You’ve built your business from the ground up. But one person can only scale for so long. At some point, you’ll need to hire employees. But it takes more than just finding the right person. The guide can help you determine if you’re ready to hire employees and how to go about the hiring process.
A step-by-step process for hiring employees
When you’re ready to hire employees, it’s tempting to jump straight to posting job descriptions and interviewing candidates. But before you do, make sure to understand the legal requirements. It’s one thing to run a business. But running a business is an entirely different ballgame when you become an employer. There’s a lot to manage, so don’t be afraid to consult an HR professional or labor law expert regarding your situation.
Step 1: Consider the legal requirements
There are certain numbers, documents, and provisions you’ll need to consider to be ready to hire employees. And it can be easy to overlook essential steps because of local, state, and federal requirements. To hire employees, you’ll need
- An Employer Identification Number (EIN)
- To register with your state revenue department
- To register with your state labor department
- To understand your withholding tax
- To purchase workers’ compensation insurance
- I-9s for each new hire
- Workplace posters to inform employees of their rights
Apply for an Employer Identification Number (EIN)
The IRS will need to issue you a unique Employer Identification Number (EIN), or Tax Identification Number (TIN). If you’ve filed business taxes, opened a business bank account, or applied for a business license, you probably have an EIN.
If you don’t have an EIN, you’ll need it to start hiring employees. Employees will use your EIN when they need to file their income taxes. And you’ll need it to report and file payroll-related taxes. You can apply for an EIN online.
Register with your state revenue department
In addition to having a federal EIN, you’ll likely have to meet state requirements too. After all, your employees will need to pay state income taxes as well as federal. While sign-up processes and state tax ID numbers vary, many states use an Employer Account Number (EAN) for tax purposes. For specifics regarding your state, visit your state’s revenue or tax department, or consult tax professional.
Register with your state labor department
To hire employees, you’ll need to register your business as an employer with your state labor department. State labor departments vary in their relationships with businesses. Some operate through a series of laws that mimic federal labor laws. Others take a more restrictive approach to employee relations.
Regardless of your state’s approach, familiarize yourself with your state labor agency’s jurisdiction over your business. The U.S. Department of Labor (DOL) has published a guide to state labor departments. As you look into your state labor department, note state unemployment benefits and requirements for reporting new employees.
Calculate each employee’s withholding tax
The government collects federal and state income taxes on a pay-as-you-go basis. Employers deduct applicable taxes from each employee paycheck and pay that tax as the year progresses. This helps employees avoid huge tax bills come tax season.
The exact withholding tax depends on several factors, including an employee’s tax bracket, dependents, marital status, etc. To calculate withholding tax, employees need to fill out Form W-4.
Calculating withholding tax rates for your employees is only one step. Withholding taxes and paying the appropriate tax bodies is a much bigger task. Automated payroll software can help you simplify this process as you bring on employees.
Purchase workers’ compensation insurance
Workers’ compensation is a form of insurance that may help you compensate workers who sustain injuries while in your employment. Not every business needs to have this type of insurance. So make sure you understand workers’ compensation requirements and how they apply to your business. Ultimately, your business’s requirements will depend on your state laws on workers’ compensation.
Issue Form I-9 to each new hire
Every employee you hire must be eligible to work in the United States. And you have a legal obligation to prove your employees’ eligibility. Each employee must verify their eligibility on Form I-9. The U.S. Citizenship and Immigration Services department publishes the document for this purpose. They use it to verify the identity and employment authorization of employees hired in the United States. You must submit an I-9 for every employee you hire, including U.S. and non-U.S. citizens.
Display workplace posters
Workplace posters are a federal requirement. The DOL and the National Labor Relations Board (NLRB) oversee compliance with workplace posters laws. The DOL produces updated workplace posters for labor laws. But you may subscribe to a workplace poster compliance service to ensure you get the right posters for your business.
Step 2: Define the roles and responsibilities for each job
With the legal boxes checked, it’s time to define job roles and responsibilities. When creating a role and drafting job descriptions, ask yourself: What problems am I trying to solve? What skills and activities will solve that problem?
Once you answer those questions, translate them into job descriptions. Avoid vague descriptions or roles that cover too much ground. Prioritize your pain points, and define roles that will attract candidates who can meet your business’s needs.
