For small-business owners, hiring a first employee is a significant milestone—one that directly affects the company’s growth, future success and culture. Hiring staff means enhancing your business’ ability to grow, but it also presents unique challenges.
From affirming that the person you hire has the credentials to do the job and is the right personality fit for your organization, to ensuring you don’t run afoul of payroll taxes, workers’ compensation and other legal requirements, making that first hire requires a lot of preparation. When you’re getting ready to make that first all-important hire, keep some guidelines in mind:
You hire a first employee to help your business grow, but the costs associated with that growth can be significant. It’s important to weigh carefully the benefits of hiring against the related costs. According to the Small Business Association, these can include:
- Wages and taxes, including unemployment, Medicare and Social Security taxes
- Workers compensation insurance
- Recruiting and training expenses
- Payroll management
- Equipment, including software licenses and data plans, to help an employee do his or her job
Finding the right employee for your small business can also be a challenge. While professional hiring services can do the legwork for you, most small-business owners manage the hiring process themselves. You’ll need to consider where to advertise for candidates, what professional requirements you’ll want them to meet, what wage you’ll offer and how you’ll handle the interview process.
Another critical component to consider is fit. A comprehensive pre-employment screening can help you make better hiring decisions. In addition to reviewing candidates’ resumes and references, your screening may include a background check, drug screening, behavioral assessments and skills testing.
Prepare for payroll
No one works for love alone. Your new employee will expect to be paid on time each pay period with the appropriate amount of withholdings taken out of his or her check. Managing payroll, however, can be costly and time-consuming; a small business with 10 or fewer employees may spend up to $2,600 per year on direct labor for payroll, according to SurePayroll. What’s more, if you don’t know or understand tax laws and requirements, you could find your company facing IRS penalties.
In the past, outsourcing payroll wasn’t always a practical option for small businesses with just one or two employees. Today, you can find online services that can help small business owners manage their own payroll affordably, accurately and efficiently by paying employees and paying and filing payroll taxes. These services handle all the calculations for paying employees; calculating, paying and filing federal, state and local payroll taxes anywhere in the country; and notifying tax authorities of new hires. Mobile payroll apps also allow owners to run payroll on the go anytime, anywhere.
Next steps after hiring
In addition to completing necessary payroll tax forms, benefit enrollment forms and employee information files, you’ll need to complete a New Hire Reporting form that helps state and federal agencies track down parents in regard to child support payments.
You’ll also need to set up a storage system; the IRS requires all companies keep employment tax records for at least four years. Additional post-hiring tasks will include:
- Verifying an employee’s eligibility to work. Federal law requires employers to verify that an employee can legally work in the U.S. You’ll need to complete and submit an Employment Eligibility Verification Form within three days of making a hire.
- Fulfill your obligations under your state’s new hire reporting program. Federal law requires all employers to report all new hires to the state within 20 days of hiring.
- Secure workers’ compensation insurance.
- Establish a bookkeeping system.
Hiring that first employee can be exciting and challenging. Fortunately, with some planning and the help of online tools, you can ensure the hiring process goes smoothly, and each worker who joins your team contributes to your business’ continued growth.