How to Hire the Best Employees for Your Small Business

Starting a small business requires determination, adaptability, and creative problem-solving. It’s a proud moment when small business owners realize it’s time to hire employees. However, it also presents a tough new challenge—finding and shaping the right individuals to build on what you’ve created.

Building a great team isn’t easy, and each hiring decision can have a significant impact. Hiring the right person for your small business will fuel growth and free you to focus on what is important. A bad hire can divert your time and energy, making this growth period more challenging.

This is a guide to help you hire your first employee—and each subsequent new employee! With these tips, you’ll make a great hire every time. Following a structured hiring process ensures you can deliver on your business goals and find the best new employees for your small business.

Prepare for Your First Small Business Hire

A common mistake small business owners make is rushing through the hiring process. You may need someone right away, but when the recruiting process is rushed, you set yourself up for employee turnover or a regrettable hire. A little extra time on the front end can save days, weeks, or months of hassle.

Here are two essential steps to complete before you post your job opening.

Evaluate Your Business Needs

Take a moment and consider what your business needs from this new employee. You may be used to wearing several hats and jumping from task to task, but which of those skills is essential for your new hire?

You also need to think about your potential employee and how this position will meet their career goals. Why would someone be willing to become the first employee for a small business? How can you make this role attractive to qualified candidates?

By approaching the job role from both points of view, you set yourself up to identify and recruit the right talent for the job.

Be Ready to Onboard Employees

Before a small business hires its first employee, ensure you can do so properly. This should include:

Get an EIN

An Employer Identification Number (EIN) is the business equivalent of a Social Security number and will be used on your payroll paperwork. If you aren’t working with a lawyer or accountant who can do it for you, you can apply for an EIN on the IRS website.

Set Up Payroll and Bookkeeping

Payroll is a complicated calculation, and at the end of the year, you’ll need a clear record of the wages and taxes paid. It’s never a good idea to try and calculate payroll manually.

If you use an accountant, let them know you’re hiring soon. Confirm if they can handle payroll for you. Otherwise, you can hire a dedicated payroll service provider. If you do your own accounting, most business accounting software platforms have a payroll add-on.

Follow Any Tax Requirements

As an employer, you are responsible for each employee’s Medicare and Social Security taxes. If you hire W-2 employees, you pay half the Medicare and Social Security taxes owed. The employees pay the other half, but you need to withhold that amount from their paychecks and submit it to the IRS.

Familiarize Yourself with Applicable Laws

There are U.S., state, and sometimes local employment laws, and it’s important to adhere to all of them. They include the minimum wage, overtime, and safety regulations. Familiarize yourself with the laws in your location.

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⇒ ULTIMATE GUIDE: HOW TO HIRE EMPLOYEES ⇐

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Recruit Job Candidates for Your Small Business

Now you’re ready to let job seekers know you have a position open. Your goal in sourcing job candidates is to reach the widest possible audience of job seekers while targeting the best matches. You achieve this by writing a clear, specific, and targeted job description and advertising it on well-populated job search networks.

Write a Job Description

Your job description is the first pre-qualifier for potential candidates. You want to avoid wasting time sorting through unqualified applicants by writing a good job description. Don’t be too general, but also avoid cliches or unnecessary jargon. A clear and accurate job description will help the best candidates find you. You want to include the following:

• Job Title: Make it specific, precise, and descriptive.
• Job Summary: A few sentences to capture the job seekers’ attention.
• List of Responsibilities: What are the position’s core responsibilities?
• Skills and Qualifications: What do they need to be able to do, and what skills are necessary for the job? Include both technical and interpersonal skills (hard skills and soft skills).
• Location: Is this a remote position, will they work on-site, or is a hybrid schedule available? Will travel often be required?
• Pay: What is the pay range you are offering? Is it hourly or salary?

Advertise Your Job Opening

The more people see your job posting, the better for the quality of your pool of candidates. Many popular job posting sites have a free plan for employers, but these do not usually translate into the best cost-benefit for you.

It’s worth paying for a well-populated job site like LinkedIn, Indeed, ZipRecruiter, or Monster. Then, cross-post the listing on your website and all your active social media accounts.

Select the Best Candidate

As the applications start coming in, your job is to review each one and decide who warrants an interview. While you want candidates who meet most or all of the job requirements, it helps to keep an open mind as you review applicants.

You may see candidates who look perfect on paper but may not be a good match for your company culture. As you sort through applicants, keep in mind both the hard skills of the job and the soft skills of being a good team member.