At this stage, you might also conduct market and salary research for your jobs. If you pay too little for a complex job, you may not attract the right candidates. It will be important to set realistic expectations around what you can pay for your new role.
Step 3: Find your ideal candidates
Your future employees are everywhere: on social media, at tradeshows, on career sites. You must find them where they are and entice them to join your business. That means you need to post your jobs where your ideal candidates will find them. Here are three places to find job candidates:
- Job boards and career sites. There’s no shortage of these sites, and it can be hard to make your jobs stick out from the competition. However, employees on these sites are actively seeking employment. If you don’t have a presence on these sites, you may be missing out on the easiest way to find candidates.
- Your network. Regardless of how connected our world becomes through the internet, your network may be the best source for qualified candidates. A strong network can help you find trusted referrals.
- LinkedIn. Whether you’re posting new jobs or expanding your network, LinkedIn is where candidates and employers expect to meet in the modern world.
Step 4: Conduct interviews with qualified candidates
Don’t walk into an interview without a plan. You need to be as strategic with your interviews as you were with defining your jobs and finding candidates. Keep up that problem-solving mindset and create a list of questions that you can pose to all candidates.
There’s no perfect set of interview questions. But the following can keep you on track when assessing how each candidate can meet your business’s needs.
- What are your top three skills that qualify you for this position?
- What’s the first project or challenge you’d want to tackle?
- How can you help grow the business?
- What’s one thing you would do to improve or change the business?
These questions can help you gauge whether the candidate understands your business and how they can impact the business. Now is also the time to discuss each candidate’s pay expectations, based on their experience, education, and skillsets.
Compare the figures your candidates present with what you find in your market and salary research. And remember not to dismiss a candidate out of hand if their salary expectations are higher than you anticipate. A higher number may mean you need to adjust the job responsibilities or incentivize your ideal candidate with more benefits and perks.
Step 5: Select your candidate
There’s no formula for choosing the best candidate. Qualifications and education are important, but so is the candidate’s character and core values. Sometimes, qualifications alone won’t cut it. The right candidate will bring the right qualifications and values to the business. And they’ll bring a level of intelligence and creativity that you haven’t imagined yet.
Step 6: Notify the candidate of their job offer and compensation
When you’re ready to extend a job offer, stay positive and congratulatory in your communications. But make sure you don’t give the candidate an open-ended time frame to accept the offer. You may make your offer contingent on an answer by a specific date, and propose or ask for their preferred start date. When you extend a job offer, be positive, but know that it’s OK to put your business needs first.
With your job offer letter, you’ll want to include information about the candidate’s compensation package. If the compensation you offer is lower than what the candidate expressed in their interview, communicate your company’s perks and benefits. You might also include a progression path so that the candidate can assess your expectations for improvement and higher compensation.
3 hiring process best practices from top companies
There’s no shortage of hiring best practices to find across the web. But which best practices are worth their salt? You may consider looking at some top companies and take inspiration from what they’re doing.
1. Create a culture deck for job candidates
Netflix believes that its success depends on its culture. From its early days, Netflix has published a culture deck that outlines what it expects from employees. This deck helps candidates and employees understand expectations and what it takes to succeed at the company. You may not be prepared to dedicate a webpage to your company values. But including them in your company profiles and job descriptions can show candidates more of what matters to you.
2. Audition candidates, instead of interviewing them
After some basic screening, Automattic—the makers of WordPress, a content management system—has largely done away with traditional interviews. Instead, they pay prospective employees to work in the positions they’ve applied for. It’s more of an audition than an interview. Consider how a job audition, instead of an interview, would work for your business.
3. Launch a recruitment campaign
Chipotle and McDonald’s are two examples of companies that have successfully executed massive recruitment campaigns. You might not be ready to hire thousands of workers at once, but the concept allows you to promote your business to a broader audience. If you have several positions to fill, a recruitment campaign may help you bring in more candidates.
Make the best hiring decisions for your business
Whether you’re hiring your first employee or improving how you’ll hire your next, take your time. You shouldn’t rush yourself to hire just anyone. Your hiring decisions, especially your early hiring decisions, are among the most critical you’ll make for your business. Be strategic, and make a plan that you can improve as you grow.
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