This post was written by AP Intego
When you’re the only person working in your company, most of your time and attention is spent doing the primary work of the business. Whatever it is—baking, landscaping, programming, consulting—it’s what you’re best at, and it’s the reason you took the leap in the first place. You began with talent and an idea, added the will, provided the energy and, voila, you’ve created momentum.
Now you’re at that place in your business journey where you need to hire an employee who you can rely on to help take your vision to the next level. The payoff can be great, but now you’ll have to adeptly execute a new set of responsibilities specific to being an employer.
Where do you start?
This may be your first experience as an employer, or you may already have a good knowledge base about the ins and outs, but a quick read of some basic information is a good place to begin. Here’s a primer (or review) of the top considerations as you transition from “just me” to “me plus one.”
The gut check
Hiring an employee is a milestone. It means you’ve grown and it’s time to invest in more permanent talent, skills, and experience. It also changes everything. This goes without saying, (but we’ll say it anyway): Are you ready?
Hiring and retaining an employee requires a fair amount of logistics. To ensure you’re ready, talk to other small business owners about their experience and get some anecdotal data to help set expectations.
You’ll also want to be sure you envision what your day to day with an employee will look like. To help you envision this, answer these questions:
- What tasks do you need an employee to do?
- What will a day in the employee’s life look like?
- How will your day to day change having an employee?
- What is your expectation on how involved you will be in helping this employee complete tasks?
This is not meant to discourage you from taking the next exciting step—just the opposite. This should be a fulfilling experience, one that will build confidence and add another dimension to your business expertise. Knowing what to expect going in is directly related to the return on your investment.
Get Started with Square Payroll
Payroll processing trusted by thousands.
Learn how to formalize and grow your business. Check out the Employer Launchpad.
Paying an employee is a vastly different exercise than only paying yourself. If you’re going to bring on a team member, you’ll need to make sure that your finances are up to the task. You’ll need to determine what you want to pay the person you hire, if that is compliant with minimum wage laws, and if your business can sustain that recurring cost.
The amount you pay will also impact the kind of candidates you recruit. If you’ll require the person to be skilled in some capacity, it may cost you more. It also can be hard to compete if you set wages too low.
Also, think about how you’ll run payroll and file and pay payroll taxes. Compliance with state and federal labor requirements, withholding calculations, benefits, and other employee-related items takes time, attention, and patience. An employee needs to be paid regularly and on time. When you have an employee, fixing payroll errors creates significantly more work and, potentially, distrust.
Remember the three “Be’s”: Be accurate, be timely, be compliant. The easiest way to ensure all three is to outsource payroll. Your expertise lies in merchandising, filling the seats in your bistro, styling hair, or developing e-commerce sites. You need to be doing more of these things, not managing weekly payroll. A payroll service provider, such as Square Payroll, allows you to outsource the process in a cost-effective way so you can have more time doing what you do best.
Familiarizing yourself with myriad federal, state, and local employment laws is a great place to go next. There are laws and regulations that you’ll need to comply with before you bring on an employee. Great resources for learning more can be found on your state and city employment department websites or the U.S. Department of Labor website.
Once you familiarize yourself with these laws, you’ll find that you have a few new items on your to-do list ahead of bringing on an employee. For example, the law in every state—except Texas—requires that businesses with at least one W-2 employee have workers’ compensation coverage in case an employee gets sick or injured on the job. Non-compliance can result in stiff fines and other punishments.
Not all states are alike, and there are important differences in how to comply with workers’ comp (and other requirements) among the 50 states, so make sure you have a handle on the obligations in your state—and any state in which you have an employee. Shelling out up-front premiums for a traditional workers’ comp policy can cash-strap you. A pay-as-you-go workers’ comp policy, however, ties your premium payments to your regular payroll run, enabling you to fund your premiums over the course of a year. There are plenty of resources available on federal and state Department of Labor websites. Read the Worker’s Comp 101 Guide if you’d like to learn more about a pay-as-you-go workers’ comp policy.
*Note: Square does not provide legal or tax advice. Consult with a legal or tax professional if you have specific questions. *
A lot of business owners hiring for the first time struggle because they fear giving up control. This is why you’ll want to really think about who it is you want to hire.
Think about what skills you want the person to have, what tasks the employee would take on, and what training you’re willing to do. This thought process could take the form of writing your first draft of a job description or just getting your thoughts out in a bulleted list. Taking time to collect the concrete pieces of what you’ll need in your first hire will help you visualize the person you’re looking for.
Once you have a clear picture, you can start thinking about where you can find that person, or if that person even exists. Are your standards in line with what’s out there? You might already know someone perfect for the job. If not, you’ll have to evaluate the best sources to hire the candidate you’re looking for.
The future of your business
You’ve considered, planned, researched, and planned some more. You wrote the job description, found the (nearly) perfect employee and made the hire. Now what?
Most plans—especially those created in the name of business—tend to become less relevant over time, and perhaps fairly rapidly. The reasons vary. Perhaps volume accelerates quicker than expected or the nature of the market you serve changes. Regardless, you may find that the tasks you need your new employee to do are changing.
If you hired well, this shouldn’t be an issue since the employee is hopefully a flexible, get-it-done-whatever-it-takes person. To ensure you’re set up for success as time goes on and your business twists and morphs like the organism it is, hold regular and timely performance reviews with your employee. Keep them up to date on your changing expectations and the opportunities you’re chasing. Be as transparent as you’d like.
What’s most important as you transition is to continue to learn from this experience and apply those learnings to all your overlapping roles: owner, operator, hiring manager, boss, trainer, and mentor. Now that you’ve hired, your labor costs are likely one of your biggest expenses. Steward that investment well.
Hiring your first employee is an exciting time. To keep it exciting, make sure you’re covering the basics, from knowing your objectives to handling the critical setup tasks that will keep your business efficient, compliant, and manageable as you grow. Doing this early on when you hire your first employee makes everything easier when you hire your second, tenth, and hundredth employee.
What is an Employer Identification Number (EIN)?
Choosing Payroll Software for Your Small Business? 5 Things to Consider
How Much Should You Pay Your Employees