What you need to know when hiring your first employee

Your business is booming, and you are working every spare minute. You may need expertise in a different area to your skillset, and you may be lucky enough to have received an investment and now need to focus on growth. So when is the right time to hire your first employee?

For each business owner, the time and reason for making your first hire will differ and depend on your circumstances. What you need to do and consider will be the same, and it can feel daunting.

Understand your own business goals.

As a business owner, you need to understand your goals and vision for the business before you make that first hire. If your business aims to launch an online e-commerce site, your first employee needs to understand this market and have experience in this field to add value to your business. However, if you have experience in this field and need administrative help, this is the area you need to focus your hiring on. You need to understand where you want the business to go and where your skills lie. This understanding will help you define the role of your planned hire.

Cost

Other considerations for your first hire will include cost. Can you afford an employee? You will need to pay salaries, taxes, insurance, benefits, etc., and you are committing to be able to find this money every month. Make a plan on how you will deal with this added cost and run some 'what if?' scenarios to see your options if your business takes a downturn. If you have funds available, consider putting six months' salary aside into a deposit account, so you have some runway.

Time

Having a new employee can drain your time when they start with you. You will need to onboard them, give them some initial training, and continue developing them, which is time-consuming.

Full versus Part-time

Do you have enough work for a full-time hire? Also, consider the cost of full versus part-time staff. You may need someone for a few hours each week to start with, and this could develop into a full-time role as the business grows.

Role

Do all the tasks you need fall under one particular skill set? Recruiting for one specific skill set will be easier than recruiting one person who needs to cover different areas of your business. Requiring a broader skill set could make searching for the right person more difficult. Consider full-time versus part-time or consultants if you need help in contrasting areas.

Consultant/Freelancer

Consider whether this is a one-off task or whether you have an ongoing need for this particular skill set. If you need someone on a short time basis to help develop and launch your website, you may be better off working with a consultant on a defined project basis instead of hiring someone that you would have little use for after 3-6 months.

It is a great time to hire if you have the budget available and can define an area where you could use the additional skillset. The investment in additional resources will give you the additional input you need for the growth and development of your business.

Having decided that the time is right to hire someone, what do you need to do next?

Planning, processing, and paperwork

As already discussed, it is important to understand your goals and vision for the business. Once you know where the skills gap is, you need to define the role. Consider what duties you will require your new hire will to undertake, what they will be responsible for, and what skills and qualifications they need. Carry out market research so you can put together a competitive compensation package.

Once you have the job description and compensation package, you will need to advertise the vacancy. Post the job description on job notice boards, and ask friends or former colleagues for personal referrals. Consider using a recruitment agency for any specialist roles.

The next stage would be to review the applications and conduct interviews. Consider asking open-ended questions during the interview process. As this is your first hire and likely there will only be the two of you working on the business for a while, hire someone who compliments you and fits your working culture, not just the skill set you have identified. Also, think about the future and hire for the potential they could bring to you, the company, and themselves; don't just consider what they have done in the past. Find ways for the applicants to demonstrate skill and attitude.

Take your time to find the right candidate, don't rush the process, and meet with them at least twice during the process. Look for passion and commitment, enquire about their work/life balance, and see if it fits your expectations and outlook. Understand what else they are looking for beyond the paycheck and see if you can offer something back in return above and beyond the salary expectations.

When you have identified the right candidate, check references and carry out background checks. The job offer should be written and should clearly set out the role and responsibilities and your expectations in an employment contract.

Employer compliance

The paperwork and employer requirements will depend on your location. In the US, you will need to register as an Employer with the tax authorities to obtain an EIN reference. If you are UK based, you must contact HMRC for a PAYE reference. In addition to registering for employer taxes, you need to consider insurance (Workers' compensation in the US and Employer's Liability insurance in the UK), right-to-work paperwork, benefits, and how you plan on processing the payroll each pay period.

You will need to decide whether to use a service provider or carry out the processing yourself using payroll software. Look at your local government website for more information, and talk to your accountant for further advice. Also, look at the requirements for workplace posters (health and safety, employee rights, insurance certificate) and ensure you meet the legal requirements.

Once the paperwork is complete, you will be ready to onboard your new hire and welcome them to the team. Work with your new hire to set up any internal systems and start the next chapter of your business journey.

So let's recap:

• Understand your business goals and define the role.
• Post the job advert, review applications, and carry out interviews.
• Carry out your due diligence; check references and background.
• Register as an employer, obtain EIN, look at insurance, benefits, etc
• Arrange payroll processing, either a service provider or software.
• Speak to your advisors to make sure you are meeting all regulatory requirements.
• Onboard your new hire, and welcome to the team.

Please note the information presented on this website is provided as a general guide and is not a substitute for legal or tax advice. For specific advice, be sure to consult with a qualified professional.