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Hiring Your First Employee

hiring-first-employee-100712-02 Credit: Dreamstime


Hiring your first employee can sometimes seem daunting. And if it doesn’t, you aren’t doing it right.

One of the biggest mistakes entrepreneurs make is thinking that they can simply go to someone they know, such as a friend or a family member, pay them something, and that would be it. But while we may have fond memories of family-owned local shops , most businesses can’t work that way.

Here are some things you must know before you hire your first employee:

Legal requirements

Besides filing the relevant forms with the Internal Revenue Service, there’s making sure that someone is legally able to work in the U.S. It starts with the I-9 form. Once that is filled out you keep it – it’s for USCIS (U.S. Citizenship and Immigration Services) officials to look at if they need to, and you have to keep it for at least four years. (It must be on file for three years after hiring someone and at least year after they leave, whichever is later).

There are a number of verification services – in fact, if your business is a government contractor you’re required to use them. The USCIS has a program called E-Verify, which makes the whole process easier.

Fines can be heavy – knowingly hiring someone not authorized to work can cost you up to $3,200 for a first offense. Giving that summer job to the nice exchange student from Finland probably isn’t worth it.

Liability insurance and worker’s compensation

Don’t think that just because you run a simple office-based business that nobody can get hurt. An employee who is driving to see a client is doing so on the employer’s time, no matter whose car they are driving. They are at work, and anything that happens is work-related.

Benefits and salaries

Even in a small retail business, it’s important to think about how to get the employee interested enough to help the business grow. Hiring people on the cheap can be a huge mistake.

“The people who view it as ‘This is just a retail, I’ll just hire a high school kid and pay them some low wage' are not quantifying the loss from unwillingness to invest,” says Zane Safrit, an Iowa entrepreneur and former CEO of Conference Calls Unlimited. You’ll pay for that thinking later when you wonder why turnover is so high and much of your time is spent recruiting.

Some benefits don’t cost the company much. Vacation time is one, Safrit says, and it helps motivate people. It’s a salary increase in terms of dollars per hour – but not one that increases the outlay any.

“A great employee will have a direct impact on your company’s results,” he says. The converse is also true.

What will they do?

Once you’re at the stage of interviewing people for the position, you need to think about how they fit into your company’s vision and what you want to do.

Frances McGuckin, author of "Business for Beginners" and "Taking Your Business to the Next Level," says it ties into figuring out whether you are a good manager or not, and what kind. “That first employee is like a marriage,” McGuckin says. A good idea is to write down the priorities for the job — figure out exactly what you want the new employee to do.

In doing that, you ask yourself what are the skills the job requires, and whether you’re willing to pay enough to get them. (And if you’re not, are you willing to help the employee develop those skills). Ask yourself what other experience you want them to have. If they are going to be interacting with customers or clients, what kind of personality are they? And find out if they are interested in helping the company grow or if they just need a job.

Check references

One thing both McGuckin and Safrit emphasize is the need to check references as well as look at what’s on the resume and see if it’s kosher.

A simple Google search can go a long way to verifying that someone actually earned that degree. (A 2008 study by the Wall Street Journal found at least seven of 353 top execs at publicly traded companies had inflated academic credentials – or nonexistent ones). References are a good tool because they can offer insight into what kind of an employee you might be hiring.

You can also use a background check service. For a modest fee — typically $15 to $50 — these services will dig through a person's past, including: criminal and personal background checks, business history, and professional licenses. Even the best criminal background check can miss things, so check their references also!

Test them out

Depending on your business, it might be possible — and invaluable — to try an employee out. Options range from giving them a freelance project for a fee to hiring them part-time for a stipulated period. This way, you can learn about the things not on a resume: whether the prospective employee shows up on time, gets the job done on deadline, and does it well.