Attracting and retaining excellent employees is not what it used to be. In today’s competitive job market many companies are offering benefits that go far beyond health care and two weeks paid vacation. This month, we’re going to share insights with you that will help you create a company people love to work for. Because we all know, happy employees are productive employees. And productive employees make profitable companies!

One of the biggest leaps small business owners take is when they choose to begin scaling their business by hiring their first employee. It’s an intimidating step for many reasons. The fear of letting go of control can be paralyzing. The anxiety around making payroll can be suffocating. And learning all of the ins and outs about workers compensation, taxes, workplace safety, family and medical leave and so on and so forth, while still balancing your every day “to do’s,” can get really overwhelming, really, really fast.

The good news? Rome wasn’t built in a day and your hiring plan doesn’t have to be created in a day either. In fact, we encourage you to take baby steps as you move toward business expansion. Start here:

7 Steps You Need To Take Before You Make Your First Hire

1. Check your finances.
   • There is a lot more involved in hiring employees than just paying a salary. Do your research (or hire someone to help you with the numbers) to find out what your out-the-door cost will really look like. Your expenses will go far beyond an hourly wage once you throw in Worker’s Comp, paid vacation, health benefits, new equipment and so on. Schedule a meeting with your CPA and ask him/her to run through the real numbers with you so you can make an informed decision.
2. Get friendly with the IRS.
   • If you don’t already have one, get an employment identification number (EIN), often known as an Employer Tax ID. This will be important when it’s time to report and file taxes. You’ll also need your EIN when reporting information about your employees to many different state agencies. You can apply for your EIN online or call the IRS at 1-800-829-4933.
   • Familiarize yourself with the withholding taxes you’ll be responsible for as an employer. Every employee will need to fill out a W-4 form which must be submitted to the IRS. Each year, you’ll be responsible for reporting taxes withheld from each employee, using a W-2 form. For more info, check out this PDF created by the IRS.
   • You may also be responsible for withholding state taxes. You can find information specific to your state here.
   • Visibly post any required notices. You can find more information on which posters you may need to display here.
   • Be sure to file your taxes correctly and on time. If you’re not interested in learning how to manage all of this on your own, talk to your CPA about who he/she recommends you lean on for support.
3. Register with your state’s new hire reporting program and verify every employee’s eligibility to work in the United States.
   • All employers are required to report every new hire and re-hire to a state directory within 20 days of hiring. Learn more and find contact info for your state’s New Hire Reporting System here.
4. Get the right insurance coverage
   • Every business that has employees is required to have a workers’ compensation insurance policy. Find more info here.
5. Assess your needs.
   • Spend some time really reflecting on where you business is at and what you need help with. Think about where your biggest needs lie and then fill those needs with a new employee. It will be much easier to find the right employee who will truly be an asset to your company if you go into it knowing exactly what you need.
   • Determine what characteristics your ideal employee must have. Do you need someone who is a self-starter and who can work independently and anticipate needs? Many candidates coming from jobs in larger companies or corporations look great on paper, but they’re used to working in a structured hierarchy with established processes and clear expectations. A growing business could be a difficult adjustment for these candidates.
6. Set up employee benefits
   • If you’ll be offering health coverage, a retirement plan, or other benefits, you’ll need to work out the details and set up a sign up process before hiring your first employee. There are many HR companies that service the needs of small business owners in this capacity. Ask your CPA for a reference to one if needed.
7. Ask for recommendations
   • Sometimes the best way to find the perfect fit for your business is to talk to the people who know you best. Ask your friends, former clients, fellow entrepreneurs. Tell them what you’re looking for and ask them to help you find someone to fill the position. Also, think about who you already know that might be serving you in a different capacity and willing to transition into a different role with you. We know of one small company that used the same babysitter for years. When it came time to scale their business, they knew she was dependable, helpful, honest and smart. It was a no brainer for them to invite her to be their first employee.

Hiring your first employee is a huge step to take as a business owner. Before taking that leap, do your research and take all the steps required to make sure you’re fully prepared before starting your search.

Be sure and stay tuned this month. Next week we’ll continue our series on employment by sharing tips on how to attract the best of the best once you begin looking for candidates.

7 Steps To Take Before You Make Your First Hire