How To: Hire an Employee
by: Gaines Kilpatrick | ChooseWhat.com
Hiring an employee to increase your capacity is a major step and needs to be done correctly.
If you are doing all the work yourself, you can only accomplish what you have time for. Hiring an employee is a key step in growing your business. These are the main reasons people hire employees:
Add capacity (e.g. an assistant that can relieve some of the administrative responsibilities you might have, so you can focus on the important stuff)
Operate the business in your absence so you don’t have to be physically present for the business to work
Bring a crucial skill set to the business that you can’t (or shouldn’t) provide
What is an employee?
It's important to understand the definition of an "employee" before you create employment agreements. An employee refers to any of the following:
1. Business Owner
- Pays self-employment taxes
- Gets a K-1 from the employer
- Example: Business owner who takes a salary from the company and gets distributions when there are profits
- Works for you
- Employment taxes withheld by, and a portion paid by, the employer
- Gets a W-2 from the employer
- Example: Your assistant
3. Independent Contractor
- Does selected work for you as needed
- Pays his/her own taxes
- Gets a 1099 from the employer
- Examples: Your lawyer, a consultant, someone doing work for you through an outsourcing agency, etc.
Process for Hiring an Employee
1. Assess Your Hiring Needs
- How many people will you need?
- Will they be full-time, part-time, contractor, or intern?
2. Define Roles and Responsibilities / Write Job Description
- Job Boards
- University Employment Services / Job Fairs
- Social Media
- Staffing Agencies / Recruiters
4. Screen and Interview Candidates
5. Extend Employment Offer
- Create an Employment Agreement Form (*Consult with your attorney or use a template from LegalZoom.)
6. Prepare for Employee’s Start Date
- Set your business accounting software to run payroll and withhold employment taxes.
- Checklist for Hiring New Employees
Note: The following are our recommendations for where a small business owner or entrepreneur should look for new employees. You could use recruiters or a staffing agency to find employees, but those options tend to be costly and not recommended for the business owner just starting out. All of the following options are inexpensive and easy to use.
Job boards are still the most popular way to find employees, as they provide access to a wide variety of candidates and skills. Job boards range from large, general websites to niche job boards for job categories such as engineering, legal, insurance, social work, teaching, green jobs, seasonal jobs, etc. Some job boards are better for finding experienced or full-time employees, while others are better for finding part-time employees, freelancers or contractors.
For a small business owner, the best job boards for finding full-time employees are Craigslist and Indeed. These sites are easy to use and relatively inexpensive when compared to Monster.com (which costs about $210 to $400 for a 30 to 60-day job posting) and CareerBuilder.com (which costs roughly $420 to post one job).
On Craigslist, it will cost you about $25 to post one job in one category (e.g. business, education, real estate, sales, etc.). You may want to post your job in multiple categories to get a wider variety of candidates, but stick with 2-3 categories at most. The only downside to using Craigslist is that newer posts are listed at the top of each page, which means that you may have to repost your job after a few days to keep it visible.
Tips for Posting a Job on Craigslist:
- Never list your phone number.
- Use an anonymous email address.
- Post positions in several different categories, but don’t go overboard.
- Repost your job posting weekly so that it doesn’t get buried by new listings.
- Be aware of size issues if you’re requesting work samples. (Craigslist allows only a specific number of files to be received through their system.)
- Take down the job posting once you’ve hit a specific number of applicants (we recommend 50).
Indeed uses the "pay per click" model to charge for job postings. This means that you pay a fee every time someone clicks on your post (most clicks cost between $0.25 to $1.50). Because you're charged on clicks, you'll need to make sure you monitor your job posting so that it doesn't become expensive. Again, remember to take down the job posting once you've received a specific number of inquiries or applications, so that you won't be inundated with resumes and charged an exorbitant amount.
