strategies in play to attract an excellent pool of job seekers, let’s take a look at some core responsibilities small business owners should keep in mind when hiring.
What are the responsibilities of a small business owner in hiring employees?
In addition to following local and federal labor laws during the job posting, interview, and employment process—and having the right business insurance in place before you hire—helping your new employee succeed is your responsibility as a small business owner.
Once you’ve selected the right person for the job, you can set them up for success with onboarding, training, and a healthy workplace culture.
New hire onboarding
Onboarding usually starts on the first day of employment, and it’s where your new employee is introduced to the work environment and fills out all the necessary tax forms and paperwork required by the federal government, state and local governments, and your organization.
When small businesses hire employees, they are responsible for payroll taxes and state taxes, in addition to Social Security and unemployment. Have all the right paperwork in place on day one—that way, you have all you need to legally enroll your first employee on the books.
Make sure to complete a background check (keeping your state’s guidelines and regulations for background checks in mind); obtain the appropriate work eligibility and IRS forms, including an I-9 and W-4; and 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.
You’ll also need to enroll them in your payroll system so they can appropriately receive their paychecks. And make sure to collect core contact information, like a mailing address, personal email address, phone number, and 1 or 2 emergency contacts to have on file.
New hire training
One of your core responsibilities as a business owner is to give your new employee the tools and information needed to succeed.
Remember that detailed list you made of the work you needed the new hire to perform? Train your employee in each task, including equipment or software applications to perform the task, and set clear expectations at the start.
For example, suppose you’re hiring for your landscaping business and choose an entry-level employee. In that case, you should provide training on how to operate all equipment, the basics of lawn care, and general safety precautions. Go through each piece of lawn care equipment that your team member will use and every task they’ll perform. Make sure they understand their responsibilities and have the opportunity to ask plenty of questions.
If you’re hiring an employee for the first time, be intentional about the company culture you create. Help your new team member feel welcome by celebrating their arrival and allowing them plenty of time to ask questions about their new role and get familiar with your business.
Create a space for feedback and ideas, and be open to learning alongside your new employee. You hired help because your business needed it, so be willing to hear their fresh ideas to help your business grow or simplify your processes.
After you put in all the hard work to find the right person—and onboard and train them—let’s talk about smart ways to keep employees on your team for the long term.
How to retain employees: 3 tips for keeping top talent
1. Develop a positive culture and work environment
As mentioned above, creating a healthy workplace culture is an excellent way to retain employees—and it should start on the first day.
According to the Harvard Business Review (HBR), negative work environments lead to unproductivity. Overall, a stressful work culture can hurt the well-being of you and your employees—and it can be damaging to your business’s bottom line.
Even when work gets stressful, keep employees engaged and help them feel appreciated and heard. Leading your team with kindness goes a long way.
2. Provide opportunities for career advancement
Employees join to grow not only your business but also their careers. According to a 2016 Gallup study, 87% of millennials rate "professional or career growth and development opportunities" as important to them in a job.
Demonstrate your interest in their career growth by laying out a development plan for advancement (where it makes sense for your employees and your business). Offering training and continuing education benefits is also an excellent way to encourage employees in advancement and add value to your team.
3. Start an incentivized compensation program
An incentivized compensation program, like revenue sharing, is one of the best ways to keep employees motivated and at the company. With their compensation tied to the business’s success, they’ll be motivated to perform well, stay at the company, and reap the benefits of the profit-sharing model.
For a program like this to be successful, employees should know exactly how it works and feel that their goals are ambitious but achievable. Clearly communicate goals ahead of time, what they need to do to meet those goals, and the rewards.
How to hire good employees for small business: Frequently asked questions
When determining how to hire employees for a small business, many tasks are involved, especially when attracting and retaining excellent team members.
Here, we’ll take on some common questions small business owners have when going through the hiring process for the first time.
What are the benefits of hiring employees?
The most significant benefit to hiring employees is sharing the workload while scaling your business. Employees are an investment that can add value and increase your business’s profitability, even as an added expense. In some cases, there can also be tax credits for small businesses that provide jobs to those who have faced certain barriers to employment.
What is the best way to hire employees?
The best way to hire employees is by using intentional recruiting strategies throughout your hiring process to avoid any rushing. In addition to following all state and federal regulations when interviewing and hiring, determine what pay rate, benefits, and work environment would attract the right candidates to your business and use that information in your hiring strategy.
Do I need an LLC to hire employees?
Small business owners do not necessarily need to be structured as an LLC to hire employees. In fact, owners of sole proprietorships and partners of a business partnership can hire employees, as long as they do so by following any state and federal laws and regulations required, like using an Employer Identification Number (EIN) and paying payroll taxes.
Check with your state’s labor laws or your local chapter of the Small Business Administration (SBA) for more information about your state’s hiring requirements.
How much do I need to pay employees?
You’re required to pay employees at least the required minimum wage for your state, although there may be some exemptions depending on the size of your business and other factors. You’ll also need to budget for taxes, Social Security, workers’ compensation, and unemployment tax payments.
However, the minimum wage is your state’s set minimum, and it may not be enough to attract and retain top talent. The smart strategy is to research average salaries or hourly wages in your area for the position you’re hiring for and budget accordingly.
For example, $38,000 a year might not be the right starting salary if you’re hiring an office manager for a large law firm in New York City. Still, it may be a reasonable offer if you’re hiring an entry-level office manager for a small law office in rural Texas.
What kind of benefits do I offer to my employees?
Depending on the size of your business, you may be required to offer health insurance benefits to avoid penalties. And in most states, workers’ compensation coverage is required—which is smart insurance coverage for you as the business owner and your team members.
Standard competitive benefits could include paid time off or sick leave, health insurance coverage, flexible spending accounts (FSAs) and health savings accounts (HSAs), and retirement benefits. But you can get creative with the benefits you offer as a small business owner, depending on your budget, industry, and workplace culture, and offer things like childcare reimbursement, gym memberships, flexible remote work, or provided lunches.
What is the difference between an independent contractor and an employee?
Independent contractors, also called freelancers, are not considered employees of the business that they are contracted to do work for. Independent contractors often set their own work schedules, timelines, and production methods, while calculating and paying their own income taxes, expenses, and business insurance.
When deciding if your small business is ready to hire help, you’ll need to determine if a temporary independent contractor is a good fit for your business or if you need to hire an employee instead. When you officially hire an employee to be a part of your team, you’re able to direct their work schedule, timelines, and work production methods as needed to fulfill the needs of your business. Learn more about how to hire contract employees.
Do states have different hiring requirements?
Yes. The state that your business operates in will affect the minimum wage, workers’ compensation requirements, forms you need to submit for hiring, labor laws, types of business licenses and permits you need, and more. Make sure to check with your state’s regulating authorities for proper hiring forms and regulations.
Depending on where you’re located, Huckleberry has a few guides to help:
- How to hire your first employee in California
- Your guide to hiring employees in Georgia
- Hiring your first employee in Texas: A how-to guide
Attracting and retaining top talent: The bottom line
If you’ve been wondering how to hire employees for a small business (and get it right the first time), you’re not alone. Hiring is often a lengthy, detailed process.
Luckily, online tools can make operating your business easier—like Huckleberry, which can help you estimate your workers' comp rates. An online quote is simple and fast, without all the extra paperwork. (And let’s face it, the hiring process comes with enough paperwork already.)
With Huckleberry, you can easily check one thing off your hiring to-do list and put your extra energy into what’s important: attracting and retaining the right people for the job.