It costs more than $4,000 on average to hire a new employee. This means that it is essential to hire the best possible candidate for the job so that you don’t make an expensive bad hiring decision. You want your new employees to perform their duties well, but you also need to make sure your new hires blend seamlessly into your company culture. This is especially important when it comes to small business hiring.
With this in mind, we have created an essential guide to help you understand how to employ someone in a small business. We will cover when to hire in your small business, and share hiring tips to help you find good employees. We will also discuss the hiring procedures you need to keep in mind when you begin your recruitment process. Table of Contents
Table of Contents
When to Hire in Your Small Business
According to a survey by Monster, 62% of small businesses claim that they have made a bad hiring decision in the past. Even more worryingly, only around one-third of U.S. companies report that they monitor whether their hiring practices lead to good employees.
Aside from the unnecessary costs that result from making these bad hiring decisions, recruiting the wrong person for the job can also put your business in jeopardy, affect productivity, and have a negative impact on your company’s reputation.
It’s important to get it right from the start.
The first step in making an informed small business hiring decision is deciding when to hire in your small business. This means understanding what your staffing levels and business needs are, and how they fit into your budget and overall growth strategy. This will help you avoid any potential understaffing or overstaffing issues.
Here are a few clear indicators that you are ready to take on new employees:
- Missed targets: If your employees are struggling to keep up with customer emails, fulfil orders, or meet deadlines, then it could be a sign that they are overstretched.
- Increased absences or employee sick days: This could be a clear sign that your employees are tired, overworked, and frustrated.
- Business growth: If your company is growing and your business is expanding, then you will need more employees to manage the increased workload.
- Wasted high-value resources: If your high-value employees are spending too much time on junior-level administrative tasks then it’s probably time to hire more staff.
How to Hire Employees for Small Business
Once you’ve considered the question “When should I hire my first employee?”, the next step is to work out how to hire an employee for your small business. What recruitment and selection procedures will give you the best candidates? Where do you find a high-value talent pool? Which internal and external recruitment processes will get you started on the right foot?
There are a few things you need to address when it comes to hiring employees for your small business.
- Your recruitment goals and expectations. Which positions do you need to fill? What qualifications and experience are you looking for? How do your expectations tie in with your projected growth and small business hiring budget?
- Where will you post your job ads? Will you use online platforms or industry-specific job sites? Will you conduct interviews yourself or outsource to a recruitment company?
- What salaries can you offer? Are they in line with industry averages? Do they meet minimum wage legal requirements? Do you have the correct small business payroll practices in place? One option when it comes to hiring employees for small business is hiring part-time staff. This will help you keep costs down whilst you determine the extra workload that needs to be covered.
- Background checks. Have you investigated what you need to do to ensure potential candidates have the legal right to work? What background checks are mandatory for your industry?
- Job offers and employment contracts. Once you find the right candidate, you will need to make a formal offer and draft an employment contract. To do this correctly, you will need to know whether or not the new hire is an independent contractor or an employee. Have you created your contract templates yet?
- Onboarding, insurance and tax liability. Make sure you understand your legal and fiscal obligations to ensure you comply with every aspect of US employment law.
We’ll look at some of these steps in a bit more detail below.
How to Find Good Employees for a Small Business
It’s all good and well understanding the basic principles of small business hiring, but what you really need to consider is how to hire good employees for your small business. This means not only finding candidates with the right qualifications and experience, but also with the right mindset for your business; employees who will blend seamlessly into your corporate family.
Here are a few best practices to help you attract and retain top talent:
- Look for qualified candidates within your organization and make internal promotions.
- Consider using tools like human design and virtual recruitment ideas to make your recruitment strategy more creative.
- Implement a referral program and offer rewards to employees who suggest suitable candidates. Employee referrals can be a great find to find top talent. They are also good for boosting morale and retention rates and are often less costly than other advertising methods.
