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Hiring your first employee is a large but pivotal step if you’re looking to expand your business and relieve some of the pressure from yourself as a self-employed worker.

Many businesses are similarly onboarding new workers, with the IRS receiving more than 7 million requests for new employer identification numbers (EINs) between January 2020 and June 2021.

While it might seem daunting that there are many state and federal laws, and other regulatory compliance requirements that go into hiring an employee, once you get through your first hire, you can streamline your process for the future.

This article details what you need to consider when moving forward to hire your first employee, from deciding when it’s right to hire, to developing your onboarding process.

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Key Takeaways

  • The job posting should be friendly and open but concise and clear about the job and what it entails.
  • Financial responsibilities and legal compliance need to be taken into consideration as you hire your first employee.
  • A solid training program is a big help to get your first employee comfortable with the operations of your business and on the right track for a successful tenure.

How Do You Know It’s Time To Hire Your First Employee?

It’s very important to be certain you need to take on extra help. You need to be sure that your business cannot function properly without extra people on board.

Perhaps you’re receiving more orders than you can process by yourself, you can’t keep up with your deadlines, or you’re about to start a project that’s larger than any you’ve ever done on your own. These are all cues that you might need the assistance of your first employee. Having clear human resource processes in place for attracting, sourcing, recruiting, onboarding, and training talent is important.

How Do You Write a Job Posting?

When you’re looking for your first employee, you have to get the word out that you’re hiring, so you want to create and share a job posting. The posting should be friendly and open but concise and clear about the job and what it entails.

It should include details, such as the amount of experience you require for the job, the amount of time potential employees have to dedicate to the job, and whether the job requires heavy lifting or skills, such as food prep or even being able to drive legally.

Indicate if you require a resume and cover letter. You should also include a method of contact, such as an email or phone number.

What You Need To Know About HR Before Hiring Your First Employee 1
Source: LinkedIn

Depending on your industry, you can share a job posting in several places including:

  • Online job boards and websites
  • Social media, including LinkedIn and Twitter
  • Local newspapers
  • Your company website
  • Printouts on physical noticeboards

How Do You Write a Contract?

While you’re considering your job posting and description, it might also be a good time to consider what stipulations go in your contract. You want to consider your expectations for the role.

Details like your employee’s salary should be included within the contract. Ultimately, both you and your employee will sign the contract, and you’ll have a copy for your records. Your worker likely also keeps their own signed copy.

If you require any assistance in drafting a contract this is also an instance where you can enlist the help of an expert, such as a lawyer or business consultant.

Are You Financially Ready?

When looking to hire your first employee you need to be prepared to pay them. You should know whether you’re planning to hire a full-time or part-time employee. You should know whether you plan to offer benefits, including health insurance, Social Security, and workers’ compensation, depending on the state.

You’re financially responsible for all these factors, so ensuring your business can handle part of its revenue going to another person is important. Still, one benefit of having an employee is the potential to add revenue as your business expands.

If you find crunching the numbers is challenging, enlist the help of an outside expert, such as a lawyer, bookkeeper, accountant, or human resources (HR) consultant to help you figure out any details that you cannot sort out on your own.

What You Need To Know About HR Before Hiring Your First Employee 2
Source: Paychex

Once you’ve determined that you’re financially solvent enough to take on a new employee, you want to set up payroll so that you can pay them. You also want to ensure that you’re withholding the proper amount of taxes to deposit to the IRS, in addition to Social Security and Medicare tax payments.

You have the option of enlisting a certified public accountant (CPA) or bookkeeper to handle your payroll. However, there are many services and software that allow businesses to handle payroll in-house. Some of these services include:

How To Comply with HR Regulations

If you’ve gotten to this point, you’ve likely already hired your first employee. However, there’s still lots of work to be done.

What You Need To Know About HR Before Hiring Your First Employee 3
Source: IRS

Get an EIN

Once you hire your first employee you must register with the government as an employer. An EIN allows you to identify yourself as an employer on tax returns and other documents that are submitted to the IRS. You can get an EIN by downloading Form SS-4 from the IRS website.

Register With the State Labor Department

Registering with your state’s labor department sets you up to pay the required unemployment compensation taxes. This is what workers receive in the form of unemployment insurance if they happen to lose their jobs.

You can find more information about labor departments for different states at the United States Department of Labor.

Get Workers’ Compensation Insurance

Having workers’ compensation insurance isn’t legally required in every state but it’s a good safeguard because you never know when accidents can happen. Overall, you should have a plan for worker’s compensation within your business if you plan to take on extra workers.

Other Important Legalities to Remember

  • Report new employees to your state’s new hire reporting agency
  • File IRS Form 940 each year
  • Adopt workplace safety measures
  • Create an employee handbook
  • Set up personnel files
  • Set up employee benefits

How To Onboard Your First Employee?

Once your employee is ready to start work, you want to make sure that they have a smooth and successful introduction to your company. However, there are still some important details to get out of the way before you can get to work. These steps include:

  • Have your employee fill out IRS Form W-4: Withholding Allowance Certificate
  • Fill out Form I-9: Employment Eligibility Verification

It’s a good idea to have a solid training program to get your first employee comfortable with the operations of your business and on the right track for a successful tenure.

You want your worker to feel comfortable and confident in their new role. This increases the likelihood of them maintaining their position at your company for a long time.

Later on, you can choose to set up a human resources department that is dedicated to hiring and recruiting new employees, and assessing performance management to make sure that employees are well-trained and satisfied in order to retained them.

What To Do Next

There’s a lot that goes into hiring your first employee. This is the first person that you’re entrusting with the vision of your business outside of yourself. This person is the beginning of your company culture and someone you depend on to execute things when you cannot. You want to take the time to find the right person for the job, but you also want to be sure that you’re in the position to provide the best work experience possible.

This person represents a positive step of growth for you and your business. Once your first hire is complete, you might very well be on your way to hiring two or three employees, or even having your employees be the ones doing the hiring. The next wise move is to find a fully-equipped HR software that provides effective and well-designed support for the traditional pillars of human resource management such as personnel tracking, payroll and benefits administration, and time and attendance tracking.

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