Hiring employees invariably involves a certain formality—even if the business is very small and the person hired is a member of the family: at the very least, mandatory forms must be filed with the federal and state government. The bigger the business the more complex it is likely to be; the hiring process will tend to reflect that. The major elements in the process are 1) the definition of the job itself, often a formal job description rendered on paper, an important aspect of which is determination of the compensation to be paid; 2) a process of recruitment; 3) prospective employee interviews; 4) the job offer and related negotiations (if any); 5) registration of the employee and related introductions and orientations; and 6) some kind of job training which may be minimal or may involve formal training programs. The hire may be a permanent or temporary employee; this status will also influence the process.
Employment of individuals is substantially governed by federal and often also by state law touching upon compensation (the minimum wage requirement), the type of job offered (hourly or salaried), and also on matters relating to discrimination and equal pay for men and women. Hourly workers are covered by the Fair Labor Standards Act and are therefore viewed as "non-exempt"—meaning non-exempt from the FLSA rules—whereas salaried workers are exempt. If the business offers fringe benefits, these in turn are regulated by law. Businesses that do government contracting may also be under regulatory requirements that must be known and respected—lest federal contracts are placed in jeopardy.
Only larger businesses will typically have human resources people whose job it is to keep up to date with changing requirements. In the smallest operations hiring is typically done by the owner; in those of some size the task if often managed by the person who handles most of the heavy administrative work load. But the absence of well-developed "machinery" surrounding the hiring of employees in no way changes the general rules that apply. Indeed, it is good practice generally to dot the i's and cross the t's in an activity that may result in time-consuming difficulties if the hiring process misfires for lack of care, attention, and observance of proprieties.
At the same time, hiring employees is a quintessentially human activity in which personality, fit, and many intangible qualities play crucial roles. In businesses of any size, a new employee changes the company for the better or the worse: in a small business this fact will tend to emerge sooner. For this reason hiring of employees is one of the business's most important management tasks. Doing it well pays high dividends.
Writing a job description is very similar to doing planning work: most managers dislike the job but, having done it, learn that it was worth the time. The effort of creating the description brings out crucial aspects of the job not usually consciously considered—which helps later in the recruiting and in the interviewing process. More importantly, a job description helps a prospective employee picture the work and respond (or fail to respond) to it revealingly. To be sure, many jobs do not appear to require description beyond saying: "Wait on customers and help with the stocking." But if the store's primary customers are elderly, or if this is the midnight shift and the employee will be alone in the store, or if the stocking involves using a forklift—then adding such details adds significantly to the job description. Part of the description, therefore, includes the hours to be worked and other relevant context that will help in the selection of employees.
Crucial to the job's description, even if not part of it, is setting the compensation. This may be easy if the job already exists. If it is new, the business owner may wish to consult data offered by the Bureau of Labor Statistics on wages actually paid for specific occupations in an area. This is the BLS Wages by Area and Occupation Program and is accessible on the Internet.
Even if a job description is not actually written, some kind of conscious process by the team engaged in hiring will be helpful. And the job should then be described to the applicant in as much detail as necessary.
Recruitment typically takes place by word of mouth, by publishing an advertisement in a paper or hanging up a sign, participating in job fairs, contact with state unemployment services, or even the engagement of a recruiting firm. Using third parties can be expensive and run as high has 30 percent of the new employee's first year's earnings. All experts on hiring agree that recruiting simultaneously from within and without is desirable, especially if the job represents potential advancement for current employees. Some managements resist this because it potentially doubles the hiring labor, but openness in personnel policies provides good returns in morale. Often the announcement of an opening will result in employees lending a hand to find good candidates outside.
The content of recruitment ads will typically depend entirely not only on the job but also on the competitive environment. Sometimes quite creative approaches are tried when labor is tight—merely to draw potential candidates' attention. The golden rule, generally, is to be straightforward. The job should be minimally described and the approach specified: should the candidate call, visit, or send a resume? Sometimes it is valuable to show the compensation, sometimes it is best left unrevealed. Small businesses typically pay less than large ones (see Employee Compensation in this volume). However, many prospective employees are also scared away by job titles but would apply if they judged the salary within their personal reach. For the small business it is sometimes a very good tactic to add the words "small business" to the language of the ad: this may cause some not to apply while drawing others who want to work in a small business.
The chief aim of recruitment is to find the right candidate. For this reason, sometimes, recruitment is quite personal: the owner calls a person he or she already knows. However, in most situations getting a reasonable sample of the talent "out there" is the best approach even if it later becomes difficult to pick the right person from several highly qualified applicants.
In the well-managed hiring process, resumes or applications will be filtered and only a selection of promising candidates will be invited for an interview. The well-prepared employer will have read and annotated the resume first and will not spend time at the interview with head bent over paper.
Although the human resources literatures is filled with wisdom on how to conduct interviews, the distillation of the best advice is that the interview be a semi-formal but friendly interchange in which the interviewer makes an effort to cause the candidate to relax so that a conversation can ensue. The best interviewers play a nice game of give-and-take. The worst hold lectures for an hour or sit in hostile silence like inquisitors. The clear object of the interview is to elicit information from the candidate but in reactionto the offered job situation. It is good practice in larger organizations to pass promising candidates to two or three other people each of whom will, in turn, obtain a different view—and also present the company from a different perspective. Objectivity and concentration on the mission are important. Frequently interviewer and candidate will hit it off very well—as people—even when the qualifications are poor. The inverse, of course is possible. The candidate may have a charisma-deficit and yet do a tremendous job.
