📺 Stream EntrepreneurTV for Free 📺

4 Things You Should Do Before You Hire An Employee Save yourself a headache and get ahead of the hiring game.

By Kendra Stephen Edited by Jessica Thomas

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Hero Images | Getty Images

Hiring your first employee is a milestone that many small businesses will never reach. Before you run off to create a job posting or start scheduling interviews, though, there are a few things you should do.

1. Register with the IRS.

Your business needs to be set up to collect and pay taxes to the IRS. To do this, you will need an employer identification number (EIN), which you can apply to on the IRS website for free. Once you have an EIN, you need to set up your employment income taxes at the federal and state level. I had a client who completely skipped this step, and his employees were not happy when it came time to file their income taxes.

Related: 22 Qualities That Make a Great Leader

2. Set up a payroll system

I always recommend that my clients consult with a human resource specialist and use a payroll company. Your business account is going to be vital when it comes time to pay your employees and independent contractors. You don't want payroll payments getting mixed up with your personal bills. The payroll company can process 401(k), medical and other employee deductions so you don't have to.

I would also recommend using a payroll service that provides tax filing services and can handle tax payments. The last thing you want to do is not pay your taxes or send out the wrong tax forms to employees and contractors.

Whether you hire an employee or contractor, you need a system to track their time. You don't want to end up in a situation where your salary employee sues you for overtime pay. The time tracking system can be as simple as the employee writing his/her time on a spreadsheet or using a program to "punch" in and out. Regardless of the method used, you must track their hours to ensure you are paying them the right amount. Additionally, you may need this information if an employee decides to sue your business, files for workers' compensation or unemployment.

Get into the habit of keeping good records and the easiest way to do this is by using a payroll system that includes a time tracking system.

Related: How to Start a Business With (Almost) No Money

3. Create an employee handbook.

Employees need to know what you expect from them, and the employee handbook provides you a chance to set the ground rules, describe employees' legal obligations as an employee and inform them of their rights.

You can add all sorts of broad or specific specific information, ranging from the work schedule for a specific employee's position to company policy on paid leave. You can add other materials, too, like a contact sheet, so employees know who to contact and when.

Whatever's in the handbook, though, it's always a good idea to have it reviewed by a lawyer before you pass it out.

Related: 11 Habits of Truly Happy People

4. Create a training manual.

Start creating this document right now. Create a document in Word or Google docs and record the steps for everything you use for your business, then update the manual to reflect the changes as you go along.

The goal is to provide the employee with a resource that can provide the basics and have them come to you with specific questions. Save step-by-step, screen-recorded videos, screenshots and other documents in a folder and provide that folder to your employees.

Once you've completed these tasks, your business should be in a better position to handle your new addition. Trust me: It's worth it. It's definitely better to set this up now than later.

Kendra Stephen

Business Strategist and Brand Protection Attorney

Kendra Stephen is the founder of BrandProtector.com, a brand-security agency for entertainers, professional athletes and entrepreneurs. She uses her business acumen and legal expertise to provide business strategies that protect brands while increasing brand value.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Side Hustle

These Coworkers-Turned-Friends Started a Side Hustle on Amazon — Now It's a 'Full Hustle' Earning Over $20 Million a Year: 'Jump in With Both Feet'

Achal Patel and Russell Gong met at a large consulting firm and "bonded over a shared vision to create a mission-led company."

Business News

These Are the 10 Most Profitable Cities for Airbnb Hosts, According to a New Report

Here's where Airbnb property owners and hosts are making the most money.

Side Hustle

How to Turn Your Hobby Into a Successful Business

A hobby, interest or charity project can turn into a money-making business if you know the right steps to take.

Starting a Business

This Couple Turned Their Startup Into a $150 Million Food Delivery Company. Here's What They Did Early On to Make It Happen.

Selling only online to your customers has many perks. But the founders of Little Spoon want you to know four things if you want to see accelerated growth.