Scaling your business is exciting, but the growing pains can also be stressful. One of the most significant growing pains is often hiring. The decision of when and how to hire can be scary because often it's completely foreign territory. Here are some steps you can take before, during, and after the hiring process to make sure you don’t accidentally violate any of the new legal and administrative obligations you’re now on the hook for.
Set Up Tax Withholding
You’re going to need to register at both the federal and state level before you can bring anyone else on. For now, let’s assume you already registered with your state’s labor department and have an EIN for your business (if not, see Part 3 of this guide). You’ll also need your EIN to set up a payroll system that will withhold taxes for the various government entities that will be expecting a portion of every payroll check you cut.
Make sure you’re set up with a payroll system designed to calculate, collect, and pay Federal Income Tax Withholding, Federal Wage and Tax Statements, and in some cases, State Taxes for every employee you bring onboard.
You can also do them yourself or outsource to an accountant, but you’re still ultimately responsible for making sure the tax bill gets paid.
Get Worker’s Compensation Insurance
To keep you and your employees safe in the event of an on-the-job injury or accident, you’ll need to sign up for worker’s compensation insurance. With very few exceptions (like super small operations), most states will require it. Even if your state is one of the few that don’t, it’s still a good idea to reduce your liability as an employer.
Fill Out Forms and Verifications
Having these forms on hand will expedite the hiring process and ensure that nothing gets lost in the shuffle. It’s a good idea to create employee packets or personnel files with the new hire’s application, offer letter, future annual reviews, and the following documents:
Form W-4, Employee’s Withholding Certificate, determines the amount of federal income tax that needs to be withheld based on allowances like the number of dependents an employee has. This needs to be submitted to the feds upon completion.
State withholding forms will vary depending on where you’re registered, but you can access them at bls.gov to see individual state requirements and print the required form(s).
Form W-9, Request for Taxpayer Identification Number and Certification, ensures that you have all the necessary information for your independent contractors. These are primarily used with freelance or other contract employees who pay their own taxes and have been hired to help with anything from seasonal tasks to long-term overflow.
IRS Form 940 details your annual federal unemployment tax payments and needs to be filed each year.
Form I-9, Employment Eligibility Verification, determines a candidate’s eligibility to work in the US. It doesn’t need to but submitted to anyone, but it’s important you keep this document separate from the employee’s personnel file and make it available for inspection for at least the first three years of their employ.
By January 31 of each year, you’ll need to send a Form W-2 to your employees or 1099 Misc (used to document income paid out each year to contract employees). This details what they made for the year and the amount of taxes that were withheld. You send Copy A of the W-2 or 1099 forms to the Social Security Administration by the end of February.
Be sure to keep all corresponding tax paperwork for a minimum of six years.
Decide on Employee Benefits
Many companies offer health insurance and 401(k) plans as part of their employee benefits package. If you’re a startup who can’t offer these benefits yet, don’t worry. If you are extending employee benefits, you’ll need to walk employees through the enrollment process so their dependents are also covered and beneficiaries have been named.
Check your DOL and OSHA Compliance
If you have a brick and mortar store or central office, remember that different government agencies have different required notices that must be posted in the space. These detail the rights of your employees and can be found and printed from the Department of Labor’s website. Be sure to check if there are any state-specific notices for your area.
You must also comply with any Occupational Safety and Health Act (OSHA) regulations. These are designed to keep your employees safe and mandates that government administrators be notified of serious workplace accidents or injuries.
Put Together an Employee Handbook
There’s no law that says you have to, but it’s a great way to cover the company-specific rules and policies each employee is expected to follow. In it, be sure to specify that employment is at-will unless your state requires a written contract.
Write the Job Description
You’re probably hiring based on a particular bottleneck, lack of in-house skill, or simply because you’re too busy and don’t like doing a particular task. That’s fine so long as you can communicate it in a job post.
Visit other job boards to see the phrasing and general responsibilities other employers have written. Be sure to add your own requirements and specifications for the role, including years of experience and education you’d like the person to have. You can also use platforms like Textio to help you catch any gender-biased words or jargon in your job post.
While you’re at it, do some number crunching and figure out what you can afford to pay your new employee. It’ll be helpful when it comes time to negotiate their salary or hourly rate.
Pick a Recruiting Strategy
There are many recruiting strategies to consider when your business is scaling. Recruiting can be expensive at times, but it doesn’t always need to have a monetary obligation attached to it. Here are some routes to consider when hiring:
Research Contractors
Bringing on contractors (or 1099’s) is a great way to hire extra help if you’re unsure of how long you will need it. As your business is rapidly growing, there can be some uncertainty around how long the pace will continue at that rate. Contractors are great to hire on a project-by-project basis. You can easily find contractors using sites like Upwork to narrow your results, depending on the type of work you need to be completed. There are some legal implications to consider when hiring contractors, so make sure you follow IRS guidelines.
