Want to hire your first employee? Consider these 4 things first.

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There comes a time when all small business owners think about hiring their first employee. After all, if you’re serious about growing your small business, at some point, you’re going to need someone to help you.

But finding qualified employees is hard these days, especially when you consider the nation’s low unemployment rate. So you need to be sure you’re ready to hire your first employee.

How will you know you’re ready? Consider these four things first. 

 

1. You’re busy enough to justify hiring someone

Take a good look at your cash flow. Is money coming in regularly, or are you experiencing peaks and valleys? You shouldn’t hire a permanent employee until you have enough steady work to keep them busy—even during slow times.

You might not be at that point yet. And that’s ok. If you still need help, consider hiring temporary or seasonal workers, outsourcing to independent contractors or freelancers, or hiring part-time employees.

If business is consistent, then you may need to hire a full-time employee. Of course, once you do, like many entrepreneurs, you’re going to have to work on delegation.

 

2. You lack the skills needed to grow your small business

In the beginning, most small business owners need to be that proverbial wearer of many hats.  But as the business grows, it gets harder to focus on all aspects of the business.

Perhaps you’re good with numbers, but you don’t know anything about marketing. Maybe you’re a great designer, but your sales skills are lacking.

Never hire someone who has a skill set that’s identical to yours. New hires should be able to fill gaps in business operations. The idea is to add different expertise.

 

3. You can afford to hire someone full-time

Having employees can be expensive. In addition to wages, you’ll also have to pay Social Security taxes, Medicare taxes, payroll taxes, and state unemployment taxes. 

If you plan to offer employee benefits like health insurance or a 401(k) plan, those costs can add up. Benefit costs account for 31% of an employee’s total compensation, according to the U.S. Bureau of Labor Statistics. Not to mention, you may need to buy workers’ compensation insurance, depending on your industry and your state’s employment laws.

Hiring an employee means covering more than the minimum wage. If you’re not sure what kinds of wages or benefits you can afford, consult an accountant or bookkeeper. 

 

4. You’re prepared to meet state and federal compliance standards

Being an employer is a lot different than being a one-person show. Hiring an employee means staying compliant with local, state, and federal laws. And compliance starts during the hiring process. Your job ad and interview process must comply with anti-discrimination employment laws. And then the strict compliance laws really kick in. 

  • Employers must pay all employees either the federal minimum wage or their state’s minimum wage, whichever is higher.
  • Employers must maintain records of employee time worked and wages paid.
  • Employers must follow workplace safety regulations. 
  • Benefits like sick and parental leave must comply with state and federal regulations. 

Don’t think hiring contractors simplifies compliance. Federal regulations govern what makes someone a contractor or an employee. Consult your state’s labor department and the U.S. Department of Labor for more information. 

 


Rieva Lesonsky is the CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for free TrendCast reports.