Hiring employees is a massive step forward for your business, and an exciting time for any entrepreneur. This is a sign that your business is ready to grow, and your opportunity to choose the people who will help turn your vision into a reality. But before you pull the trigger and hire that first important employee, or even begin the interview process, there are a few things you'll need to prepare first.
Before You Hire Employees
Make sure you have these items in place before you hire an employee:
1. An EIN. Every startup business that hires employees will need an employee identification number (EIN). This is a nine-digit number uniquely assigned to your business when you register with the federal government. It's an important requirement for withholding taxes from employee paychecks.
2. A plan to scale. Why do you need an employee? How many employees do you need right now? How many will you need in the future? Why? If you don't know the answers to these questions, you might have jumped the gun on hiring. It's important that you have a formal plan in place for how you're going to expand; otherwise, you may hire too many employees too quickly, or hire employees you don't truly need in the first place.
3. A budget. How much are you willing to pay your employees? What benefits and insurance packages are you going to provide? Hiring employees can be expensive, more so than most first-time entrepreneurs realize, and without a proper budget, the costs can eat your business away from the inside.
4. Defined roles and responsibilities. Your formal plan for expansion should include justification for why you're hiring the people you're hiring. That means these employees will have defined, important roles in your organization. But what exactly are those roles? What responsibilities are going to be attached to these positions? Write up the plans so you can use them in your listings and discuss them in your interviews.
5. Workers' comp and other insurance. You'll likely be required to have some policies and protections for your employees in place, including workers' compensation coverage. Rules and regulations will vary by state and possibly by locality, so make sure you've researched how workers' compensation works (as well as the basics of personal injury law, especially if your workplace has hazardous conditions). Even if you aren't required to have these insurance policies, it may be wise to get them in place for your own protection.
6. Payroll and taxes. Setting up payroll is possible for a non-expert, but it's not recommended. You'll need to withhold taxes from your full-time and part-time employees, and put a system in place that allows your employees to get paid consistently, conveniently, and on time. For most entrepreneurs, that will mean using a third-party system or app to handle things automatically; you might also consider making your first hire an HR or financial authority who can manage employee pay on your behalf.
7. An employee handbook. It's good to have an employee handbook written before you even start scouting for candidates. This is a comprehensive document that formally explains what employees can expect from you as an employer. It should include basic items like which holidays are paid, what benefits are available, and rules and restrictions for using company equipment.
8. Employee paperwork. Your employees will have to fill out a few forms before they can work for you. For example, you'll need to keep a W-4 on file for income tax withholding, an I-9, and any state-level forms required by your state. You may also want to have your employees sign a non-disclosure agreement (NDA) or an employment agreement, depending on your business's needs.
9. Safety measures. Your business should be safe for employees before you make your first hire. If you don't have any heavy machinery or equipment, you might overlook this, but it's important to do a safety review even in a basic office environment. Any occupational health and safety violations could spell trouble for your business if you don't address them proactively.
10. Required notices. All businesses are required to post certain notices in a publicly available area, such as explanations of employee rights under various pieces of legislation. This is one of the easiest steps on this list, so it shouldn't take long to complete.
Beginning the Search
Once you have all these items covered, you'll be ready to formally begin your search for employees. Put together a strategy that allows you to cultivate promising leads from multiple channels, including personal references from other professionals, social media channels, and job listing sites. In general, the more qualified applicants you get, the better, so focus your attention both on the number of applicants and your ability to narrow that pool down based on qualifications.