Interview Third Party Recruitment Agencies
There are a multitude of companies to choose from if you want to consider using a third party recruitment agency to assist with building out your team. There are also key advantages to using their services for hiring. Third party agencies will have more knowledge of the industry, and many firms specialize in certain markets. They come with pre-existing knowledge of where the talent is, how to find them quickly, and current salary trends. Agencies sometimes will come equipped with their own network of candidates to pull from at any moment. This allows you to not be solely reliant upon inbound applicants who apply directly to your company. This also can help speed up your time to hire. If speed is a top priority in hiring, using a third party recruiting agency may be your best option.
Consider Interns/College Hires
Never underestimate the value of a great intern! Intern talent tends to be easily attainable. Wherever your company is headquartered, there’s bound to be a nearby university with students who either want an internship to gain experience or actually need an internship for joint course credit. Universities have free job boards where you can effortlessly post available internships at your company. You can also decide if your internships will be paid or unpaid. Over time, if you build a successful internship program, your best interns will want to continue working at your company post-graduation. This is a great way to convert intern talent to full-time, post-college hires. The intern-to-full-time hire model works well for small companies and equally for some of the largest fortune 500 companies.
Put out a Call for Employee Referrals
Employee referrals generally provide the best quality of candidates because great people tend to want to work with other great people. You can count on your employees to refer awesome candidates with whom they feel passionate about potentially working in the future, whether it be an old coworker or someone from their network. Always consider capturing your employees’ networks by gaining employee referrals. One of the best ways to incentivize employee referrals is to create a strong employee referral program. There are many ways to design a successful employee program, so you might want to consider polling your employees to see what type of incentives they would like (ex: money, gift cards, gifts, etc.).
Attend Networking/Meetups
One of the prime ways to build your company brand is to network in your community. The more people who know about you, the better your opportunity to receive inbound applications. A lot of small business owners attend meetups on a regular basis or join networking groups around town to find potential talent. Networking widens the breadth of your reach as a small business, and will eventually pull more candidates into your hiring funnel.
Create Targeted Job Postings
Another insightful way to drive applications is to improve your job postings from a keyword search standpoint. This means making your postings extra targeted toward the type of applicant you’re looking for. You can start the process by thinking of what someone would search for who was looking for a position similar to yours, and then tailor your posting from there. The more targeted the keywords you include in your posting, the better the quality of applicants.
Search on Social Media
Another way to find talent is by using social media outlets like LinkedIn. LinkedIn is full of active job seekers. You can easily leverage your own network of connections on LinkedIn to find people who may be a fit for your company. Facebook also tends to have many grassroots job seeker groups where you can post about open positions at your company for free. It’s also very important that your company have a company page presence on LinkedIn, Facebook, and/or Twitter—this will help build your company brand and, in turn, yield more applicants over time.
More Things to Consider
Before you start hiring, it’s vital that you evaluate your current team of employees. There may be some people that deserve a promotion to a higher level position and/or management role. Promoting and hiring from within is a great mark of a successful company. It’s also a bit simpler to find entry-level talent than senior level or management talent.
Another critical component to consider is your company brand. Evaluate what your company brand looks like in its current state, and work on building your brand every day. Branding is a continued effort, but it’s extremely important when you want to increase your inbound applicant traffic.
The next vital component is company culture. You want to create a fantastic culture that makes people want to work at your company. Company culture definitely builds over time, but it’s always a good idea to regularly poll your employees to get a better idea of what they like and dislike about working at your company.
Finally, the most crucial and easily overlooked component is employee retention and turnover. It’s extremely expensive to replace employees who leave your company. Valuable employees who leave can cost your company thousands of dollars when you consider the loss of knowledge and experience during the time of finding and training new talent. Look at ways you can help retain your employees, such as company perks or awesome benefits.
Choose your Candidates Wisely
Hiring a new employee or freelancer to work for your online store is a big decision. No matter what role they’ll be in, they’ll have an effect on how your business runs and the overall atmosphere your other employees work in. A bad hire will waste time and money, and will set your business back for the time it takes to find a replacement.
When hiring someone new, the first thing to look to is the work history described on their resume and whether they have relevant experience. To find the right candidate, you need to look beyond how they look on paper. Read between the lines and assess candidates based on these important factors:
1. Their Basic Manners
Someone can be entirely competent for the role, but if they’re rude and inconsiderate to your other employees—or worse, your customers—then their attitude can offset anything good about the quality of their work. It can be hard to pin down a job candidate’s manners in a job interview though—people are likely to be on their best behavior when they come to the office to meet you.
