Hiring Your First Employee? 5 Things You Need to Know.
You're finally letting someone else infiltrate the walls of your company, and you'll have to assume the role of that person's boss. Don't panic.
You've been a solo entrepreneur for a number of years and things have finally taken off to a point where you're in need of hiring some full-time help in the form of an employee. While exciting, this "next step" can also be a very nerve-wracking change.
Hiring your first employee, in fact, may feel strange. You're finally letting someone else infiltrate the walls of your company, and you'll have to assume the role of that person's boss (in addition to the dozens of other titles you already hold). But before giving any individual a job offer, you need to be aware of the following:
If you're only taking salary into account when hiring an employee, you're failing to account for the myriad of other expenses (and possible expenses) that could come into play. For example, you have to pay 6.2 percent of each employee's salary (up to $118,500) for social security tax. So, if you're paying an employee $40,000 per year, you're responsible for $2,600 in social security tax.
Other things to think about include Medicare tax (1.45 percent of base salary), federal unemployment tax (6 percent on the first $7,000 of wages) and, possibly, state unemployment tax.
2. Legal requirements
"When you are planning on hiring any employees, you need to understand your obligations as an employer and what you can and cannot do," explained Consultants 500, an online platform for connecting businesses with specialized consultants.
Some things to think about include employment laws, employment contracts, tax obligations (as previously discussed), the implications of firing the employee, minimum hour and wage requirements, overtime stipulations and more.
3. Finding applicants
If you're going to put forth the effort to hire an employee, you'll want to make sure you're hiring the best possible person for the job. And while you may think that will be easy, finding good candidates can be a major challenge.
The marketplace is filled with job-seekers and many will apply for positions without even reading the role or requirements. Many spend hours and hours filling out all sorts of applications, hoping something will stick.
The result: You'll likely get a stream of unqualified applicants. Be prepared for this and develop a method for screening candidates.
One little trick some companies use to filter out people who don't belong is to require the applicant to submit a code word within their cover letter. This code word is given out in the requirements section of the job posting and reveals whether or not the applicant actually read the posting in its entirety.
"The key to a good interview will always lie in your ability to avoid common hiring mistakes and assess potential talent in the interview process," Paul Falcone wrote on Monster.com. "But keep in mind that more new hires fail due to personality-culture mismatch than technical skills mismatch, so keep a keen eye out for compatible styles in terms of communication, pace, constructive criticism and work-hour commitments in candidates' responses."
While your small company probably doesn't have much of a workplace culture quite yet, your first employee will go a long way toward helping determine what that culture will look like. You're setting the tone for your business and want to make sure everything from skill set to personality aligns with your goals.
5. Training and onboarding
The hiring process doesn't end when the employee signs the dotted line. At that point, you'll have to turn your focus to the onboarding process. So, picture your new hire like a lump of clay. He or she is raw and has potential but still has to be shaped into the kind of employee you want.
Be meticulous in how you approach training. When in doubt, over-train rather than under-train. The last thing you want is for your employee -- who is costing you money -- to be more of a nuisance than a help.
Take hiring seriously.
Hiring an employee is not a decision that you should make overnight. It requires careful planning and lots of thought. Otherwise, you could end up jeopardizing the future of your business.
As finance expert Damian Davila has pointed out, "A bad hiring decision can cost a company 30 percent of the employee's annual earnings, according to estimates from the U.S. Department of Labor. Before you hire your first employee, make sure to establish a clear profile of whom you're looking for, take the appropriate time to evaluate candidates and follow federal and state regulations."
This article isn't meant to scare you or convince you not to hire an employee. Hiring your first employee is an important step in taking your business to the next level. However, you do need to take it seriously and avoid costly missteps.
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