Things to Consider When Hiring Your First Employee

by Pat Gordon | March 30, 2018

You’ve been through all the initial challenges of opening your own business. You created a business plan, calculated your costs and pricing strategy, and opened a business bank account. You decided on a business name, researched your target markets, created a website and developed your social media strategy. And now all your hard work is paying off – paying off so well that you need to hire some help to keep up with demand! Not every entrepreneur gets to this point, but if you are fortunate enough to be there, you need a plan for the next phase of your business growth.

If you are about to hire your first employee, a good plan is to approach the task as if you will be hiring more employees in the future.  Do it right the first time.  Most new business managers have a general idea of the first step, which would be to advertise the job opening. Let friends and family know you are hiring and maybe start searching online for people looking for work.  Before you actually start interviewing candidates, it’s a good idea to write a job description (what are the duties and responsibilities of the job) and the job specifications (what skills do you want in the person filling the position).

If you put the right amount of thought into this task, you are more likely to hire the right employee, instead of the “friendliest” candidate or someone who was simply referred to you by a family member.  It is a lot easier and less costly to hire right the first time than to hire and have to let someone go a month after you have trained them.

If you haven’t already done so, this is when you need to decide who is going to process your payroll.  You can do it yourself, ask your bookkeeper or accountant to handle your payroll or find one of many payroll services via the Internet.

Once you have selected the person that you think will be a good match and they’ve accepted your offer, it is time to hire them.  Again, it’s easier to have a plan in place than to have to back pedal when things don’t go well.  Create a checklist and a guide to keep track of what you need to do with each employee.  Some items are mandatory.  You need a W-4 form completed by the employee so you can withhold payroll taxes for the government.  You need a completed I-9 form and copies of proper ID to verify that the employee is who they say they are and that they have the legal status to work in the U.S.

In addition to the mandatory paperwork, there are other documents that you will probably want to have on file.  Here are a few to consider:

• Provide them with an offer letter and agreement stating the pay rate, benefits (if any) and their start date. Include a probationary period so if they are not a good fit, you have a perfect opportunity to say “thanks but no thanks.”  Have them sign it and keep a copy.
• Background testing and drug screens are very useful. Your offer letter should state that the offer is contingent upon acceptable results from background and drug screening.  Have the new hire complete a form stating that they agree to the screenings.  You will need to have done some research already to know what companies you will use to conduct these screenings.
• Give them a Policy and Procedures list (including timesheet policies, policies on tardiness, absences and requesting time off, dress code guidelines and safety procedures) and ask them to sign a form verifying that they have read it.
• Create a Code of Ethics Statement that you want them to abide by and ask them to sign it. Include your plans for disciplinary actions in the event that the code is not followed.
• Is your employee going to gain valuable information while working for you that he or she could share with your competitors or use on their own if they started a business? Then a non-compete and/or non-disclosure agreement is a great idea.

Finally, have a good training plan in place.  Every new employee, whether they come with relevant experience or not, will need training to get up-to-speed quickly on your products, services, procedures, etc.

The cost of hiring a new employee can be expensive.  Not only are there direct costs if you pay to post a position and pay for screenings, but there are indirect costs associated with your time to interview, process and train a new hire.  Some estimates are as high as $3,500 in turnover costs to hire a minimum wage employee and then have to let them go.

You can’t avoid hiring help when your company starts to grow.  If you hire right, the return on your investment will be well worth it.  Follow these guidelines and you will be well on your way to building a team of employees to assist you in growing your business to the next level.