As a way to get a glimpse of a candidate’s personality in action, consider scheduling at least one interview outside of the office, such as a breakfast or lunch interview, and pay attention to how they talk to the wait staff, their table manners, cell phone usage, etc. By interacting with them in a less formal context, you can gain some insights into how they generally behave and see any warning signs that might alert you to them not being a good choice.
2. Their Integrity
The job market is competitive and, unfortunately, some candidates do exaggerate or misrepresent their skills as a way to get their foot in their door. That means the resume alone may not provide an accurate snapshot of the knowledge or experience a candidate really has.
You can use the interview not only to confirm if their actual experience matches what you need, but also to get an idea of their integrity. A job candidate that oversells themselves in a job interview may display dishonesty on the job as well.
In contrast, a candidate that’s willing to admit what they don’t know so they can learn will be much more valuable to your business than one that claims to know more than they do.
3. Their Motivation
While money is a perfectly understandable motivator—we all have to work to live—you ideally want to find a candidate that feels some draw to the business and job beyond the salary. Someone that cares about building a career, has a passion for what your company does, or genuinely enjoys the kind of work they’re applying to do will be a more committed candidate than someone who spends their time on the job just waiting for the workday to end.
4. Their Preparation
A good job candidate won’t just see their role in the interview as answering questions you ask—they’ll know the interview should go both ways.
If the candidate spends a lot of the meeting asking about the company and position, it shows that they have a real eagerness to learn about your business and that they’re willing to put a little extra work in beyond the bare minimum required for a job interview.
5. Their Loyalty
High turnover rates are the bane of hiring managers’ existence and bad for the company as a whole. That’s why it's important to hire people who are loyal and looking to be a part of something for the long term.
While it’s impossible to tell for sure during a job interview whether or not a candidate is likely to stick with your company in the long term, you can see some evidence in the level of interest they show in the job interview (see also #4) and their overall job record. If they have a history of leaving every job they start within a year and don’t have a good explanation, that could be a bad sign.
6. Their Adaptability
While a big part of hiring is making sure a job candidate is qualified for the job they’ve come in for, in practice, most jobs end up spanning responsibilities beyond what’s laid out in the job description.
Adaptability means a candidate will be able to come into the position and make it his or her own. To get a feel for how adaptable a job candidate is, ask about how they’ve responded in past jobs when tasks came up that they didn’t expect, or present an example of unexpected responsibilities one of your employees has faced and ask what they would do in that scenario.
7. Their Self-Awareness
Self-awareness is something you should be able to spot in the way a candidate answers questions about how they take feedback. If you have valid feedback, sharing it with them can give you insights into how they’ll react on the job. It may also come out if you express honest concerns about something in their job history or provide constructive criticism for their resume, cover letter, or performance in the interview. Don’t make criticisms just to see what they’ll do, but if you have valid feedback, sharing it with them can give you insights into how they’ll react on the job.
8. Any Signs of Discriminatory Thinking
If you bring in someone who discriminates against co-workers or customers based on race, gender, age, sexuality, marital status, or really anything, you’ll have personnel and customer service problems because of it. Some job candidates won’t reveal their problem prejudices early enough for you to avoid hiring them, but do your best to pay attention to any signs of discriminatory thinking.
9. Their Fit with Your Company
Hiring decisions are best made based on our cultural values. Many successful businesses put that right in the job description.
You might also want to create a profile of what your ideal employee would be like. Include both professional experience and personality traits that you hope to find that will enhance your company culture. That will both help you craft a better job posting and come into interviews with a clearer idea of what to look for.
10. Your Gut
You can do everything right and conduct multiple interviews, but ultimately there’s one other important thing for you to pay attention to during the hiring process: your gut.
It’s easy to let interviews and shiny resumes sway you, but your intuition can keep you from hiring those you may not feel are compatible with the team.
If something about a candidate feels off to you during the interview, don’t talk yourself out of the feeling. It’s probably there for a reason. On top of everything else you consider when making your hiring decision, factor in what your gut is telling you.
Conduct a Background Check
Pre-employment screenings are a common part of the candidate selection process. It’s really the only way to know that a potential hire is who they say they are. Make sure you get authorization to conduct a background check before performing one, and check with a legal professional about the requirements and restrictions in your state.
Contact Your State's New Hire Reporting Agency
New hire reporting agencies vary by state, but the general idea is to collect information to ensure parents who owe child support don’t fly under the radar. In the event there is a debt to pay, you may be asked to work with these agencies to set up garnished wages.
There are several important legal and administrative tasks necessary when hiring a new employee. Though the process can feel foreign and intimidating, it’s more than manageable if you follow these prescriptive steps. Use them to cover your bases lest your deadlines fall behind simply because there isn’t enough manpower to support the work.
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Don’t let the process of setting up your company keep you from taking your career by the horns. Follow this guide, and soon you’ll be promoting your new business and processing orders
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