Key points
- There are steps you’ll need to take before hiring begins in order to ensure your business is compliant with tax and legal regulations
- Hiring a new employee can cost over $4,000 on average, so it’s important to follow recruitment and HR best practices to ensure your investment is worthwhile
- Job description writing and posting as well as attracting and screening candidates are all tasks that can be outsourced to quality HR service providers
- After finding the right candidate, you’ll want to provide a positive onboarding experience.
Things are going well at your small business – well enough that you need to hire a new employee. Congratulations! That’s quite an achievement. But it’s also one of the most important tasks you’ll take on and can have a huge impact on your company’s future growth and development.
For small businesses in particular, hiring has far-reaching consequences. When you find the right talent, you’re setting yourself up for long-term success. But with the average cost of hiring a new employee topping $4,000 on average, making poor hiring decisions can be costly. So what does it look like to get the hiring process right?
That’s where our comprehensive guide to hiring employees for your small business comes in. We’re aiming to give you the most relevant, practical, up-to-date advice that covers the whole hiring lifecycle. Trust us on this one: Smart hiring is worth investing time and resources.
Preparing for Your First Hire
Just because you need to hire someone doesn’t mean your business is actually ready to do so. It’s important to perform some pre-hiring steps to ensure that you’re following all of the applicable tax and legal regulations and ensuring that your organization remains in compliance. You’ll need to conduct some simple research to find out which rules apply to you.
1. Tax and Legal Compliance
Before you can get started hiring employees, you’ll need to address a few legal matters. First off, you’ll need to set up an Employer Identification Number, or EIN. Don’t worry, it’s not as intimidating as it sounds!
An EIN is a number that the IRS (Internal Revenue Service) gives you to identify your business. It’s kind of like a Social Security Number (SSN), but for a business instead of an individual. You’ll use it on forms and documents related to payroll.
You can apply for your EIN on the IRS website, by mail, or over the phone. Whichever method you choose, you’ll need to answer questions about your identity and the structure of your business. Once you complete this step, you’ll be given a nine-digit EIN.
Business Tax Requirements
Any company should be aware of federal taxes, state taxes, and applicable withholding rules. Ignorance is never an excuse for lack of compliance – and trust us, the IRS agrees! Here are some of the rules that might be relevant to your business:
- Employers have to report and deposit employment taxes
- You’ll need to file Form W-2 to report wages you pay each employee
- You have to withhold taxes from your employees according to the IRS withholding tables that can guide you on how much to hold back
- You should withhold part of Social Security and Medicare taxes
Those are just a sampling of the federal rules around taxes and employment. States each have unique regulations and rules, too.
Other Legal Requirements
Whenever you hire a new employee, make sure that you complete each of these legal requirements that will help ensure you’re in compliance with state and federal laws:
- Collect new employee tax forms (like a W-2 and I-9)
- Report your new hire to the state
- Get workers’ compensation insurance
- Hang Department of Labor posters
- Familiarize yourself with local laws
These steps can also be part of your onboarding process, which we will discuss in detail later on. It can be helpful to make a checklist that encompasses all of the items you’ll need to complete each time you hire someone new.
2. Setting Up Payroll
So you’re ready to hire a new employee – but how are you going to pay them? If this is your first or one of your company’s earlier employees, you might still be cutting checks manually. But effective payroll isn’t that simple.
In today’s competitive labor market, it’s more important than ever to ensure that all employees are consistently paid on time, in compliance with all relevant laws, and enjoying a positive experience working for your company as well. That’s why, for many companies, it can be a smart move to work with a payroll provider or seek support from a Professional Employer Organization (PEO).
A payroll provider or PEO can help with all of those goals and more, including…
- Helping you set up payroll from a mobile device
- Facilitating compliance with HR laws, filing for employee taxes, sick day and personal leave tracking, and more
- Automating processes and reducing paperwork
Whether you opt to use a provider or decide to take on managing your payroll in-house, you’ll want to make sure that you have a robust understanding of the HR concepts that apply to your workplace.
Attracting the Right Talent
Once you’ve set up your tax information, ensured legal compliance, and have a payroll system up and running, you’re reading to find the perfect candidate for the job. So how do you attract the right person?
1. Write a Strong Job Description
There are so many job descriptions out there, but not all of them are created equal. Plenty of job descriptions are either too vague or too over-the-top. But neither of those options does what it’s supposed to: attract qualified candidates with the right temperaments for your brand.
It’s important to showcase your brand’s values and personality in your job description so that you can attract people who think and act according to your company’s priorities. Here are a few other tips to improve your job descriptions simply and quickly:
- Pick a strategic job title
- Describe the job duties and day-to-day tasks accurately and in detail (for an example of how to do this in the case of a personal assistant, check out our in-depth Personal Assistant Hiring Guide)
- Match your tone to that of your company
- Emphasize the available benefits
- Comply with all laws (for example, anti-discrimination)
2. Post Your Job
Once you’ve written a job description that you feel confident about, it’s time to disseminate that description across many different marketplaces in order to attract the best candidates possible. Of course, you can head over to traditional job search sites like Monster, Indeed, Glassdoor, or LinkedIn.
