Do you think it’s time to hire your first employee? Congratulations! If the process feels overwhelming at times, that’s understandable. Hiring an employee is a sign of growth, but growing your business can be intimidating.
If you’ve been a solopreneur who wears all the hats, the jump into being an employer is exciting. It means that you will be able to delegate tasks and refocus on your zone of genius.
For help navigating this new stage, reach out to me at Angie Avard Turner Law, LLC. I work with entrepreneurs around the country to protect what they create. You can reserve your time here.
Making the Shift To Hiring Your First Employee
Most small business owners are used to going it alone for a while. They trust that with hard work and persistence, their companies can grow. Expansion and growth are very exciting but also extremely taxing on the one-and-only person in the business. It is around this time, a time of excitement and exhaustion, that it becomes clear you need to hire.
Hiring your first employee is not a simple A-to-B scenario. There are many things to consider and steps to complete to be ready.
As with anything else in your business, the more prepared you are, the better. Labor laws are complicated, and employees have significant rights. So, it is worth the time and effort to get your hiring practices in line from the beginning. With that in mind, here are six essential steps to take when hiring your first employee.
1. Get Legit In the Government’s Eyes
If you’ve been a solopreneur, you have probably used your social security number for tax identification purposes. But when you hire an employee, you need to obtain an Employee Identification Number (EIN) to file your taxes. You can apply for an EIN online through the IRS website.
You will be paying into the state compensation fund for unemployment once you hire someone. So you need to register your business with your state’s labor department. This handy website directs you to the appropriate state agency to get yourself set up before hiring.
2. Get All the Proper Documents
Taxes loom large in most aspects of running a business, including hiring employees. Every company must withhold taxes at the federal level. And in most places, there are also state withholding taxes.
For federal purposes, every employee must complete a W-4 form, also called the employee’s withholding certificate. This document allows the employee to specify how much of their pay to withhold as federal income tax.
At the state level, there can be different requirements when it comes to withholding employee taxes. Talk with your CPA or bookkeeper about the rules in your state.
Outside of the tax world, there is one more essential form you need to have on hand. Each employee needs to fill out an I-9 to prove they have the legal right to work in the United States. They will need to produce proper identification when submitting this document to you.
After you hire an employee, you need to submit their information to the new hire reporting agency in your state. The purpose of this requirement is to help government agencies track parents who owe child support.
While we’re discussing forms and documents, it’s worth noting that you should also have legal support in drafting employment contracts. Additionally, you may want to consider having a non-disclosure agreement for new hires.
3. Clarify the Role
Before hiring your first employee, take time to write out their duties and responsibilities, as well as the anticipated schedule. The more you can communicate before you make the hiring decision, the better.
Make sure you are crystal clear on your expectations for the employee and the consequences if they do not keep up with their tasks. Outline all potential disciplinary actions so that you have recourse if an employee doesn’t perform as required. It’s also crucial that you create an employee handbook with this information before hiring.
4. Choose a Payroll Provider
Once you have a W-2 employee, it’s wise to choose a payroll service provider. Technically, you could figure out the withholding taxes for your employee and issue a paycheck for each pay period. But should you? Probably not.
Payroll isn’t the best part of your business to DYI. There are legal and tax ramifications if you get it wrong, so save yourself the stress and outsource it. There are many payroll services on the market to help you get payroll out correctly and on time. Choose the one that you feel comfortable using and that can grow with your business.
5. Do Your Due Diligence
Hiring an employee always carries a little bit of risk. Humans can be unpredictable, after all. But the more research you can do before offering a position, the more likely you will have a good outcome.
Be sure to follow up on references and complete a background check on anyone you are considering hiring. If the position will involve access to any banking information, it’s wise to run a credit check, too.
6. Offer Benefits
Successful, hardworking employees deserve support. In addition to paying an actual living wage, employee support includes offering a robust benefits program. Engaging your first employee is an important milestone. But equally crucial is the ability to retain the employees you worked so hard to hire.
Consider a package that includes some or all of the following:
Medical Insurance - If your business grows to a certain size, this benefit will be non-negotiable. Establishing it early on is a great idea.
Retirement Plan
Vacation Time
Gym Membership
Flexible Hours
Remote Work Opportunities
Paid Volunteer Days
It is never too early, and you are never too small to offer benefits to your employees. Setting the standard with your first employee is a great way to build a reputation as a great place to work.
Ready To Hire? Let’s Get Started
Congratulations on growing your business! Now that you’re ready to hire your first employee, be sure to cover all your legal bases. At Angie Avard Turner Law, LLC, I help entrepreneurs protect what they create in their businesses. Reserve your time today to get started on the right foot with your first employee