help wanted: the small business guide to hiring the first employee
DESCRIPTION
A short presentation about considerations small business owners need to make before making their first hire. This presentation covers how to decide whether you need someone full time or on a contract basis, the total costs involved in hiring and human resource management systems you need in place prior to making that first hire. Email me for notes or more information: [email protected]TRANSCRIPT
In this presentation we will cover: • Deciding on whether to use a contractor or hire directly • The cost associated with a direct hire employee • Human Resource Management policies and procedures that should be in place
first • How to go about sourcing, interviewing and hiring that first employee
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A little about me. I can be found online across the major social networks or reached via email at [email protected]
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As small business owners, most of us start out by doing it all. We handle the marketing, the finances, the administrative paperwork and then the actual work itself. At some point, it all may begin to be too much. The decision to hire is a big one, but when things are not being done well or at all because there is just too much to do, it may be the right one.
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The decision to outsource or hire is a big one. Deciding whether you need a full time employee or can work with an independent contractor or service has huge implications on your out of pocket expenses. The DOL and IRS have a few guidelines for who can be considered a contractor vs employee and what each should be paid once they are classified.
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There are three primary questions that a business owner needs to answer when deciding whether they need a contractor or employee. They are: • Who has financial control? Who can realize a profit/loss from the work? What
does each party have invested? • Who has behavioral control? Who decides where the work can and will be done?
Who decides where and in what time frame it will be done? • What is the ongoing relationship between the parties? Does this need to be a long-
term arrangement or is this a short term project? Reference: http://exitpromise.com/employee-vs-independent-contractor/
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If the decision is made to hire an employee, it is important for business owners to understand the true cost. Beyond pay, there are required taxes and insurance (depending upon size of the company) that must be considered. Various studies show that this cost is on average, at least 50% more – meaning, if an employee is making $20 per hour, their overall cost is really $30 per hour. Costs include: federal social security tax, state unemployment tax, federal unemployment tax, workers comp etc Reference: http://www.nwstaffing.com/forms/TrueCostOfEmployee.pdf
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Before starting the recruitment process, there are a few things to consider. Establishing these things before the first hire will ensure that it and every subsequent hire work to meet the overall objectives of the company. • Company culture – what type of culture do you want to build? • Leadership style – what is your leadership style and what type of person works
well with that? • Drive – what drives this business. What types of things do people need to be
passionate about to help drive towards that goal? • Future growth – what reasonable expectations does the business and a new
employee have for growth in the next five years? • What policies and procedures do you need to have in place to handle employee
situations? These are your HRM practices. Things like a handbook, performance mgmt program etc. Even with only one employee these things are important to establish early on.
Specifically for this position, you will need to write a job description and understand typical compensation for a similar role in the industry. You can conduct a salary survey yourself by calling other businesses to see if they will give you info or you can find some information online – although the source of that info has an impact on accuracy.
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Once you have all of the aforementioned stuff figured out, you are ready to post, promote and recruit for your open role. You can do this yourself or get help from a recruiter. The type of position will determine the route you take to post the job. LinkedIn is obviously a popular job posting site, but if the role you are hiring for does not have large representation on LI, you could be wasting time. It is important to find out where the people you would want to hire are and meet them there. Costs of recruiting yourself versus getting help: • Job postings range from $200 on smaller niche boards to $500 on larger job boards
for a 30-day posting. • The time you will put in screening, interviewing and processing applications • Recruiters typically charge a percentage of first years salary and do the posting,
screening and processing for you. This is anywhere from 18-30%.
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Once the person is hired, don’t forget about onboarding. It is important to invest time and effort into setting them up for success. Throwing them out to figure things out on their own may mean a ton of re-work down the road. Be sure they are up to speed on company values and mission as well as how their role fits into that. This is a crucial step.
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