When your business grows to the point where you can no longer “do it all” yourself, hiring employees is an important next step. Besides hiring the “right” people for the positions you are creating, there are legal, financial and management issues to deal with.
Unfortunately, the majority of small business owners think hiring and managing employees is a simple process, when in fact it isn’t. Before bringing one or more “outsiders”—new employees—into your business, there are a number of things you need to be aware of.
To prepare yourself for this next big step, use the following two checklists as your guide. Besides opening your eyes to a host of new responsibilities you will face and things you need to know, these two checklists could prevent you from making costly and time-consuming mistakes.
Checklist one: legal & financial matters
For the legal and financial matters, it is wise to consult with your lawyer and accountant. They will guide you and answer your questions. But even when you get professional advice, when you are planning to hire, you must do the following:
- Familiarize yourself with the kinds of taxes that are withheld for W-2 employees, such as temporary disability and family medical leave insurance. Make sure you have an EIN (employer identification number) to use on tax documents.
- Calculate the total cost of hiring employees, not just the salary. Equipment, benefits, training and the hiring process itself should be offset by the contributions expected by the addition of staff. Can your business handle the extra overhead on an ongoing basis?
- Understand the legal requirements of hiring W-2, 1099 and full-time and part-time employees.
- Register with the state Department of Labor and get the appropriate posters that must be displayed prominently to notify employees of their rights. Also, get the proper forms you need to report immigration status.
- Obtain workers compensation insurance. Proof of this insurance coverage must be posted. Make sure that appropriate measures are in place to provide a safe workplace.
- Set up personnel files—one for each employee—to house applications, employment offer letters, IRS W-4 form, benefits sign-up forms and performance evaluations. Create a second file for each employee for I-9 immigration status forms and medical records. Keep these files securely locked away.
- Create an employee policy manual to prevent confusion about company rules and to avoid frivolous lawsuits.
Checklist two: management skills
For the most part, the legal and financial issues are straightforward. Yet, if you think that is all there is to expanding your company then you are in for a rude awakening.
From previous good experiences working for others, you might already possess some of the skills needed to manage employees. However, management is more than simply giving orders—and more often than not, management skills have to be learned.
To help you assess these, answer the following questions before finalizing your decision to bring on employees:
- Do you understand how to hire effectively? Do you know:
- What to post in an ad?
- How to initially screen responses?
- How to construct interview questions to compare “apples to apples”?
- What to never ask an applicant?
- How to negotiate with the finalists?
- Are you prepared to be the “motivator in chief”? Do you assume that employees will care as much about your business as you do—especially when you are reluctant to share any of the key aspects of the business with them and just want them to focus on specific tasks?
- Do you recognize that the addition of each new employee changes the dynamics of your organization, in much the same way as adding a new child or puppy does to your family?
- Do you assume that employees will understand your expectations of what their jobs entail:
- Without a clearly defined structure of how each job relates to the others?
- Without clear job descriptions?
- Without training or follow-up?
- Without regular, objective performance evaluations?
- Do you understand how to set boundaries between you and your employees?
- Have you stated the firm’s professional norms in your employee handbook?
- Are you prepared to model the behavior you expect from your employees?
- Do you know how to enforce policies and procedures evenhandedly?
- Are you prepared to handle inevitable conflicts between employees?
- To what resources can you turn to help you with management issues?
Hiring and managing employees are important steps for a growing company. They allow the owner or owners to focus more on vision and strategy while delegating some of the tasks of implementation to others. However, that decision should be the result of careful forethought. Are you prepared for the challenges involved?
Abby Duncan is a seasoned human resources consultant. She takes a “teach a person to fish” approach by helping owners of small businesses hire, manage, train and retain their employees. Rather than relieve them of these tasks, she educates and empowers entrepreneurs to be better managers and to make informed decisions relative to outsourcing any part of human resources. For more information about how Abby can help your growing business, visit www.duncanresources.com, call (973) 256-8443 or e-mail her at firstname.lastname@example.org.