How to Hire Your First Employee for Your Small Business

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Brian Roberts

September 2, 2020  •  6 min read

Ready to hire your first employee for your small business? Congratulations! You’ve reached an important milestone: you’re joining the millions of other U.S. small businesses that create 1.5 million jobs every year.  

So, how do you hire your first employee? Once you’ve found and interviewed your potential first employee, you’re ready to complete the hiring process. 

Here’s how to do it from conducting background checks and drug testing to compliance, recordkeeping, insurance and onboarding.  

1. Perform a Background Check

Most screening and testing policies for new hires at small businesses are intended to help business owners avoid potentially damaging or embarrassing scenarios that can create a negative impression about the company or leave you liable for legal costs. By using your best judgment and analyzing every possible candidate’s history and behavior, you gain an extra layer of scrutiny to help you avoid problematic employees.

Performing a background check on a potential new hire is a crucial step. A job candidate  may seem trustworthy and hardworking, but without a background check, you run the risk of hiring someone you really know nothing about. So, consider engaging one of the following reputable background checking companies to perform speedy, thorough background checks.

  • GoodHire offers FCRA-compliant pre-employment background checks for businesses of all sizes.
  • Accurate offers affordable pay-as-you-go packages for quick background checks.
  • Sterling offers background checks, employment screening, and drug testing services.
  • HireRight provides background checks as well as employment and education verifications.

2. Administer a Drug Test

In addition to checking your potential first employee’s background, you want to ensure their reliability by testing them for any illegal substances via a drug test. Drug testing offers you the assurance the candidate, if hired, is not engaging in behavior that can put you or your small business at risk. Here are three reputable drug testing companies that operate nationwide:

  • LabCorp offers drug testing for employers through urine testing.
  • Concentra offers both pre-employment and random drug testing at one of their many conveniently located medical centers.
  • Sterling offers background checks, pre-employment drug testing and health screening.

3. Prepare Questions to Ask References

Check the references provided by your potential first employee. This is another important step to ensure you are bringing the best possible candidate onboard. By taking the time to come up with a few important questions to use when checking their references, you can better understand your candidate and whether they can provide what your business needs. 

Questions to consider asking include:

  • Was this person reliable and dependable?
  • What are their strengths and weaknesses?
  • What was one of their most memorable accomplishments?
  • What type of environment would they thrive in?
  • What are their strongest skills? And where are the gaps?
  • Would you recommend this candidate for the job?

4. Know What Questions to Avoid Asking the Job Candidate

It’s important to get to know as much about your potential hires as you can by asking thorough and detailed questions about how they work and what their job history has been like. However, there are certain questions you shouldn’t ask to avoid breaking the law. Here are some laws you need to consider:

There are numerous other questions that are illegal to ask job candidates including about their:

  • Race, color, or national origin
  • Religion
  • Sex, gender identity, or sexual orientation
  • Pregnancy status
  • Disability
  • Citizenship status
  • Age
  • Marital status
  • Number of children or if they’re planning to have kids

Learn more about what you can and can’t ask in a job interview.

5. Determine Salary and Job Title

The competition for talent is off the charts today. So, every small business needs to find ways to incentivize talented workers to choose their company over another. By providing a competitive salary and meaningful title, you can attract top talent.

Here are a few tips about how to provide a competitive salary:

  • Research the market for comparable salaries for jobs in your industry and your region. You can check out Glassdoor and Payscale to find this information.
  • Determine the median wage for the position. Once you know the general range of salaries for that type of job, you can decide how far you want to skew to remain competitive.
  • Figure out what perks you can offer to supplement the salary, including health insurance, PTO, and bonuses.
  • Determine how valuable the position is. The more you will demand from this employee, the higher their salary should be to ensure you find someone capable of fulfilling your requirements.

6. Collect and Document the Right Information

Paperwork may be the most frustrating part of the hiring process, but it’s incredibly important to collect the right information to send to the U.S. Department of Labor and the IRS. The Department of Labor requires employers to file certain information whenever there is a new hire. Here is a list of information you need to collect: 

  • Employee’s full name
  • Social security number
  • Mailing Address
  • Date of Birth (if under age 19)
  • Sex
  • Occupation
  • Time of day and day of the week when employee’s work week begins
  • Hours worked per day and per workweek
  • How often the employee is paid
  • Regular hourly pay rate
  • Total daily or weekly “straight time” earnings for each workweek
  • All additions to or deductions taken from the employee’s wages
  • Total wages paid each pay period
  • Date of payment and pay period covered by each payment

You may need to collect this same information for the IRS. 

If this all sounds daunting, consider using an all-in-one hiring platform like Gusto. Plans start at just $6 a month per employee plus a $39 monthly fee. Gusto offers:

  • Affordable full-service hiring suite
  • Automatically files payroll taxes
  • Easily added medical, dental, or vision coverage
  • Consult with certified HR experts 7 days a week
  • Time tracking, sending offer letters, and much more.

7. Know Your Insurance Requirements

Every state has its own requirements when it comes to the level of coverage your small business needs to provide your employees. This coverage also can vary by the size of your business. To find out your state’s requirements check out the National Conference of State Legislatures.

Here are several different options for finding coverage for your employees:

Providing the right coverage for your employees is an excellent way to attract talented workers to your small business. While most very small companies are not required to provide health coverage, it’s a crucial perk employees look for. Check the legal requirements in your state to make sure you’re in compliance when it comes to health insurance coverage.

Our Two Cents

Hiring the first employee for your small business is a major milestone. Employees can fuel growth, but hiring comes with a lot of responsibility too. 

Make sure you know your local, state and federal laws, do your due diligence on all potential employees, research salary requirements to stay competitive, keep good records and provide the appropriate coverage for employees. And if this process sounds too arduous, don’t worry, Gusto and other all-in-one hiring platforms exist to simplify the process.