As your startup begins to grow, you may find yourself in a position to hire employees. The best new hire will be one who can help you advance your organizational goals while also helping you build the company culture you want to cultivate.

However, hiring a new employee is a big decision. It requires a careful understanding of legal and financial implications. You also want to make sure that you can work well with the person, as you'll most likely work side by side until the business expands.

Here's what you need to know about hiring your first employee.

How to Know When You Need a New Employee

As your business begins to grow, the time may come to hire a new employee. However, you'll need to weigh the benefits of having an extra set of hands while also keeping in mind the costs associated with the hiring process, including having to pay employee benefits and employment taxes.

Here are some key signs of when it might be time to bring someone onboard:

  • The workload has become too large for you to manage. If you spend excessive amounts of time managing the workload, it might be time to bring in some additional help.
  • You find yourself having to pass over opportunities because you don't have the manpower to manage them.
  • Your business has become increasingly specialized and you need someone to manage tasks that you can't. For example, you might need someone who can focus exclusively on marketing while you focus on sales.

As you evaluate whether you need to hire someone, keep in mind that you don't necessarily have to bring on a full-time employee. You can bring in a part-time worker to help you with important tasks for a few hours each week. If that employee's responsibilities and hours increase, you can reevaluate if they should become a full-time employee.

Some new businesses may also find it helpful to hire an independent contractor if they only need help with particular tasks. However, you'll need to understand the labor laws surrounding the independent contractor and ensure that you don't treat them as an employee.

6 Things to Do Before Hiring Your First Employee

Once you've determined that it's time to hire your first employee, there are a few steps you should follow to make sure that you have set up your business properly and you're prepared for the Internal Revenue Service (IRS), the Department of Labor, and any legal implications. Then, you can get started finding the perfect employee to add to your team. Let's explore what you will need to do to succeed.

Understand the Financial Impact of Hiring a New Employee

Before you hire your first employee, make sure you understand what the financial implications will be for having someone on staff. This includes withholding taxes, the employee's wages, and the cost of benefits.

Next, look at the minimum wage in your state and the typical wage in your industry. Run some price comparisons on employee benefits to see what you can afford. This can also help you determine the type of package you can offer your employee and whether you will need to stick with part-time help until you have the growth needed to afford full-time help.

Understand Legal and Tax Requirements

You also want to consider your legal and tax requirements before you begin your employee search. For example, you will need an employer identification number (EIN) to legally hire help. You can get an EIN if you have a Social Security number or another valid taxpayer identification number and your business is in the United States. You can review the requirements and apply online here.

When hiring a new employee, you will also have to consider the insurance you may need, including workers' compensation insurance. Workers' comp insurance takes effect if the employee gets hurt on the job. You will also need to pay into your state's unemployment insurance pool through a state tax.

You may also want to speak with a business accountant to make sure you understand your tax requirements and how you can make sure that you manage your new taxes and payroll responsibilities correctly. Know how much federal laws mandate you withhold for federal income tax, as well as your local state laws. This includes remembering the important paperwork you want to provide to your new hire on the first day, including a W-4 form so you can set up their payroll taxes correctly.

Create a Detailed Job Posting and Description

Once you have the legal and financial steps taken care of, create a job description and then craft a posting to help you attract the best possible candidates for your new business. Writing a job description requires careful thought. Consider not only the types of technical skills you want to see in an employee but also the soft skills and work traits that will help you form a good team.

If you want to have a self-driven employee who works on their own projects, note this. On the other hand, if you prefer that the two of you collaborate on most projects and produce deliverables as a team, write this down.

You can post your listing in a variety of places. Social media, such as LinkedIn, can provide an excellent means of reaching potential candidates. Job boards pertaining to your specific industry can also help. If you have a strong network in your industry, you can also reach out to people you know and ask them if they know of someone who might be a good fit.

Interview Several Candidates

After you post your job listing, you should start to see job applications from candidates begin to arrive. Select the ones who have the backgrounds and skills that align most closely with what you want to see in your new hire. You will want to pull them in for an interview.

Interviewing your top candidates can help you gain a better understanding of their work personality and how they respond to different work situations. This can help you identify the candidate who will fit best with the company culture you want to cultivate.

Do a Background Check

It's also a good idea to run a background check on the potential employee to help you spot any red flags. For example, you can tell if the work history they reported to you was accurate. You can also see if they have been convicted of significant crimes that might hinder their ability to do their job at your business.

During your background check, you can also run a background check for employment eligibility verification. Employment law mandates you check that your employee can legally work in the country.

Create a Great Training Program

Once you make the decision to hire someone, you want to offer them a great benefits package so that they join your company. On the first day of work, though, you also want to offer a great training program to help you transition the employee to the job.

Your training program should accomplish a few main goals:

  • It should teach your new employee how to perform their essential jobs and functions.
  • It should fully onboard them, including getting them set up with email accounts and any passwords or access codes they need.
  • It should help the new employee feel comfortable in their position.
  • The process should let the new hire know about any office policies you have.

As you go through the training program, providing an employee handbook can have many advantages. It helps to explain your benefits, such as health insurance, and can help the employee stay up to date on office policies. It also provides the employee with something to reference if questions arise after the training has finished.

Manage Your Company Finances With Skynova

As your startup begins to grow large enough to hire your first employee, you may also have more accounting responsibilities. From managing the additional expenses associated with the employee, such as paying for benefits and their salary, to the importance of withholding taxes, you need to make sure that you accurately and effectively manage your accounting.

Fortunately, Skynova offers accounting software specifically for small businesses like yours. With a straightforward interface and convenient business templates to help you with your finance needs, Skynova can help you quickly take care of financial issues and get back to your business.

Notice to the Reader

The content within this article is meant to be used as general guidelines regarding hiring an employee and may not apply to your specific situation. Always consult with a professional accountant to ensure that you're meeting accounting standards.