Small-Business Hiring: Who Should Be Your First Employee?

two women shake hands after an interview

two women shake hands after an interview

You’ve decided it’s time you hire some extra help for your business. Congratulations! That’s a big step and a sign of growth.

Being a small-business owner means knowing how to do everything yourself. The hours are grueling, and the stakes are high, and yet there is perhaps no more fulfilling career goal than getting something up and running that you’ve created yourself.

But what about once you’ve hit the survivability stage and it’s time to look for extra help? Every successful business hits a point where hiring support is crucial for the next steps of growth. How should you decide which position to hire for, and what important legal requirements should you need to keep in mind?

Here’s a brief roundup of who to look for, how to find them, and what to keep in mind throughout the process.

1. Employee or Freelancer?

The first thing to decide is whether you are in need of a full-time, payrolled employee or whether the support you need can be offered by a freelancer working on contract. Outsourcing work to an independent contractor may be more expensive per hour, but it can save you plenty of paperwork and give you the freedom to only pay for outside help when you really need it.

There are several factors to consider when making this decision. Begin by getting clear on your objective. Are you looking for a permanent team member who will take on the vision of the business as his or her own and commit to its success and growth? Or are you looking for project-specific support, such as help with a product launch or a smaller aspect of your business, such as design?

Next, consider the financials. Have your numbers shown enough consistent growth to justify hiring an employee, and are you prepared for the extra expenses that will come with that hire? The average upfront cost of hiring and training a new employee has been estimated to be as high as $4,000, making it a pricey commitment. If you’re not ready to foot this bill, it may be wiser to hire a contractor. With freelancers, you are not responsible for withholding taxes, administering worker’s compensation insurance or any other benefits given to permanent employees. These complications can make or break the decision for you. Be sure you understand the implications of your actions: the line between contractor and employee is not always as obvious as it might seem.

The final factor to consider is the nature of the shoes you are looking to fill. Things that are integral to the core of your business – product design, for example – should probably be kept in-house, because you likely have a particular vision that would be difficult for an outsider to capture. Other essential-yet-peripheral things, such as bookkeeping, are easier to outsource.

2. Recruitment

Once you’ve decided it’s time to bring someone else on board, make a list of the professional requirements for the role and the characteristics you’re looking for in an applicant.

Begin your search by seeking out referrals from friends, advisers, and industry colleagues, as those candidates will essentially be prescreened for you. Some of the best employees are found without a job ever having to be listed.

Write up a job listing that you can post on LinkedIn, Craigslist, and job-posting sites relevant to your industry. Be as specific as possible. This is your opportunity to filter out people who are unqualified and will give applicants a better understanding of what the job is all about.

When you write your listing, think about more than just the duties of the specific position. Your first hire is your opportunity to extend your company culture beyond yourself, so you’ll want to make sure you are growing your team with someone who can project your company’s values and identity.

You will also want to think about your new hire’s work ethic. With a young company, no one can afford to hire someone who requires constant hand-holding or who doesn’t work at full capacity. To counteract those possibilities, look for candidates with experience in other small businesses or startups, as they’ll likely be used to the heavy workload and shifting priorities that a small-business environment entails.

Once you have a pool of candidates and are ready to interview, remember to keep your questions above-board and be mindful of relevant federal laws that prevent discriminatory practices. The federal Equal Opportunity Employment Commission has all the details on what’s prohibited in both the hiring process and on the job. Focus on asking strong, open-ended questions that allow applicants to paint a picture of their habits, experience, and character. Be sure to let them ask questions as well.

Once you’ve narrowed your interviewees down to one or two final candidates, get on the phone with their references. Make sure that any questions you ask of the reference relate directly to the candidate’s work experience or relevant skills.

3.  Records and Paperwork

Once you get a new employee on board, the process isn’t over. This is the time to get all of your paperwork in order.

Begin by obtaining a nine-digit Employer Identification Number (EIN) from the IRS. Records of employment taxes must be kept for four years, and new employers must register with their state’s New Hire Reporting Program. The Small Business Association has resources to help you.

This is also the time to secure worker’s compensation insurance as well as any other benefits you are offering as part of the compensation package. Because it is unlikely that you will already have an HR policy in place, your first hire is a great opportunity to begin setting up agreements around vacation pay, sick and personal leave, and codes of conduct. Use this time as a way to set your company up for long-term success and employee satisfaction.

No matter how you go about making your first hire or where you find them, the person you choose and the work they perform are the most important results of the hiring process. Build a good relationship with them that will help everyone involved you, your employee, and your company.

Do you have suggestions to help small-business owners with the hiring process? Share them with us!