Written by As an entrepreneur, making the decision to expand your team can feel exhilarating. After all, it probably means that your business is growing. About 18% of small businesses in the U.S. have paid employees, according to the U.S. Small Business Administration (SBA). But hiring new talent comes with certain legal obligations, plus effort to recruit and onboard your workers.
It’s time to demystify the hiring process for entrepreneurs who are going from startup to established business. Here’s how to bring on your first employees confidently and efficiently.
Recognize when it’s time to hire
Before you start researching how to find employees, get clear on whether it’s the right time to expand. Below are some tried-and-true signs that you’re ready to grow your team:
Your workload feels unsustainable
Being an operation of one means doing all the work. As a small business owner, you might feel overwhelmed by daily operational tasks and the desire to scale the business. Spreading yourself thin will probably dilute your efforts and make it that much harder to grow. That’s where expanding your team can be a game changer. The right employees can take tasks off your shoulders, freeing up time for you to focus on what matters most.
You need expert guidance
We all have our business specialties. Maybe marketing comes naturally to you, or you’re great at drumming up big-picture ideas. But there might be areas of your business that feel like a challenge. Building up your team allows you to bring a new level of expertise to your business — whether that means hiring an accountant or bringing on in-house legal counsel.
Know your legal responsibilities
When you feel ready to hire your first employees, decide what type of workers would make the most sense:
- Regular employees: These workers will receive a W-2 and regular compensation. That may be a salary or an hourly wage. When you hire a regular employee, whether part time or full time, you’ll determine what tasks need to be done and how they’ll be accomplished. Be prepared to train your new workers, manage their tax withholdings, and pay state-required insurances like unemployment insurance and worker’s compensation. You can also offer employee benefits such as a retirement plan and health insurance.
- Independent contractors: These are self-employed individuals, like freelancers and consultants. As such, they aren’t technically employed by the company. Instead of paying them a regular salary, you work with them on an as-needed basis — and they don’t have access to employee benefits. You’ll need to issue independent contractors a 1099-NEC form if you pay them at least $600 in a given tax year.
When hiring employees, your legal responsibilities will depend on the type of workers you hire, your industry and the labor laws in your state. Having said that, you’ll likely need to:
- Acquire an Employer Identification Number (EIN).
- Register with the unemployment office in your state.
- Get workers’ compensation insurance.
- Establish a payroll service so that you can easily withhold taxes.
- Create an employee handbook.
Maximize your recruitment efforts
Once you’ve clarified your legal responsibilities, you’re ready to focus on recruitment.
- Determine how many people you need to hire: Your budget and business goals can guide you in the right direction. Are you looking to bring on an entire team or department, or single employees in various roles?
- Create online job postings. You’ll want to get clear on your minimum requirements for each role and the type of candidates you’re looking for. Being able to offer employee benefits and other incentives can help you attract and retain talent. That might include group health coverage or stock options.
- Review resumes: You can advance stand-out applicants to a phone interview before meeting in person or via video call. Just be sure to contact their references first. You might also ask them to complete a pre-employment test to see how they perform.
- Start making offers: Aim to be transparent about compensation. Being aware of average pay ranges for each role can help you make competitive offers. Determine how high you’re ultimately willing to go before you start negotiating.
- Have your onboarding process ready: After hiring your first employees, you’ll need to confirm their eligibility to work in the United States. You’ll also need each new employee to complete a W-4 form to clarify their desired tax withholding. (Independent contractors will need to fill out a W-9 form.) It then becomes your responsibility to train your workers and provide any resources they’ll need to be successful.
You might choose to work with a recruitment company or hire a consultant to do all this heavy lifting for you. Just remember that the journey doesn’t end when you hire your first employees. You’ll want to prioritize their wellness and satisfaction moving forward. That can inspire them to do their best work — and help prevent employee turnover. This goes hand-in-hand with establishing a positive work culture. Do your best to encourage a healthy work-life balance, celebrate diversity and inclusion, and make your employees feel heard and valued.