Text reads "Hiring Your First Employee". A person with long hair shakes hands with another person, who is partially out of the frame, against a blurred background.

Hiring your first employee is an exciting milestone. Expanding your team allows you to offload administrative tasks and focus on your business growth. 

This article will help you determine when you should hire your first employee. We’ll also explain the steps you should complete before hiring, during your candidate search, and for employee onboarding. 

1-800Accountant offers resources to support you through each step of your hiring process.

How to Tell If You Need a Full-Time Employee

How do you know when to hire your first employee?

First, you should determine whether your company can afford to pay a full-time employee’s salary, benefits, and payroll taxes. Evaluate the long-term revenue growth – think of your first hire as an investment in your business. Your timing may depend on your industry and business model.

Consider whether you can keep an employee busy full-time. Is your business growth suffering because you lack bandwidth? If you manage all front-end and back-office operations, think about the tasks you could offload to someone else. 

Additionally, evaluate your strengths. You can hire a full-time employee who has the experience you lack. For example, a back-office assistant could take over scheduling, bookkeeping, and administrative duties. An employee could free up your time for networking and sales.  

Lastly, consider the increased administrative burden associated with hiring employees. Make sure your company’s infrastructure can support hiring responsibilities. Consult with small business professionals for extra help with compliance. 

What to Know About Hiring Your First Employee

Even if you’re not ready to hire a full-time employee, you’re still in the right place. Small business owners should understand the hiring process. Prepare early before hiring a short-term employee or an independent contractor. 

Steps You Should Take Before Hiring Employees

Comply with Federal and State Regulations

Review labor rules to comply with federal and state labor department regulations. Check your local laws for additional requirements. Complete the following steps before you hire your first employee.

  • Obtain an employer identification number (EIN). Your business must have an EIN for employment tax purposes. You can file IRS Form SS-4 or apply for an EIN online. 
  • Obtain workers’ compensation insurance. Most states require employers to have workers’ compensation insurance, which covers costs related to employee on-the-job injuries.
  • Understand labor laws and minimum wage requirements. The Department of Labor establishes overtime pay rules and fair wage standards. Check your state labor department’s rules to determine the local minimum wage.
  • Understand workplace safety requirements. Employers must enforce safety measures and inform employees of safety protocols. The U.S. Occupational Safety and Health Administration (OSHA) establishes specific rules for certain industries. 

    • Implement Payroll Systems

    Accurate payroll reporting is critical to a successful business. Compliance with federal and state employment rules requires detailed records and computations. Your business should implement payroll software or outsource the function to a payroll service provider. 

    Choose a solution capable of handling the following components.  

  • Employment taxes on employee wages:
  • Social Security and Medicare Taxes
  • Federal income tax withholding
  • State tax withholding (depending on your state rules)
  • Federal Unemployment Tax
  • State Unemployment Insurance
  • Employee benefits and deductions:
  • Health insurance
  • Retirement plan contributions
  • Wage garnishments

    • Additionally, your business must comply with federal and state payroll filing requirements. Federal payroll tax reporting generally includes the following forms. 

  • IRS Form 940, Employer’s Annual Federal Unemployment Tax (FUTA) Return: Employers must report their FUTA liability and payments annually.
  • IRS Form 941, Employer’s Quarterly Federal Tax Return: Employers with an annual FICA liability of at least $1,000 must report their FICA liability and payments quarterly.
  • IRS Form 944, Employer’s Annual Federal Tax Return: Employers with an annual FICA liability of less than $1,000 must report their FICA liability and payments annually.
    .
  • IRS Form W-2, Wage, and Tax Statement: Employers must report employee wages and tax withholdings annually.
  • IRS Form W-4, Employee’s Withholding Certificate: Employers must obtain a signed withholding form from each employee. 

    • Check your state laws to determine which local payroll forms you should file. 

    How to Find Your First Employee

    After establishing your business structure and compliance procedures, follow a hiring process to attract high-quality candidates. Complete the following steps to search for your first employee. 

    Write a Detailed Job Description

    Determine the title and description for the position you want to fill. 

