As your small business grows, you're likely to think about hiring employees. If you're like many business owners starting out, the hiring process may appear a complete mystery. Knowing how and where to find the right candidates, what types of interview questions to ask, and understanding the legal requirements in your state is a lot to take in.

In this article, we'll go over some of the best practices to find qualified candidates for staffing your small business and what legal considerations to keep in mind while adding team members to your company. But before bringing on any new employee, think about the areas of need within your business so you can develop the right job description to attract the right candidates.

Understanding Your Need for an Employee

For some startups, hiring their first employee or adding new employees to a small team can be a big decision financially but also offer more growth for the company. Recognizing some key indicators can let small business owners know when it's time to hire more help.

Signs your company may benefit from additional staffing include upper-level people working on minor tasks they're overqualified for or too much work for current team members to handle in a reasonable amount of time. While you may find these hard to spot, things like mistakes and a drop in quality of work are indicators of employee burnout. And, as a business owner, when you take on multiple tasks and they pull your time away from growing your business, you can bet it's about time to bring some additional hands-on deck.

Now you understand your need for extra part- or full-time help, let's go over how to hire employees.

How to Hire an Employee

When hiring employees for your small business, you'll want to make sure you are taking steps in line with local and federal government guidelines and labor laws. Once you know the actions to take, you can get down to recruiting qualified candidates to fill your staffing needs.

The U.S. Small Business Administration (SBA) offers an excellent checklist for small business owners just starting on the hunt for new hires. The Internal Revenue Service's (IRS) Employer's Tax Guide also explains what you need to know about hiring new employees, such as verifying employment eligibility, federal tax withholding, and new hire reporting.

Here, we'll introduce what you need to meet legal requirements, screen qualified candidates, and start the onboarding process.

Get an Employer Identification Number (EIN)

According to the SBA, the first step before doing anything else is to get an employer identification number (EIN). This is like a Social Security number but for your business. This is your federal ID number, and you need it if you want to hire employees. You may already have this, and if so, great! You're a step ahead! If not, visit the IRS website and apply for an EIN for your business. There's no cost to you when applying for an EIN.

Prepare Federal and State Tax Withholding Requirements

To know how much federal or state tax to withhold from employee earnings, you need a W-4 form — Employee's Withholding Certificate — for the employee. The amount to withhold each paycheck depends on the filing status, such as married, single, head of household, and if there are any dependents. You'll need the employee's Social Security number and have verification of their legal right to work in the U.S. The IRS website houses Tax forms for hiring employees.

For small businesses with independent contractors, this affects how you set up withholding. The line between employee and independent contractor is often blurred and depends on several factors. Be sure to review federal guidelines on independent contractors and which IRS forms are necessary for those instances.

Define the Job Role and Duties

Clearly defined job roles and duties will simplify the hiring process for you. Not only does this attract qualified candidates for the position but can also significantly reduce the time spent interviewing and screening job seekers.

Defining roles and duties saves time even after the hiring process. When employees know what's expected, it lessens confusion among team members and makes for a more productive work environment.

Now you have defined the job role, you can create a job description and upload it to a job board.

Post a Job Ad

Job posting lets people know you're hiring and can reach a lot more candidates. Social media sites, such as LinkedIn, or online job boards are great ways to let job seekers know you're hiring.

Remember to use clear, concise language when creating your job posting. This will limit the number of unqualified candidates from applying. Include your business name, location, job title and description, and a list of essential skills needed to do the job. To make it easier for applicants, simplify the application process by including specific instructions on how to apply, whether it's through email, a link, or telephone.

Screen Candidates

So, your job post is getting attention and now you need to screen job candidates. Business owners go about this in different ways, so take what works for you and leave the rest. In time, you will develop a system to help you track high-quality candidates.

A cover letter can reveal a lot about a person — sometimes, more than the resume itself. While the resume offers a job history and skill set, the cover letter often shows a more personal side and a glimpse of the potential employee's communication style. Keep a list, either handwritten or spreadsheet-style, of the applicants who stood out most to you.

Once you've sorted through the resumes and have your list of ideal candidates, it's time to dig deeper. You can do this by reaching out and setting up a short Q/A session over the phone or by email. Screening through social media accounts is another effective way to downsize the applicant pool and can serve as an informal background check tool for business owners. Here, you can compare what you see on paper versus online behavior. This may or may not mesh well with your company values and raise some red flags about prospective candidates.

Now you've narrowed down the field, you can begin the interview process to find the perfect new hire for your growing startup.

Hire and Report New Hires to the State Employment Agency

By now, you have your first employee or new hire for your team. You need to report the new hire to the appropriate state agency. New hire reporting is a federal guideline run through the Department of Health and Human Services requiring all employers to report new employees to their state. It's designed to help state agencies enforce and collect child support.

Each state is set up differently, but you are likely familiar with your state's online services for businesses. In California, for example, new hire reporting is done on the same site as filing and making tax payments.

Set Up Payroll for the New Employee

To pay your new employee, you need to set up payroll. You can do this on your own by purchasing software or outsource through a payroll company. You'll also want to think about a pay schedule: weekly, biweekly, or monthly. Several states have payday requirements listed on the U.S. Department of Labor website, so be sure to know the regulations where your business is located.

Document payment terms in a memo, form, or employee handbook to avoid any confusion or misunderstanding down the road.

Train the New Employee

Training, or onboarding, introduces new hires to the company culture, values, and their new role within the organization. If possible, enlist a buddy to help and oversee tasks. Offer support and encouragement along the way and remain flexible during the process.

Everyone is different, and levels of excitement and anxiety vary widely. Try to offer consistency and check in often during the first few weeks. Avoid information overload on the first day and celebrate success to offer motivation and show they are valued.

Stay on Top of Your Company Finances With Skynova

Hiring employees is a sure sign of positive business growth. See how Skynova can help you manage your day-to-day business operations. With templates and online management solutions specifically designed for small business owners, Skynova's accounting software can help you track and manage income and expenses.

Notice to the Reader

The content within this article is a general guide and may not apply to your specific situation. Always check with your state to verify your business meets the legal requirements for hiring employees.