Time To Hire Your First Employee? Knowing When and What To Do

  •    A freelance reporter and writer based in Philadelphia, Pa., Dinah previously worked as a staff reporter for The Associated Press and Dow Jones Newswires.

Your sole proprietorship has been booming — doing so well, in fact, that you've started having trouble staying on top of growing customer demand.

You may be fulfilling orders or turning in projects on time, but falling behind on paperwork, even the all-important invoicing. If you run a small store, maybe you've noticed the checkout line is getting longer and patrons more restless as you attract more customers.

If any of this sounds familiar, it may be time to hire your first employee, before your business becomes the victim of its own success.

Zane Benefits, a health insurance reimbursement firm, published a small-business hiring guide that lists several signs your company may be ready to take on its first employee. Among them: Having to turn away work because you're too busy with current customers, lacking time to seek new clients or handle business paperwork, and needing a worker with special skills.

Before hiring your first employee, you might consider an interim step, such as paying a freelancer or otherwise outsourcing work that doesn't require a regular staff member. As a Wall Street Journal guide notes, your business may be able to use the services of web designers, virtual assistants, writers and outsource-manufacturing companies, among others, without adding employees.In fact, you can outsource services that you may need for your new employee and future hires, such as payroll and benefits.

Once you've determined that you do, indeed, require a new employee, you'll need to decide where to find this important addition to your company. Your strategy depends to some extent on the type of business you're running. An online jewelry shop may have different first-employee needs than an artisanal food truck, an app developer, a mobile florist or a lice eradicator.

If you don't already have a job candidate in mind, consider touching base with former classmates and colleagues or current industry acquaintances, as well as friends and family, to see if anyone knows a well-qualified prospect. You may use some of the well-known job-posting boards like Monster, Indeed or SimplyHired, or home in on industry-specific job websites.

LinkedIn allows fine-point searches for people with the skills you seek, and hosts networking groups that also may lead you to the right candidate. You might check with local colleges and universities for well-qualified students or alumni. As Zane suggests, you also could post the opening on your business's website and use social media to recruit candidates.

Zane also encourages small business owners to "develop a consistent interview process" that allows you to choose applicants for skill and company fit. The firm advises, among other tips, that you ask open-ended questions, know the questions you're not allowed to ask, give candidates hands-on exercises, and "hire for attitude and willingness over skills and experience."

As you work to bring on an employee, you'll need to take a number of steps to do it the right way.

The U.S. Small Business Administration lists several tasks for starting the hiring process in compliance with state and federal laws, including:

  • Obtaining an employer identification number (EIN), also known as the employer tax ID, from the Internal Revenue Service. You can apply online or call 1-800-829-4933.
  • Keeping records for withholding taxes, and filing your taxes. Your business will need to withhold federal income tax, file a federal wage and tax statement, and, depending on your state, withhold state income tax for employees. The SBA provides information on state and local taxes.
  • The IRS' small-business tax page provides information you may need to know.
  • Verifying the employee's eligibility to work in the United States. Information and forms are available at E-Verify.
  • Registering the employee with your state's new-hire reporting program.
  • Acquiring workers' compensation insurance.

Even if you're not considering offering a health benefit or reimbursement plan for your new worker, check the SBA's health care page to make sure you comply with legal requirements under the Affordable Care Act.

It may sound like a bit of research and effort, and it is. Like other aspects of your business, that's what it takes to succeed -- and there are plenty of resources out there, including your local Small Business Development Center, to help you.
Take your time to plan, prepare and find the right first employee, and enjoy your business's successful growth.