- Post your job openings to general and niche online job boards, as well as your company website. You should also post open positions on social media platforms and ask employees to share.
- Host career fairs and open houses.
- Approach local universities, schools, and community colleges to open up your search.
- Don’t just list qualifications and required experience in your job descriptions. Get creative and sell your jobs so that you attract more top talent.
- As a small business, it might be worth contacting external recruiters or staffing agencies, especially if you don’t have a dedicated HR department yet.
- Streamline your hiring processes with the right recruitment tools and software. Explore the possibility of investing in a talent acquisition platform.
Small Business Hiring Procedures
We’ve looked at the basics of how to hire staff for your small business, now let’s take a look at effective hiring procedures for your small business to help you find the right candidates.
Once you understand these small business hiring procedures, you should create an HR checklist for your startup to make sure you cover all steps for each new recruit. Check out this free hiring process checklist if you don’t already have one.
Define Your Small Business Hiring Goals
The first thing you need to do is clarify and define your small business hiring goals.
Start by establishing if you are ready to hire someone new. Is your business in a position to recruit new employees? Can you afford the ongoing costs of a new hire? Have you done a cost-benefit analysis?
Next, look at the structure of your business. Is there room for a new role? How would the new position fit in with the overall structure of your business? If you haven’t already designed one, start by creating a small business organizational chart to help you understand the hierarchy of your organization and where a new role might fit in.
Once you’ve done that, you need to specify what role you are looking to fill. It’s important to be as specific as possible here. Don’t just hire someone new because you feel overwhelmed. What roles and responsibilities will the new hire have? Will you need temporary or permanent help?
Apply for Your EIN
If, after all the above, you have determined that you do in fact need to hire a new employee, you need to start by applying for an EIN (Employer Identification Number). This ensures you are covered from a legal point of view, and you need to do this before you post your first job ad.
Don’t worry, this is actually very simple.
An EIN is a number the IRS gives you to identify your business. You will need it for all forms and documents that relate to paying your employees.
There are three ways to do this:
- Check the IRS website to see if your small business needs an EIN, then apply for your EIN through the same site. You just need to answer a few simple questions about the structure of your business. You will also need a Taxpayer Identification Number (Social Security Number, Individual Taxpayer Identification Number, Taxpayer Identification Number for Pending U.S. Adoptions, or Preparer Taxpayer Identification Number).
- If you prefer to apply offline, download IRS Form SS-4 and mail or fax it in with all the above info.
- Apply over the phone through the IRS Business and Specialty Tax Line at (800) 829-4933.
Tax Regulation Compliance
The third small business hiring step is ensuring you comply with all tax requirements. It’s best to get advice from a tax professional here (or contact your local labor department directly) as requirements vary by state. Generally speaking, though, make sure you are aware of all federal taxes, state taxes, and withholding rules.
- Deposit and report all employment taxes.
- File Form W-2 to report wages for each employee. You also need to withhold taxes from your employees according to the IRS withholding tables.
- Withhold part of Social Security and Medicare taxes from employee wages and pay a matching amount yourself. You also need to withhold the 0.9% Additional Medicare Tax on an employee’s wages and compensation if they exceed a threshold amount.
Aside from tax requirements, you also need to make sure you comply with all labor laws when you take on new employees. This includes reporting the names, Social Security numbers and employment statuses of all employees to the state within the defined deadline. You will also need to get workers’ compensation insurance to cover wage replacement when an employee is injured, medical treatment, and vocational rehabilitation among other benefits.
If you’re not sure of your legal obligations as a small business employer, then check your local state laws to get up to speed. You need to consider issues like minimum wage, garnishments, and termination. Consult with a lawyer to make sure you comply with all federal and state labor laws.
Finally, make sure each new hire completes the following forms by including them in your standard onboarding documents:
- A W-4 form, so you know how much income tax to withhold from their paychecks.
- An I-9 form to prove they’re authorized to work in the US.
