After using independent contractors to build your business, you're finally ready to hire permanent employees. This quick guide on how to hire employees when you've never done it before may be of help.
Prepare Your Business
Understand the financial aspects of hiring: In addition to the employee's actual salary, consider the cost of any benefits you plan to offer when determining how to hire employees. You may also want to consider the costs of advertising the position, training new workers, purchasing equipment for them and handling the ongoing administrative aspects of hiring, such as maintaining records.
Consider making sure that you have enough steady work to justify a permanent employee before you hire one, and that your business's cash flow is sufficient to meet payroll every month.
Learn how employment laws affect your business: Knowing the state and federal employment laws your business must follow can be important when understanding how to hire employees.
- The Fair Labor Standards Act (FLSA) sets federal standards regarding minimum wage, overtime pay and recordkeeping. The federal minimum wage for nonexempt (hourly) workers is $7.25 per hour, but many states, counties and cities have their own minimum wage laws setting a higher wage.
- You also need to comply with Occupational Safety and Health Administration (OSHA) regulations about workplace safety.
- To protect employees who are injured on the job, many states require you to buy workers' compensation insurance, and some also require disability insurance. An insurance agent can explain what's required for your business.
- Federal discrimination laws prohibit discrimination on the basis of race, gender, age, marital status, national origin, religion or disability both during the hiring process and after employment, and there are state anti-discrimination laws as well.
- Your state labor department can provide details about workers' compensation insurance, wage and hours laws, anti-discrimination laws and more.
Because employment law is complex, it may be a good idea to contact your local SBA district office, SBDC or SCORE office for help understanding what requirements apply to you. (Disclosure: SCORE is a client of my company.)
Get an Employer Identification Number (EIN): You need this tax ID number, issued by the IRS, in order to hire someone. You can apply for an EIN online.
Advertise Your Job Openings
Write a job description: Determining exactly what you need the employee to do can help when deciphering how to hire employees. Consider creating a job description that includes the duties and responsibilities of each job for which you are hiring. This can cover the day-to-day tasks the employee will need to perform, any specific skills or prior work experience that's needed and personality traits that will help the individual succeed in the job (such as being detail-oriented or outgoing). Looking at online job descriptions for similar positions may help you develop a good job description.
Set pay: Creating a reasonable pay rate or salary range can be important when hiring someone. Depending on the type of job, you may be paying an hourly wage or a salary. An hourly wage should comply with federal and state minimum wage laws, and reflect the going rate for similar jobs in your area and industry. For salaried positions, you may want to establish a range rather than a set salary during the interview stage—this may help give you more flexibility to negotiate with candidates.
Write a help wanted ad: Based on the job description and pay rate, you can then create an ad that includes the duties, skills, work experience and personality traits needed for the job. You may also want to list any specific requirements, such as being able to lift a certain amount of weight or being available for frequent business travel.
Giving some indication of the pay rate can be beneficial as well. If it's an hourly wage, you can state the actual dollar figure, but if it's a salaried position, you may want to state a range or use a term such as “salary commensurate with experience.”
Spread the word: You can post your want ad on general job search sites such as Monster, LinkedIn and CareerBuilder; industry-specific job search sites; or regional sites, such as the online job listings of local newspapers. Since many employees are discovered through connections rather than ads, it may also be a good idea to let business associates, friends and family know that you're looking to fill a position.
The Selection Process
Sorting resumes: Once you receive resumes from interested people, go through them to sort out those who actually meets your requirements. Then have those candidates fill out a job application. (You can find sample job applications online.)
Since laws regarding what you can legally ask on a job application vary depending on your state, using one that meets your state's legal requirements isn't a bad idea.
Interviewing: Once you've found qualified candidates, consider doing an in-person interview. This is an important step— especially for first-time employers—in how to hire employees.
Creating a list of questions and asking every candidate the same things can help ensure you're comparing “apples to apples” when you make your decision. It may also help protect you from any accusations of discriminatory hiring. Speaking of discrimination, it's important to know which questions you can legally ask during an interview. You can get more information and advice on the Equal Employment Opportunity Commission (EEOC) website. During your interview, consider doing more listening than talking. You may want to ask a lot of open-ended questions rather than questions that can be answered with just a “yes” or “no.”
Job testing: In addition to the interview, you may also want to test your job candidates on skills relevant to the job listing. For example, you could have a potential marketing communications director write sample press releases or blog posts. In order to avoid being accused of discrimination, you may want to give each of your candidates the same test.
Reference check: Calling the candidate's references and checking with them is one of the final steps in hiring employees. When talking to references, you may want to make sure your questions are directly related to the duties the person performed in their previous job(s). For legal reasons, some references will rarely give you anything other than basic information. But this at least enables you to confirm essentials such as dates of employment, job title and pay.
Background check: If you're hiring for a sensitive position, such as one that involves handling your company's finances or customers' personal information, you may want to hire a company to do a background check on the prospective employee before you actually make a job offer.
Making the offer: If you've found the right employee, contact him or her by phone to make the offer, including specifics such as start date, wages and benefits. You may want to give the person up to 48 hours to accept or decline the offer. Once you get an acceptance, consider creating an offer letter that spells out the details such as job description, job title, starting date, wages and benefits. Having the person sign and return it to you quickly can help
Congratulations! You're well on your way to finding a great employee—and you've learned the basics of how to hire employees.
For more tips on building a strong company culture, access our exclusive guide by author and leadership expert Jon Gordon: Build a Winning Organizational Culture.
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