Small Business

How to Hire Employees

Updated on October 31, 2019


Regardless of industry, hiring decisions are among the most challenging choices that small business owners have to make, especially when hiring their first employee. Key factors for an employer to consider when hiring their first employee include: following state and federal hiring regulations, finding candidates with the requisite skills and experience, and understanding the effective management of employees.

What are the initial factors to consider when hiring a first employee?

Given the importance of working with motivated employees, small business owners should invest the proper time and care into the hiring process in order to find their optimal first employee. Employers can start out by asking themselves how their first employee will:

  • Add value to the business? – What is the first employee’s purpose and job function? Are they needed to expand current operations, or will they bring an entirely new skillset to the table?
  • Affect the business’s bottom line? – Will the first employee help generate enough revenue to justify hiring costs? Do budgets or prices need to be adjusted as a result of hiring a new employee?
  • Advance the business’s objectives? – Will the first employee contribute to improving products or services? Can their talent help achieve both short-term and long-term goals?

By asking the right questions at the start of the hiring process for a first employee, a small business can set itself on the right path moving forward. Once business owners have created a hiring plan, they can begin to look into the details of hiring regulations, finding the right candidates, and the proper management and leadership of employees and workers.

Complying with state and federal hiring laws

One of the most important parts of hiring a first employee involves understanding state and federal employment requirements. Here is an overview of critical labor regulations that affect small business owners and their employees throughout the hiring process.

  • Business Taxes – When a business begins hiring employees, it must pay taxes for payroll, as well as taxes for fringe benefits including Social Security, Medicare, and state unemployment insurance. A business must also acquire an employment identification number (EIN) from the IRS for tax return purposes and start keeping payroll-related records for their employees (such as time sheets).
  • Worker Classification – At the start of the hiring process, a business must determine if its new employees will be full-time employees (also known as W-2 or common-law employees) or independent contractors (or 1099 employees), since this impacts tax liabilities. An employer must pay minimum wage and decide whether its employees will be paid on an hourly basis or with a salary.

Depending on the state, a business may be required to provide workers’ compensation insurance once it starts hiring employees into its workforce, in case their employees face the risk of accidents during their employment. Companies in certain industries may find it worthwhile to purchase forms of small business insurance coverage, such as general liability insurance and other liability insurance types.

As a small business owner going through the hiring process for your first employee, be sure to work with a legal, accounting, or tax advisor to make sure you’re going in the right direction, as well as consult with state and federal labor regulations available through the U.S. Department of Labor.

Source: SCORE

Finding candidates with the right skills and experience

With online job sites, it is easier than ever to find talented employees; the challenge is finding and hiring employees who are the right fit for your small business.
To begin, a small business owner should create the job description, advertise the role, choose resumes from applicants, and then evaluate candidates through the right interview techniques. Throughout the hiring process, a soon-to-be employer should keep the following questions in mind, especially when looking for a first employee:

  • How well do the skills and experiences of job candidates match the expectations and responsibilities required of the role?
  • Do they have the proper industry knowledge, education, certifications, or licenses?
  • What are their strengths and weaknesses? Are they willing to learn and improve as employees after hiring?
  • Do they demonstrate enthusiasm, interest, and excitement regarding the role? Is there a clear culture fit–that is, do the candidates demonstrate the right attitude and mindset?

Be sure to ask for references, perform background checks, and follow fair hiring practices. When hiring a first employee, it may also be helpful to seek out referrals in order to find high-quality job candidates.

Source: LinkedIn 2018 Global Recruiting Trends Report

Leading employees to success with the right management

Once a business’s first employee has been hired, it is imperative for the business owner to implement effective leadership and management in order to help their new employee succeed. Critical factors for an employer to consider when managing employees include:

  • Training – After hiring, how much training does the first employee require? Will employees require significant supervision and guidance, or can they work fairly independently?
  • Delegating responsibilities – Determine which tasks to delegate to newly hired employees, then clearly communicate job expectations, schedules, and short-term and long-term goals to them.
  • Evaluation – Be sure to have a framework in place to evaluate the performance of employees on at least an annual basis. This can allow for more effective feedback, better accountability, and greater transparency.

While a role may evolve over time after hiring, especially for a first employee, working under the guidance of effective management can help both employers and employees operate more efficiently.

What happens after hiring new employees?

After you’ve hired your first employee, you may also consider offering popular employee benefits, such as group health insurance, dental and vision insurance, retirement benefits, and vacation or paid time off (PTO). You don’t need to be a large company to have benefits for employees: even small businesses with only one employee can qualify for a group health insurance plan. Investing in quality benefits for your workforce may help with retaining current employees, as well as hiring and recruiting new talent by being seen as an employer of choice.

To learn more about your options for affordable small business health insurance coverage for yourself and your employees, visit or speak with one of our licensed health insurance agents.

This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.

We’ll let you know when we publish anything new.