Small Business Hiring Tips
Let’s finish by taking a look at a few small business hiring tips so that you can create an effective strategy that helps you hit your target with each new recruitment process.
Clarify What You Are Looking For
We can’t be clear enough about how important it is to clarify what you are looking for. This means understanding who you want to hire, and what you want to hire them for. It also means clearly communicating your expectations when you post your job ads.
Generally speaking, you will probably be looking for one of two kinds of hires:
- Hiring for expertise: when you need to recruit someone with specific knowledge and skills to do something that you can’t do yourself. For example, an internal auditor with specific expertise in US tax laws. When you advertise these positions, you need to be as clear as possible about the skills, qualifications, and experience you are looking for.
- Capacity hiring: when you hire staff to undertake duties that you could do yourself, but you don’t have enough time to do them properly. For example, low-level admin assistants. These positions are easier to articulate, so you may want to focus more on your corporate culture and values in order to find the right fit for your small business.
Once you understand the type of hire you need, you can adapt your search accordingly. The clearer you are about your goals, the less likely you are to take on a bad hire.
Write a Winning Job Description
When it comes to small business hiring practices, it’s also important to write a winning job description. This is your chance to sell your company so that you stand out from your competitors and attract top talent to your small business.
Start by explaining who you are as a company, and what you stand for. Describe your culture and values and be clear about the type of candidate that would be best suited to the role. Why would someone want to work for your small business? What can you offer them? What is your long-term vision as a company? Where do you hope to be in 5 years?
Generally speaking, your job description should include the following key elements:
- A compelling opening paragraph that introduces your company and describes the role you are looking to fill.
- Who you are as a business and the culture you are trying to create. This is your opportunity to tell your story and really sell yourself. Explain your key values and highlight what makes you a good employer.
- Your mission and commitment to diversity. What do your company’s DEIB efforts look like? Consider this while determining the best practices for diversity and inclusion recruitment.
- What you are looking for in a candidate. Don’t forget to talk about attitude and personality here – it’s not just about skills and experience.
- A detailed description of the role. This is where you go into specifics about the roles and responsibilities that your new hire will take on. Try to paint a picture of what their typical week will look like. Be as specific as you can here.
- How to apply for the position.
Pre-Screen Your Applicants
Interviews are time-consuming. Aside from the time spent actually conducting the interview, you also need to prepare thoroughly beforehand, then spend time evaluating how it went. That’s why one of the best pieces of advice we can give is to pre-screen your applicants before creating your interview shortlist. This will help you avoid wasting time and money on unsuitable candidates.
Whilst it’s true that you can’t get a full picture just from a CV and cover letter, there are a number of things you can do in advance to make sure you only arrange interviews with those candidates who could potentially be a good fit for the role, and for your business.
For example, you could get potential candidates to complete an online pre-screening questionnaire where they can expand on their qualifications and experience and answer a few questions that might give you some insight into their personality and attitude. That way you can get a snapshot of whether or not they would blend into your small business. Then you can filter down your applicants and only arrange interviews with those who show the most potential.
Conduct Phone Interviews
You could even take the pre-screening process a step further and conduct phone interviews with your shortlisted candidates to get a better feel of how suitable they might be. These calls don’t need to be formal, and you don’t need to spend more than 15 minutes on each call. Plus, a phone interview gives potential candidates the chance to form an opinion on you as an employer too, so that nobody’s time is wasted.
Just create a shortlist of interview questions and take notes during your calls. Questions might include:
- Why are you interested in this position?
- What do you look for in an employer?
- Which type of company culture do you thrive in?
- Where do you see yourself in five years, professionally speaking?
The more time you spend defining your vacancy, writing a winning job description, and pre-screening your applicants with questionnaires and phone calls, the more likely you will find the perfect fit for your company. This is especially important for small business hiring, as you are more likely to be limited by a smaller budget than a larger and more established company might be.