What You Need To Know When Hiring Your First Employee
Hiring your first employee can be an exciting and stressful experience simultaneously.
Exciting because you're now growing the business and reaching new heights but stressful because of the pressure you feel to make the right choice in hiring your first employee who will work under you directly.
Here are some important things to keep in mind before hiring your first employee so that both you and your new team member will have a successful partnership.
Have An EIN (Employer Identification Number)
While you can hire employees without an EIN, getting one is a good idea. The government encourages companies to apply for an EIN by not charging a fee (whereas most other types of business ID numbers, like a DBA, cost money).
All businesses with employees will need an EIN, so it's best to get your number as soon as possible even if you don't have any hires yet. Banks and the IRS require you have an EIN to interact with them anyways, so it’s not something that you should hold off on.
The IRS requires every business owner in America have their Employer Identification Number (EIN), which is similar to a Social Security Number but specifically designed for businesses. Even if you never hire anyone or form a corporation, they'll still give you one since you need it to refer to your business when filing your taxes.
Define The Role You're Hiring For
Once you know what you need and where to find potential hires, it's time to define what they'll be doing. A job description is an essential tool in identifying your ideal candidate. It should include both required and desired skills and knowledge and experience that may be helpful for candidates to have.
Also, don't forget about things like work ethic and team-player attitude—factors that can go a long way toward building a strong business culture from day one. Think about how you will make sure your candidate is right for you: In addition to making sure your hires have the skills needed for their job, it's also important to figure out how they'll fit in with your company's culture.
Even if you think someone has all of the skills they need to perform well in their role, they may not be able to do so effectively if they don't mesh with your company's existing office environment or professional style.
Make sure you're thinking carefully about what qualities are most important in new hires so that you avoid bringing on people who will make everyone else around them less productive or be dissatisfied with their time at your company.
Run A Background Check
Background checks are important, but they're also a real pain in the neck. Before you submit your offer letter, it's a good idea to run a background check on everyone who could play an important role in your company.
Legally, background checks are tricky, so be sure to talk with a lawyer before proceeding—and know that not all types of information can be uncovered. For example, some states don't allow employers to obtain criminal history records from social media networks like Facebook or Twitter.
However, you can easily obtain a comprehensive background check report in most cases. The cost depends on which services you use, but it's usually between $40 and $100 per person. It's often a good idea to run checks on yourself as well.
Make Sure They're Eligible To Work In Your Country
This is a two-part process. First, you'll need to apply for and secure an employment eligibility document (EAD) for your employee. This document will tell you whether or not they are legally permitted to work in your country.
It's different depending on where you live. In some cases, an EAD might already be provided by a visa—in which case, there's nothing more to do. Otherwise, it usually takes 3–6 months to get everything sorted out, and an EAD issued (although it can take longer).
Until then, you should treat your prospective employee as a candidate rather than an employee; talk about salary & benefits but don't make any formal offers until they have their EAD.
Once you've got their EAD, you can officially bring them on board and offer a formal employment. The next step is to sign your employee up for an individual tax number with your local tax authority and get them set up in your HR system.
This isn't essential to start work immediately, but it makes everything much easier. At that point, they're considered fully employed by your company (although they will still be working as a contractor until they receive their first paycheck).
Obtain Workers' Compensation Insurance
Workers' compensation is an insurance program that provides coverage for injuries and diseases sustained by employees on or off duty, regardless of fault. Workers' comp is mandated in many states, but consider purchasing a policy anyway even if it isn't required where you are.
Not only does having workers' comp on file make your business look more professional to future hires (and existing ones), but it can also decrease your liability risks if an employee does get hurt.
If you don't purchase a policy, you'll be personally responsible for paying out of pocket for any injuries that occur at work. That could potentially cost thousands—so it's wise to invest in coverage before your company gets off the ground.
Visit your state's department of insurance website to learn more about workers' comp and whether you need it. You may even be able to obtain a policy through your existing business or homeowner's insurance provider, so ask them how to do that as well.
Report Your New Hires To Your State Employment Agency
One of your obligations as an employer is to report new hires to your state employment agency. You can do that online in most states or by calling a specific number. The information will be added to a state database and then matched with other new hire data from employers across your state.
If you fail to report new hires, you might lose out on any tax credits for hiring workers. In addition, you could end up paying fines for not meeting reporting deadlines and, in some cases, even additional taxes if it's determined that you've misclassified employees as independent contractors.