You own a thriving business and think you’re at a point where you’re ready to hire your first employee. Maybe you have too much on your plate or you want to take a step back from day-to-day operations. Hiring employees is a great step towards growing your business – if it’s done at the right time. Hiring an employee at the wrong time, or hiring the wrong type of employee, can send your business backward instead of forward.
It’s not a great idea to rush into the hiring process when you’re slammed and desperate for help. It can be a complicated process and the act of hiring may make you busier and more stressed than you already are. Employees should be hired when you have time and energy to go through the hiring process.
Are you ready?
Ask the following questions to determine if you’re ready to hire your first employee.
Can I afford to hire?
Consider this list of employee-related expenses:
• The cost to market the job. How will you advertise the open position? We suggest using our extremely affordable job board!
• The cost of the hiring process. This may include background checks, drug tests, consultations with a labor and employment law attorney, and other steps.
• Obviously, the salary you will pay the employee will be your main cost.
• The cost of payroll taxes which must be paid by you and on behalf of your employee: Social Security tax, Medicare tax, Federal unemployment tax, State unemployment tax.
• The cost of benefits provided to the new employee, if you will provide any.
• The cost of insurance required for entities with employees. Workers’ compensation insurance is required by all states and disability insurance is required by some.
• The cost of payroll accounting and other HR or recordkeeping services, if outsourced.
• The cost of your time to hire and train a new employee.
If you feel the benefits outweigh the costs, and you can afford to hire your first employee, it’s time to iron out some details.
What do I need from an employee?
Before you hire someone, you need to know what you want them to do, so you don’t spend all your time creating work for them.
A good rule of thumb to remember is that an employee should either help the business make money, or help the business save money. They should create (design, manufacturing), market (marketing, sales, business development), or support (administrative, management, customer service) the business.
Try to come up with a list of the duties you need your employee to perform. This is the start of a job description, and will also give you an idea of the type of employee you need.
What type of employee do I need?
Now that you’ve made a list of duties, determine whether you need to hire a full- or part-time employee, a seasonal/temporary employee, or an independent contractor. Ask yourself, “Do I have a single project that’s overwhelming me or that I need assistance with right now (short-term)?”, “Or do I have an ongoing workload of daily tasks for them to complete (long-term)?”
Contractors
Contractors are typically hired to handle a specific project, such as building a website, and should be considered short-term hires. One of the greatest benefits of hiring a contractor, instead of an employee, is that you shouldn’t have to train a contractor. They should already have experience and expertise for the job you need them to perform and they provide their own tools.
One of the detriments, however, is that you won’t be able to dictate the process of the job, only the completion. They manage their own schedules and workload, and may also be working on projects for other companies simultaneously.
Contractors are only required to complete the work detailed in the contract – they won’t be available for side work or additional tasks without an updated contract and additional cost. Although you generally pay a higher hourly rate, a contractor may be less expensive than an employee – due to the short-term nature of their work.
The main point to remember is that contractors are temporary workers and shouldn’t be hired for continuous work.
Employees
Employees, conversely, handle ongoing work such as day-to-day operations and should be considered long-term hires. An employee will need at least some training and you will need to provide them with the tools and materials required to perform their job.
You have a lot more control over an employee, regarding how and when they do a job. An employee’s position can be altered to fit the current needs of the office, and they can be called upon to perform other duties as needed.
If you decide you need an employee, consider if there is enough work for a full-time position (30 or more hours per week) or if a part-time employee (20 hours or less per week) will be sufficient. Remember, full-time positions typically attract more serious applicants and may call for benefits, whereas part-time positions attract those with otherwise busy schedules, such as students.
When you hire an employee or a contractor, you’re required to register them with the state and categorize them as contractor, common-law employee, or other. If they’re classified incorrectly, there can be legal and financial ramifications.
For more information, please visit the IRS website on determining employee type.
Get ready to hire
If you’ve answered these questions and decided you’re ready, then it’s time to start the hiring process. Congratulations!