Every business has a selection process; it may be formal or simply understood. The ultimate decision on who should be selected from the pool of qualified applications ultimately rests with the most senior person involved in the process—or that person should have veto power—even when others make an input. Companies have styles. Some decide swiftly, others tend to do so after long discussions. One blessing of life in a small business is that such enterprises are more natural, organic; they do things their own way and usually get rapid feedback when making mistakes. Thus effective methods evolve. Once selections are made, however, good practice calls for due diligence in checking out the candidate before actually making an offer. This means making every effort to check references. Depending on the nature of the business, this process may be extensive (especially if government contracts are a major part of the business) and may involve checking arrest records, if any, military services, and proactive documentation of the candidate's educational achievements.
A job offer, even when verbally made, can be construed as a contractual agreement. For this reason the offer should be made very clearly and precisely, indicating the type of job it is (hourly or salaried, permanent or temporary), the compensation offered and at what intervals it will be paid, the trial period during which the employer reserves the right to terminate the offer, what benefits are included or excluded ("We have a medical program but no dental or vision care; if you participate, you'll have to pay part of the cost."), and how long the employee has to respond to the offer. These matters should be covered even if already discussed during the interview. If a verbal offer is followed up in writing, the letter should repeat these and other appropriate points.
To be sure, in actual practice small businesses often neglect formalities of this sort because the managers know the kinds of people they are hiring and know what to expect. And in 99 cases out of a hundred, the informal approach works just fine. ("Hey, Joe, you got the job. When can you start?") The formalities are intended for that one case out of a hundred when an employee sues or lodges a formal complaint. Formality, therefore, is a kind of insurance—and costs very little in the way of preparation and effort.
The offer itself may be followed by some negotiation with the prospective employee in the course of which, for example, the manager may agree to accommodate the new employee's night-school hours or fixed times off for eldercare. Once negotiations are done, the offer will be made again with the adjustments built in.
Registration of new employees involves, first of all, filling out necessary government forms and their submission. Three types of documents are involved. The Federal Tax Withholding Form (W-4) which has an employee and employer version, the State and/or Local Tax Withholding forms that correspond to the federal W-4, and the Employment Eligibility Verification Form (I-9) required to be filed with the U.S. Citizenship and Immigration Services (successor to the Immigration and Naturalization Service).
The new employee's initial session, at which these forms are filled out, is also an ideal time to collect information for use by the company such as the names and telephone numbers of next of kin for emergency purposes, information on the individual's health status for the files, and other information the company wishes or has to keep.
The session also lends itself to handing over the company's employment and/or operating policies to be read by the employee. Some companies provide two copies, one of which is to be signed and returned to indicate that the employee has read and understood the contents.
Part of the registration process, normally, is a minimal orientation. It may involve providing the employee keys to the business or to toilet facilities, a brief tour that should include pointing out emergency procedures and exits, and passing on important trivialities such as, for instance, under what conditions the copier always jams and how to avoid it '¦
The employee registration and orientation typically ends with introductions to co-workers and to the work itself. The new hire will usually be part of a team with its own supervisor. The lines of authority to be followed can be made clear at this stage—with the supervisor then assuming the role of guide and trainer; in many situations, the trainer may also be a co-worker assigned to introduce the new employee to the actual work itself.
In most work situations some training will be required. In well-run operations such training will be administered based on a checklist and will not be allowed to take place casually—with potentially costly consequences if training is neglected. The job might involve working with complex computerized databases or may require the employee to fill customers' propane containers. All manner of equipment training may be involved. In yet other organizations, complex telephone disciplines may be used. If all training cannot be provided immediately, it is always at least possible to alert the new employee to dangers and to instruct him or her to ask for help before using the forklift, the compressor, or the sonic instrument cleaner.
The hiring process is subject to legal guidelines set out by both federal and state governments; these deal with discriminatory hiring practices. Companies that hire people may not discriminate on the basis of sex, age, race, national origin, religion, physical disability, or veteran status—so-called "protected classes." A hiring manager may not screen out any applicant because of membership in a protected class or address topics during the job interview related to the protected class.
The most important laws related to hiring are—
Anti-discrimination laws do not require a company to hire an applicant because of membership in a protected class, nor is a manager required to hire applicants from any protected class in proportion to their numbers in the community. But the business owner is required to select the best qualified applicant for the position, based on the critical skills of the job, and is required to make that selection irrespective of whether or not that applicant belongs to a protected class.
The complexity of the laws shown above is rather daunting. Fortunately an excellent booklet is available from the U.S. Small Business Administration to help the small business owner and his or her administrative helpers. It is entitled An Equal Opportunity Guide for Small Business Employers and available on the Internet for downloading (see references below). The SBA guide has the merit of being much more than a motivational pamphlet. It is comprehensive, well-organized, and sufficiently detailed to let the business owner translate its requirements to his or her operation. It provides specific guidance on many issues. Obtaining this guide and spending one or two evenings looking it over with a marking pen will probably suffice in most instances to vastly improve a small business's compliance with the many laws relating to protected classes.
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U.S. Department of Labor. Bureau of Labor Statistics. "Wages by Area and Occupation." Available from http://www.bls.gov/bls/blswage.htm. Retrieved on 6 March 2006.
U.S. Department of the Treasury. Internal Revenue Service. "Businesses with Employees—Hiring Employees. Accessible from http://www.irs.gov/businesses/small/article/0,id=98164,00.html. Retrieved on 7 March 2006.
U.S. Small Business Administration. An Equal Opportunity Guide for Small Business Employers. Available from http://www.sba.gov/library/pubs/equalemployguide.html. Retrieved on 7 March 2006.