8 Things You Need to Do Before Hiring Your First Employee. You know it’s time to hire help when you’re working around the clock to keep your business moving.
Pain points like this tend to turn new entrepreneurs into employers pretty quickly. After all, the business can only scale if you can effectively delegate work to the right people. Still, we don’t recommend rushing into hiring before you have a solid understanding of the work and costs you will surely incur along the way.
Before you start posting job ads, make sure you walk through these eight steps to make sure you’re ready, willing and able.
1. Understand What It Will Cost
You need to consider the payroll tax and unemployment tax insurance in your state when determining your hiring budget. You have to add in the required taxes with the potential salary for your new employee. Total cost will also include benefits such as vacation, as well as equipment and other ongoing expenses like software or phones. Create a spreadsheet on all the costs so that you will be able to determine how much you can afford to pay your employee.
It’s worth considering hiring a contractor as well. Their hourly or project rates may be higher, but you won’t have to worry about payroll tax, unemployment insurance and other overhead.
2. Calculate the ROI
Determine the ROI needed to cover your employee. The idea, of course, is that employees generate revenue either directly (a salesperson for example) or indirectly (like a project manager who helps you get work done on time).
They may also simply take work off of your plate so that you can generate more revenue. Hiring an administrative assistant, for example, might mean that you can spend more time finding new customers.
Set a forecasted budget and measure against results. If the new hire isn’t working out, consider the advice of Likeable Media CEO Carrie Kerpen who recommends that businesses “hire slow, fire fast.” Let the numbers tell you if it’s not working and cut your losses before your company suffers.
3. Write a Great Job Description
Once you have determined your budget, you can determine the highest priority needs for your company.
- Make a list of all the things that need to be done
- Calculate how many hours these jobs are taking you to do right now
- Determine which tasks can be delegated to an employee
- Decide how much time you are able to invest in training
Use this as a resource to create a job description. The more accurate the listing, the better your potential hires will understand their responsibilities and your expectations.
4. Decide If You Need an Employee or a Contractor
Small business can benefit from starting with contractors. It helps them get work done quickly, without investing time in interviewing, training new hires, creating benefits packages and much more.
Contractors are best when the work is short-term or outside of your area of expertise. A coffee shop, for example, may need a logo and website, but not a full-time designer. This would be the perfect job to outsource to a professional. The hourly rate will be much higher than an in-house designer, but the employer doesn’t need to worry about benefits or taxes. When the work is done, the engagement is over.
If, on the other hand, your business has a need for ongoing work, a full-time hire makes more sense. A creative agency, for example, likely won’t want to outsource their sales to a freelancer. It makes sense to invest time in finding and training a great employee.
5. Understand Liabilities and Compliance
As an employer, you will need to set up accounts to withhold payroll taxes for federal, state and local taxes from your employees’ pay, then pay your company portion. You will also need to set up accounts with your unemployment tax agencies that you will pay into. In addition you will need to contact your insurance agent to see if you are required to pay workers compensation insurance for your employees and make sure you are in compliance with your state’s laws.
6. Consider Offering Perks
Will you provide a computer, cell phone, office supplies, travel, dues and subscriptions? What about benefits like health insurance, retirement plans, vacation, holiday and sick pay?
You will need to calculate these into your budget. In addition you may consider offering incentives like profit sharing to attract and keep high quality workers. Perks and benefits can be expensive, but come with an ROI of their own—hiring new employees is typically more expensive than keeping existing ones.
7. Document Everything
Even if you are only hiring one person, it’s a good idea to create an employee handbook and an employment contract. This is a good way to set clearly defined expectations for everyone involved.
This should include all of your company policies, employee hours, benefits, etc. This will help you avoid a headache if issues come up after a new hire has been brought onboard. The same is true for contractors. You want to make sure there is an open dialogue about expectations and feedback.
8. Set Up a Payroll System
Paying employees on time is essential and you also want to ensure your payroll taxes are calculated properly. In order to track this smoothly, it’s a good idea to set up a payroll subscription service that is integrated right into your accounting software.
QuickBooks offers a number of products and services to make payroll easy. From direct deposit to paying payroll taxes and reconciling with your books, QuickBooks is a great solution for businesses of any size.