However, this process can be labor-intensive and can often go one of two ways. You might be overwhelmed by the sheer number of qualified applicants, or you might be struggling to find someone who can actually perform the tasks you need at the price you’re able to pay. That’s why it can be worthwhile to invest in RPO or PEO software to help with recruitment.
3. Use Recruitment Software
If you’re struggling to find and attract the right candidates, it could be worthwhile to turn to a staffing agency, employer of record (EOR), or PEO. Each of these options can help you locate the right people to fill new roles at your company.
Staffing agencies are usually a more temporary solution, but EORs and PEOs can be long-term relationships. Their jobs include identifying and sourcing employees, managing the interview and selection process, onboarding, payroll, compliance, and other administrative tasks. Investing in HR solutions can free up lots of time and resources in your business.
Choosing the Right Candidate
Picking the right person to fill a role at your company is no small task. You’ll need to leverage plenty of up-to-date strategies to ensure you’re making the right call and setting up your business for success in the long run.
1. Screening Techniques
If you’re inundated with a plethora of resumes, you may need to employ some screening techniques to help separate the wheat from the chaff. You can search for key words that match job description requirements. You can also look for spelling errors and check whether or not they addressed any specific criteria you requested in a cover letter.
Many EOR and PEO providers will also take on this work for you. When you outsource the work of hiring and recruitment, you will often be able to find a low-cost solution.
2. Interviewing Best Practices
Conducting interviews is another important piece of the puzzle when it comes to hiring the best candidates. Generally speaking, interviews should be centered around three key metrics: skills, personality, and culture. Ensuring you and your candidates are on the same page with these topics can contribute to successful hires that are built to last.
Remember, asking good questions is key – but in an interview, you should be more interested in what you want the candidate to reveal. For instance, you may want to get details on…
- The types of day-to-day work a candidate has done before
- Problems they’ve previously had to solve in the workplace
- Any areas of specialization they can offer
A good rule of thumb is that the more real-life examples a candidate can provide, the better. So make sure to ask questions that give them the opportunity to elaborate on their skills and what they can bring to your business by referring to real-life scenarios.
Closing the Deal
Once you have found the right candidate, it’s time to make them a strong offer that they’ll be excited to accept. It can be complicated to determine an employee’s salary and benefits, but it’s important to ensure that your offer is one your business can truly afford. Once you ascertain how much you’re able to pay, you can make an offer to your preferred candidate.
For smaller businesses, it can be difficult to compete with the salary offerings that large-scale enterprises can provide. So don’t bother. Instead, emphasize the opportunities for growth and distinguishment in the workplace that they’ll get working for you. You can also talk about the benefits that you will offer.
Be prepared to negotiate, but keep in mind your hard limit so that you’re not paying employees more than you can afford. If you decide to hand this job over to a PEO or EOR, they will take care of this piece of the puzzle for you.
Onboarding
The final step in the hiring process, once the offer has been accepted and the employment confirmed, is the onboarding process. As a small business, this is a great opportunity for you to make a strong first impression on your new employees.
Make sure that everything they need is all set for them – their desk (if in person), business cards, new email addresses and logins, and anything else they’ll need. You’ll also want to plan out their first day to ensure that they’re getting all of the orientations and training they will need to succeed in your workplace.
At a loss for good onboarding ideas? This is another place where a PEO can come in handy. This third-party organization will be able to help you with every part of the hiring process, from recruitment to onboarding (whether in-office or remote onboarding) and more.
Another Perspective — Make Small Business Hiring Easy
Our Take — Hiring Employees for Small Businesses
In today’s complex job markets, hiring can feel like a daunting task – especially for small businesses that are new to the process and may have less time or resources than their larger counterparts. But hiring doesn’t have to be scary. In this guide, you’ve been exposed to all the steps you’ll need to take in the hiring lifecycle.
Whether you choose to take on the hiring process yourself or outsource the work to an HR provider like a PEO, EOR, or staffing agency, following these steps will help you find the right candidates for the right positions: Some of these providers even specialize in PEO and HR support for small businesses.
When you find qualified, committed talent for your business, you’re setting yourself up for success for years to come.
FAQ
Small business owners often have limited time and capital to effectively manage HR and payroll. By using HR outsourcing or another form of third-party support, many businesses find that they save a significant amount on the cost of hiring and payroll. The cost savings come from:
- Specialization and economies of scale from the third-party provider
- Access to cheaper health insurance and benefits through PEO benefits administration
- Outsourcing potential liability and compliance costs.
Professional HR companies, such as Professional Employer Organizations (PEOs) and Employers of Record (EORs) usually charge based on a fixed amount per employee per month, or as a percentage of the total payroll cost.
Costs vary massively, starting from around $10 per month for the most basic payroll software service, to to $1000+ per month for some international EOR solutions.
Read more about how providers set their prices in our PEO pricing guide.
