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How to Hire Your First Employees

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This post is part of a series called The Complete Small Business Human Resources (HR) Guide.
How to Build a Culture of Diversity and Inclusion in Your Workplace

In a recent tutorial we looked at the art of delegation, and saw why it’s such a critical skill for entrepreneurs and business owners to master.

But what if you’ve got nobody to delegate to?

In this tutorial we’ll look at how you can go about hiring your first employees. If you’ve been going it alone until now, bringing on full-time staff will be a big step, and it can be hard to know where to start. So we’ll take you through the process of finding and recruiting good people to help your business grow.

You’ll learn how to identify good candidates, how to interview them and select the right people, how to figure out what to offer in terms of pay and benefits, and how to navigate some of the regulatory requirements like tax forms and employment identification numbers.

1. Finding the Right People

Recruiting is a skill, like any other. In large firms, it’s handled by HR professionals, but if you’re just starting out, you’ll have to do it yourself. Here are some pointers.

Be Clear About What You Need

If you’re feeling overwhelmed, it can be tempting just to rush into putting up a job ad, to get help as quickly as possible. But if you take some time to define exactly what you’re looking for, it’ll pay off, not only in helping you find the right person, but also in ensuring that the person is happy and productive in the new job.

Not convinced that it’s worth the effort? Check out this Quartz article, in which Silicon Valley recruiter Scott Purcell says that poorly written job descriptions hurt both employers and job applicants.

“A lot of times when companies write job descriptions, they include everything that they dream of having,” Purcell said. “It’s a list of things that they need, then things that they want to use in the future or are thinking about using. They put in everything that’s in their environment, every sort of technology.”

But when you put out a poorly-thought-out job description, you deter good candidates from applying, simply because they lack one particular skill or piece of experience that may not have been important anyway.

So make a list of everything you do, and what you need help with. Refer back to our delegation tutorial if you need help with that. Then put together a short, simple list of core skills that you really can’t do without. Forget the rest.

Sell the Job

Although it’s called a job “ad”, a lot of companies don’t take the opportunity to sell themselves. They pay more attention to the “job” part of it, describing in detail every aspect of the role and its responsibilities.

While it’s good to give information on what the job entails, you also need to make it sound exciting, says small business adviser Evan Horowitz.

“There’s no faster way to bore a prospective applicant than a laundry list of duties,” he says. “Explain the job in a way that highlights what’s great about the job. What do they have the opportunity to do? Why is this role important to the company? What growth opportunities might there be? Get inside the head of the type of person you’re hiring.”

Be Focused

If you want to find the best candidates, it’s important to cast a wide net. But because you’re the one who’ll be sifting resumes, it’s also important to be smart about where and how you advertise.

Huge sites like Monster.com or Careerbuilder.com will get a lot of eyeballs on your ad, and may well generate some good candidates, but you’ll probably have to sort through some less suitable applications too.

The more focused you are, the better your chances of generating not just résumés, but the right résumés. Think about blogs or “niche” sites where your ideal candidate would spend time. Many of these sites will have job boards you can advertise on, and you’ll stand a good chance of finding the right person.

You can also use social media, if you’re smart about it. A recent survey found that:

  • 93% of recruiters currently use or plan to use social networks to support their recruiting efforts.
  • 73% planned to increase their investment in social recruiting in 2014.
  • 73% have successfully hired candidates via social media, with 79% of those hires coming via LinkedIn, 26% via Facebook and 14% via Twitter.

The advantage of sites like LinkedIn is that you get to reach a huge number of people, but in a very targeted way. You can quickly find people with particular skills and experience, and instantly see what they say about themselves. Then approach them directly.

And don’t forget the old-fashioned way, either: just ask around. This is an inherently focused way of searching for a candidate, because people in your personal and professional networks should have a good understanding of who you are and what sort of person you’re looking for, and will be able to make useful recommendations.

Whichever method you use, keep referring back to your initial list of skills as you judge the applications and create a shortlist of people to interview.

2. How to Interview

You may have been a candidate in job interviews before, but conducting them is a different skill altogether. Here's what you should ask, and a few things you definitely shouldn't ask.

How to Prepare

Everyone knows that candidates should prepare for a job interview by preparing thoroughly and doing lots of research. What’s less well known is that employers should do the same.

If you scan the person’s résumé just before the interview and then ask a bunch of generic questions, you’ll get a bunch of generic answers. A job interview is a chance to get to know the person you may be working with every day, so it’s worth investing extra time to get more out of it.

If the person is active online, read through their social media profiles and blog posts, and look for some insights beyond what’s on the résumé. Then you can ask intelligent questions that focus on specific projects they’ve worked on, or specific challenges they’ve faced.

If the person doesn’t have a strong online presence, you can still research the companies they’ve worked for and the things they’ve done, so that you can find some fodder for individualized interview questions.

This may seem like a lot of work, but by this stage you should already have shortened your candidate list to a manageable number, so it’s worth taking a little time to get the most out of each interview.

What to Ask

There are many strategies for interviewing, and the one you choose will depend on what you’re looking for.

If you want to get to know people personally and see how they’ll fit in, for example, then a relaxed, informal approach should work. But if you want to see how your candidates handle pressure, you might want to ask some tougher questions and put them on the spot.

It’s good to mix factual questions with broader, more open-ended behavioral questions. So you might ask some details about people’s experience and how they handled specific projects you’re interested in, and then follow that up with some broader questions about how they’d approach certain job situations, or what their biggest career mistakes have been.

