Ask any entrepreneur or small business owner about entering the world of entrepreneurship, and they'll tell you the same thing: be prepared to wear a lot of hats. Accountant, marketing director, operations officer, project manager, PR specialist, web developer and receptionist all are typical jobs held by a single entrepreneur. Oh, and that's on top of focusing your talents on the core role of your company. It's no wonder why even the most talented entrepreneurs reach a point where they need a second hand by hiring their first employee. It's a scary, exciting and transformative moment for any small business. Here are some key things we feel you should know before making your first hire.
Thoroughly Vet Your Candidates
Your first employee isn't just drawn out of a hat. It's a big opportunity that requires you to search hard for the right person with the right skillset. So when the applicants start flowing in, it's important you vet them thoroughly. That means check references, check backgrounds and check every conceivable and available detail about your potential hires. In other words, LinkedIn and resumes can only go so far. Be sure to ask for and call their references. If they have a certificate or degree in a certain field, ask for a copy of it. It's also a good idea to verify past employment by calling the HR departments of those companies. After all, there are a lot of job seekers out there who will bend the truth on resumes, but the right candidates will have nothing to hide; so check and double check their histories and references.
Personality Compatibility Is a Must
At the end of the day, you're hiring a personality as much as you're hiring someone to fill a specific position for your company. That means you'll be spending an awful lot of time with this employee, so make sure it's someone you'll enjoy spending a lot of time with. In the interview process, ask the right questions to help uncover if they are a good fit. Questions about how they might handle certain situations pertaining to your company are a good place to start. Also, give your candidates time to ask you any questions they might have. It's these types of exchanges that are good litmus tests for how you might work together. But remember, when asking questions to your candidate, it's against the law to ask about age, sexual orientation, marital status, religious affiliation or race. Keep it friendly, professional and relevant.
Know the Proper Employee Classification
It's absolutely critical you plan for and understand the type of employee you're hiring. For instance, a part-time worker is anyone who works 20 hours or less per week, while a full-time worker completes 30 hours or more. But every state is different on particular rules for payment and benefits, so check with your local department of labor to understand more. For tax and legal purposes, you need to classify your new hire in one of four areas: independent contractor, common-law employee, statutory employee or statutory non-employee. Here's a quick breakdown:
An independent contractor is not technically your employee at all because this person works for his or herself. Also commonly known as a freelancer, this person typically is paid on a per-job or retainer basis. Employers are not required to deduct taxes or provide them the same benefits that they do for part or full-time employees.
Common-law employees are workers that work directly under your control and management, meaning you control where the person works, the equipment they use and more. Many employees are considered common-law employees.
A statutory employee is an independent contractor treated as an employee, by statute, for tax withholdings. Traveling salespeople or delivery drivers are common examples of these types of employees.
Finally, a statutory non-employee is a lesser used classification typically reserved for some direct sellers, licensed real estate agents and certain companion sitters.
Protect Yourself, Your Employees and Your Business With the Right Insurance
Did you know that in most states, including Colorado, workers' compensation insurance is legally required as soon as you hire an employee? If you choose not to get coverage, your business could be subject to fines of up to $500 per day. That kind of financial loss is a small businesses owner's nightmare. Speaking of nightmares, there's a reason workers' compensation insurance exists in the first place: to prevent nightmares from becoming realities. That's because workers' comp insurance protects employers and employees in the event of an accident. It covers medical care and certain lost wages, and it safeguards employers from being sued. When you get it, you're covered from a medical, legal and wages standpoint.
There you have it. Hiring a new employee is a huge first step in your business's evolution. Remember these helpful tips and advice to ensure you're taking that step with all the confidence you need to take your business to the next level. Oh, and get used to being called “boss" for the first time. Don't worry, you'll get used to it.
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