If you're looking for part-time, freelance or contact work, the following sites will work best for you:
- SnagAJob: Free to post one job for 10 days; no credit card required
- oDesk: Free to post any number of jobs; pay only for time verifiably spent working for you
- Elance: Free to post any number of jobs; pay only for time verifiably spent working for you
University Employment Services
Colleges and universities are great places for finding interns and entry-level candidates. We have had great success with students and recent graduates we've hired from our local universities. Often, quality interns will turn into successful full-time employees.
Universities usually have student job boards that you can post on, but we recommend using a convenient service called Campus2Careers that will match you up with the right college candidates and save you a lot of time sifting through resumes.
Campus2Careers serves small and medium-sized businesses with the aim of helping them recruit talented students without a lage recruiting budget.
They work with hundreds of colleges around the country and offer employers some great hiring resources, tools and templates that make the hiring process easier.
The only disadvantage of hiring college students is that students are often looking for temporary work and might not stick around for long, but the trick is to establish a quality internship program. To learn how to create a sustainable internship program for your business, read our STARTicle: How to Rethink Small Business Internships.
Social media is quickly becoming a popular way to find qualified employees quickly and inexpensively. Browsing people's social media profiles and online resumes is a great way to save time and cut costs. You can start by informing your network of available positions via your status updates on Twitter, Facebook and LinkedIn, which is completely free.
LinkedIn is great for finding qualified people. You can search for people who currently (or used to) work for a particular company, people with a particular job title, people in a particular region, etc. The main advantage of using LinkedIn is the ability to browse candidates resumes online before you contact them, which can save you a lot of time. The following are two services LinkedIn offers to companies searching for employees:
- LinkedIn Job Posts: Cost for job posts vary by location (about $195 for a 30-day posting of a job in Austin, Texas)
- LinkedIn Talent Finder: An upgraded LinkedIn account that lets you contact people directly (starts at about $50/month)
In addition to posting about available jobs in your status updates, you can also use a Facebook app like Jobmodo (which is free) to post jobs on your company Facebook page and directly receive applications. Here are some of Jobmodo's features:
- Post jobs directly to your Facebook Page
- Add, modify or remove your postings at any time
- Receive applications directly or send applicants to your website
- Analytics show how many times your jobs are viewed and shared by others
- Optimize your job postings to obtain the best results
- Share job postings on Facebook and Twitter
In addition to posting about available jobs in your status updates, you can use TwitJobSearch, which is described as a "job search engine for Twitter." To use the tool you simply need to log in with your Twitter account, and you'll be able to:
- Post jobs for free on Twitter
- View candidates who've applied to your job tweet
- Receive daily notifications via your twitter account when someone applies to your job
- Option to allow candidates to apply privately, so that no one other than you can see who has applied to your job
Recommendations from people you already know and trust will likely give you trustworthy candidates. Don’t be shy: tell everyone you know, including your existing employees, that you’re in the market for a particular type of person. People usually won’t recommend someone for a job if they think that person is going to screw up and get fired. Go ahead and call, email or meet with people you know to get leads.
Tip: You can get some great recommendations from your professional network, friends, and family. However, be wary of hiring friends or family, since business relationships can strain personal ones.
- Be slow to hire and quick to fire. Hiring the right person is very important. You want someone as excited about working with you as you are to be working with them. Interviewing several candidates will give you some perspective. If you’re not happy with anyone, don’t hire anyone; settling doesn’t work. Also, if you decide you have made a mistake, you’re not doing anyone any favors by continuing the employee relationship. The longer you keep someone after you realize they aren’t a good fit, the more time you will waste for both of you. It’s better for everyone to cut and run as soon as you decide it’s not going to work out.
- Make sure your candidate has the necessary technical skills, or at least the capacity to learn those skills. A person's aptitude and personality play a big role in his or her capacity and/or desire to learn certain skills. Trying to force training on a person that does not have the capacity to succeed is a fool’s errand. Don’t waste each other's time.
- Classify independent contractors and employees of your company correctly to comply with tax laws. The IRS warns that is critical for business owners to correctly determine whether the individuals providing services are employees or independent contractors. As an employer, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. For more info, check the IRS guide: Independent Contractor (Self-Employed) or Employee?