When most people envision themselves in the role of an entrepreneur or founder of a business, they imagine being a manager or team leader for a number of employees. Accordingly, once they draft a business plan, some of their first thoughts are how to get an office or a retail location open, and how to hire their first round of employees.
But before you go through the steps of hiring those workers, there are a few considerations you’ll need to bear in mind.
Key Considerations Before Hiring Employees
Think about these questions long before you start interviewing prospective employees:
- Do you really need employees? Don’t get too ahead of yourself. Labor costs are some of the biggest expenses you’ll face as a new business owner, and you may not get much in return. After all, your business is just starting out, and your internal roles may not yet be formally defined. If you hire employees too soon, you’ll take on all those expenses without earning much in return. If you aren’t careful, it could kill your business before it ever has a chance to take off.
- Do you have an EIN? If you’re going to hire employees, you’ll need an employer identification number (EIN). It’s a nine-digit identifier for your business that works kind of like a social security number. It’s relatively easy to obtain, but it’s a strict necessity if you’re doing any hiring.
- Can you set up withholding taxes? You’ll need to set up records for your payroll, as well as withholding taxes. For example, you’ll need to withhold federal income taxes and state taxes, and you’ll need to provide every employee with a W-2 by January 31 (covering the previous year). If you’re not prepared to take this step, you may not be prepared for employees.
- Do you have workers’ compensation? Workers’ compensation insurance is required by law in most areas, and even if you have it in place, you may be held liable for injuries or damages to workers while they’re on the job. Are you prepared to set up workers’ comp?
- Can you write a concise job description? What are the specific roles you’re hiring? If you don’t have a clear idea, it’s a sign you need to spend some time defining the positions in your organization. Write up a concise, appealing job description for every position you seek to fill, and get ready to list them everywhere you can to broaden your pool of applicants.
- Are you prepared to run a background check? It’s not a wise idea to hire employees without conducting some kind of background check. Determining an employee’s educational background, criminal history, and other factors can give you confidence that you’re making the right decision. Do you have a system in place for running these checks? What red flags will cause you to reconsider your hires?
- How will you find employees? There are many channels and strategies you can use to find new employee prospects, but which ones will work best for your organization? You could list your open positions on as many job boards as possible, or you could try to secure people through professional networking. You could even host large-scale group interviews. You’ll need to consider this before moving forward.
- How will you pay employees? Employees aren’t going to work without decent pay. You may be willing to provide a reasonable salary or hourly wage to your workers, but where is that money going to come from? In your first few months of operation, you may not have much money coming in. Can you secure funding? Will you be forced to open a line of credit?
- Are you aware of required notices? Every workplace is required to post specific notices about legal employee rights and mandatory workplace conditions. Fortunately, it’s easy to obtain and post these notices throughout your workplace, but it’s still a consideration many new employers neglect.
- Are you ready to write an employee handbook? It’s important to have a formally documented employee handbook, specifying your workplace and behavior policies and explaining your pay and benefits. This document will play an important role in your employee relationships and deserves your time and attention.
Working With a Professional
These are just some of the many considerations you’ll need to bear in mind when considering when and how to hire employees. To a newcomer in the entrepreneurial world, it can all be quite intimidating. Accordingly, it may be in your best interest to work with a mentor or another entrepreneur more experienced in hiring than you are. Whether you bounce off ideas or collaborate on a new hiring plan, you’ll walk away with more knowledge and more confidence than you had going in.