    Create a clear and meaningful job title – consider industry conventions and match the expected level of expertise. Your job posting should clearly explain the role, including the following details: 

  • Annual salary or hourly wage
  • Weekly time commitment
  • Employee responsibilities and day-to-day tasks
  • Work location and remote vs. in-person expectations
  • Necessary experience and qualifications
  • Application instructions

    • Publish a Job Advertisement

    Post your job listing on reputable platforms, such as LinkedIn or Indeed. Consider including your advertisement on local job boards. 

    Contact your network and ask for referrals. Former colleagues may be able to connect you with suitable candidates. Publicize your job ad on social media, especially platforms where your ideal candidate spends time. 

    Review Job Applications and Conduct Interviews

    Compile an application form with questions that help you understand each candidate’s qualifications. Consider the applicant’s education, skill set, and relevant experience. 

    After you receive and review job applications, schedule interviews with qualified candidates whose skills match your expectations. Interviews allow you to ask specific questions about candidates’ qualifications and gauge whether they fit your company culture. Depending on the nature of the position, you can ask applicants to complete skills assessments so you can measure their performance on specific tasks.

    Cater your application and interview process to the position you want to fill. However, be aware of the U.S. Equal Employment Opportunity Commission’s (EEOC) rules about protected characteristics. 

    Consider the following list of allowed vs. prohibited questions during your hiring process. 

  • Topics you may ask about:
  • Ability to perform the job requirements
  • Availability to work the advertised hours
  • Level of education
  • Relevant experience and transferable skills
  • Certificates obtained (if relevant)
  • Basic contact information
  • Reference contact information
  • Other job-related topics
  • Topics you must not ask about (prohibited by the EEOC):
  • Age, gender, or genetic information
  • Race, national origin, or citizenship status
  • Religious affiliation or beliefs
  • Marital status, sexual orientation, or children
  • Pregnancy, disability, or other medical questions
  • Financial information or unemployed status

    • Determine Candidate Eligibility

    You cannot inquire about a candidate’s citizenship status, but you may ask whether the applicant is eligible to work in the United States. Applicants do not need to disclose citizenship information other than their employment eligibility. 

    Schedule a free call with 1-800Accountant to find out how our partners can support your business with immigration services for foreign candidates. 

    What to Do After Choosing a Candidate

    After selecting a candidate, complete the hiring process for your first employee.

    1. Conduct a background check (optional): Depending on your resources and the nature of the position, you can perform a background check. Background checks let you verify candidates’ identity, employment history, and education. You must obtain the candidate’s consent before the screening.
    2. Extend a job offer: Congratulate your applicant (and yourself!). Inform the candidate you want to hire them.
    3. Execute an employment contract: An employment contract protects your business and explains the terms of the job offer. You and your new employee should sign the contract before their first day. Include the following details:
    4. Annual salary or hourly wage
    5. Employee benefits
    6. Employment start date (and end date, if applicable)
    7. Job description and duties
    8. Work schedule and location
    9. Other industry-specific requirements
    10. Complete new hire reporting: The U.S. Department of Health and Human Services requires your business to report employees to your state’s New Hire department. The rule helps the government collect child support payments.

    If you’ve chosen to hire an independent contractor instead of a full-time employee, you may need to scale back your hiring process to maintain independence. Consult with business tax professionals for help with the rules. 

    Employee Onboarding

    Welcome and empower your new team member with a thorough onboarding process. 

    We recommend providing an employee handbook, including reference materials such as company policies and dress code. Conduct adequate training and offer enrollment in your employee benefit plans.

    Additionally, U.S. employers must complete employment verification paperwork and I-9 forms for all new hires. USCIS Form I-9 requires each U.S. employee to provide their social security number and employment authorization document(s), such as a U.S. Passport or Permanent Resident Card. 

    Let 1-800Accountant Support Your Startup or Small Business

    Don’t allow tedious paperwork to overshadow the excitement of hiring your first employee. While you search for the best candidate, let 1-800Accountant handle your payroll tax compliance. 

    Small business accountants can support your business formation. Tax professionals provide tax advisory and planning services. We’ll help you stay compliant year-round.
    Schedule a free consultation with 1-800Accountant to get personalized small business assistance.

    This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.