No matter what strategy you use, the key is to tie your questions closely to the list you made back in section one. Your questions should reveal as much as possible about the candidate’s ability to give you what you’re looking for.

What Not to Ask

We’ve covered some useful questions you can ask, but how about what not to ask? There’s a surprisingly long list of questions that are simply off-limits in a job interview. If you ask these questions, you could be breaking U.S. law (and other countries have similar rules, so check your local situation).

The idea of these rules is to ensure a level playing field for all candidates and to prevent discrimination. Here are a few things you can’t ask about, according to employment attorney Matthew R. Grabell:

  • Private organizations he or she belongs to
  • Religious affiliations
  • Date of birth (except when that information is required for satisfying minimum age requirements)
  • Lineage, ancestry, national origin, descent, parentage, or nationality
  • Names and addresses of relatives other than a spouse and dependent children
  • Sex or marital status
  • Height or weight, unless you can show that information is justified by business necessity
  • Physical or mental disabilities

In some cases, there may be similar questions you can ask that will put you on the right side of the law: Kettering University has compiled a list of 30 interview questions you can't ask, with legal alternatives. But remember that the laws are there for a reason, and accept that there are some things about your potential employee that you just don’t have the right to know.

3. Put Together Your Offer

It can be hard to know what to offer in terms of pay and benefits. If you’re just hiring your first employee, you may even be unsure whether you can afford to pay a competitive wage. Just adding one staff member is likely to be a major expense at this early stage.

The first step is to have a clear picture of your financial situation, and some realistic projections of how you expect things to develop over the years to come. If you need help with this, check out our Bookkeeping 101 tutorial, or this one on key metrics to gauge profitability.

If you’ve got a healthy profit coming in and can afford to pay an additional person’s salary out of it, that’s great. But many small businesses are not in such a fortunate position. You may have to hire someone before you can really afford it, reasoning that your new employee will bring in extra business with which you can pay his or her salary.

But if you do this, make sure that it’s a calculated risk, not a leap of faith. Do your sums and try to make realistic forecasts of how much you could expect to make. If the new hire will cost you $50,000 a year, how many new clients would you need to attract to make the hire worthwhile? Is that feasible?

Also keep in mind that on top of the new person’s base salary, you’ll have to figure in other costs, like equipment, benefits, insurance, etc. The HR expert quoted in this CNN article suggests that business owners should expect new employees to cost an additional 25% or 30% on top of their base salary.

When you’ve figured out what you can afford, it’s time to see how that stacks up to what competitors are offering for similar jobs. There are lots of online calculators to help you figure out the average wage for a particular type of job. A few examples:

Also check out other companies’ job ads to see what they’re offering in terms of perks and benefits. Although salary is important, it’s not everything. Things like attractive benefits, a good working environment and flexible hours can make your offer much more competitive.

4. Do It by the Book

Congratulations! Your ideal candidate has accepted your offer. So time to start shopping for a new set of office furniture, right?

Not so fast. If you’re just hiring contractors online, things are quite simple, but when you take on permanent members of staff, there are some regulatory requirements you need to be aware of. It’s important to make sure you have all the paperwork lined up, so that you don’t fall foul of any rules.

In this section, we’ll look at some of the main things you have to do as a U.S. business owner when you hire new employees. If you’re based elsewhere in the world, your local rules will be different, of course. And even within the U.S., different states have their own regulations.

So view this as a general guide to what you can expect, but of course check with the relevant government agencies to find out what rules apply in your area.

Check Eligibility

Is your new employee eligible to work in the U.S.? As a business owner, it’s your legal obligation to check.

The employee must fill out IRS Form I-9, giving full details of their immigration status, and you must “physically examine each original document the employee presents to determine if it reasonably appears to be genuine and to relate to the person presenting it.”

The form itself gives full details of exactly what documents the staff member needs to provide and what you yourself need to check. Read it carefully to make sure you’re following the rules.

Get Set Up for Tax

You’ll need to withhold tax from your employee’s paychecks and pass it on to the IRS, and perhaps also your state tax authority.

The first step is to get an Employer Identification Number (EIN), if you don’t already have one. That’s the number you’ll use on tax returns and other documents. You can now apply for one online at the IRS website.

The employee must then fill out IRS Form W-4 so that you can withhold the right amount of tax from each paycheck, and you should set up a payroll system that allows you to make sure it gets processed correctly.

Then you’ll need to make regular filings to keep the IRS updated on how much tax you’ve withheld. For more information, check this IRS Q&A page or this IRS guide to hiring employees.

Get Insured

If you have staff working in your shop, office or other place of business, you need insurance. According to the Small Business Administration:

All businesses with employees are required to carry workers' compensation insurance coverage through a commercial carrier, on a self-insured basis or through their state’s Workers' Compensation Insurance program.

To learn more about workers’ compensation insurance and other regulatory requirements when hiring staff in the U.S., read this SBA guide to Employment and Labor Law.

Next Steps

So you now know how to find good candidates for your job, how to conduct the interview and put together a competitive offer, and how to make sure you’re following the rules in your jurisdiction.

The next step is to get started. Get clear about what you’re looking for in a candidate, make a short, targeted list of skills and qualities, and then create an enticing job ad and place it in all the right places. You’ll soon have a pool of qualified candidates, and can begin the process of hiring exactly the right person to take your business to the next level.

Resources

Graphic Credit: Identification-Badge designed by Francesco Terzini from the Noun Project.

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