Review Resumes

Reviewing resumes is as much an art as a science. Candidates who present neat, error-free, and well-written resumes are a good start. You want to find potential employees who either have relevant experience from a similar position or whose skills will easily translate into what you need them to do.

It’s always wise to check a candidate’s references.

Interview Top Candidates

Whether you meet in person or virtually, an interview is an opportunity to determine two critical things.

1. Does this candidate have the skills my business needs?
2. Is this person a good fit for the culture of my business, including my clients and customers? Do we communicate well, and do I feel comfortable with them?

Here are some strategic interview questions to ask candidates.

Hire Your New Small Business Employee

Great news—you identified a qualified employee you would like to add to your business. Congratulations!

Keep in mind that although you are moving forward, the process is not yet over. Experienced hiring managers will tell you that not every job offer results in a hire.

Extend a Job Offer

Generally, you want to extend the job offer over the phone first. Formalizing the details in writing is essential, but a phone call helps you build the candidate’s excitement and gauge their response.

When you call, clearly state that you are extending an offer and share your excitement about them joining the company with specific and positive feedback from the interview process. Ask them how they are feeling and if they have any questions.

Once their questions are answered, ask for verbal acceptance. For example, “if you are ready to come on board and this is a verbal acceptance, I will put together a formal offer letter with all the details and email it to you.”

If the candidate has concerns or isn’t sure, allow them to voice their thoughts.

In your formal offer letter, include a warm welcome, the start date, salary, and benefits (including any paid time off and paid holidays). It is essential to include a response deadline of between two and three days. Job seekers may be interviewing with multiple companies, and you can waste precious time waiting for a response.

If they need to extend the deadline, you can let them know that you would like to hire them but cannot hold the position open for them. Tell them to reach out to you if they are ready to move forward, but in the meantime, you will continue to talk to other candidates.

Complete All New Hire Paperwork

Once the job offer is formally accepted, it’s time to collect all the new hire paperwork. This includes a combination of tax and other documents, such as a W-4.

Your state may have a required tax document. If you are paying by direct deposit, you’ll need to get the new hire’s bank information. If you provide benefits, you’ll want to ensure the new hire has all the information they need to use these benefits.

Onboard Your New Employee

Your new employee is ready to work but still needs an orientation to your company and its procedures. While a rare new hire can step in and get things done without much instruction, taking the time to onboard a new employee gets them in the mindset of how you think and how you approach business tasks. It also helps them feel prepared for their new role on your team.

There are four stages to onboarding. They are:

• Preboarding: This includes filling out forms and completing legal requirements.
• Onboarding: The new hire can attend orientation and welcome meetings.
• Training: Teach the new hire their job tasks and ensure they have the resources and information they need to succeed.
• Transition: The new hire becomes comfortable in their role, and you can focus on other parts of the business.

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Related: Onboarding New Employees in 2023

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FAQ About Hiring New Employees for a Small Business

These are common questions we hear from small business owners.

Can a Sole Proprietor Have Employees?

Yes, a sole proprietor can get an EIN and hire employees like any business. Like any other employer, you must still comply with all tax and employment regulations.

Can an LLC Have Employees?

Yes, an LLC can get an EIN and have unlimited employees as long as all tax and employment regulations are followed.

Can I Hire a Family Member?

Yes, you can legally hire a family member and process their payroll and taxes like any other employee.

What’s the Difference Between an Employee and an Independent Contractor?

This is an important legal distinction. Because it has been misused, the IRS is paying closer attention to how companies use these categories, and it’s worth getting it right.

If you hire someone who shows up on a schedule you set and performs work you direct, they are employees and should receive W-2 wages and benefits. This is still true if they are part-time.

On the other hand, an independent contractor is someone you may hire for specific tasks, like designing a logo or doing your taxes. They have autonomy and flexibility, work on their timeline, and do not qualify for health insurance or paid time off benefits.

You should consult with an employment attorney if you plan to utilize independent contractors.

When Should I Work with a Staffing Agency?

You are a specialist in the goods and services of your small business. Similarly, a staffing agency specializes in finding and hiring qualified candidates.

If you need to expand your staff quickly and are already beyond your capacity to meet the demands of your business, a staffing agency can save you time and hassle. They are a partner dedicated to recruiting talent while you manage your business.

Amplify Your Business with the Right Candidates

As your business grows, your role evolves. Initially, you may have been performing skilled labor, marketing, and sales. However, over time and with expansion, you become more of a director who maintains the vision, sets the direction, and ensures other individuals fulfill their roles.

For some small business owners, this transition is welcome. For others, there may be a learning curve. Wherever you stand, we help you find the right people to support and accelerate your business. Connect with us to discover how we can help build your dream team.