4 Tips for Hiring Your First Employee in 2013

Are you turning down work because you simply don’t have enough time or hands on-board to take it on? Thinking of hiring your first employee? Congratulations – your business is doing well!

But before you advertise for a new employee, proceed with caution. Hiring staff is a commitment to the future, and should be made in the context of your long-term growth plan and whether you really want to be an employer. Here are some points to consider, plus some tips for determining whether you can afford to hire your first employee.

1. What is your vision for your business?

When faced with too much work, solopreneurs are often encouraged to hire up, but is that what you want for your business? Is it your goal to become a larger business or remain a sole proprietor? Could you farm off work to independent contractors or outsource certain functions to take some weight off your shoulders? Could you team with other businesses to complement your services? For example, a graphic designer or web designer could “partner” with a marketing consultant to offer customers a range of full-service solutions.

Virtual assistants are another non-hire staffing option and can help you with administrative and even basic sales and marketing tasks. Temporary workers might be a short term option, but be aware: many laws and regulations that apply to full-time employees also apply to seasonal or part-time employees.

The following articles offer some tips for alternative sources of labor:

• 5 Things to Know About Hiring Independent Contractors
• Outsourcing to Freelancers & Consultants: 5 Tips for Getting it Right (and Lawful)
• “Chief Everything Officer” No More! – 6 Options for Staffing your Growing Business

​2. Where do you need help?

If you’ve decided to bring an employee on board, your first step is to project your business workload and identify areas where you need help. What does your workload or pipeline look like for the next 30 days, 90 days and six months, and which jobs do you need help with? What are you doing now that you could offload or have an employee augment? Perhaps you need skilled labor out in the field, or a sales rep to help you grow your business. Or, maybe you simply want to free up your time to concentrate on bringing in and fulfilling business orders.

3. Can you manage people?

Don’t overlook this important consideration. If you’ve managed employees in another occupation, how successful were you at making good hiring decisions? How many bad ones have you made? 

4. Can You Afford It?

Working out whether you can afford to hire is a common stumbling block. Start by building a realistic picture of the costs and overheads that your business will incur. These include:

• Wages
• Unemployment Tax – State unemployment taxes vary by state, so check with yours. Federal unemployment tax is 0.8 percent on each employee's first $7,000 of earnings.
• Workers Compensation Insurance – For new employers, this figure depends on your industry and the job performed. Again, check with your state about your expected rate.
• Medicare and Social Security Taxes – Currently, Social Security tax is 6.2 percent on wages up to $113,700, and Medicare tax is another 1.45 percent.
• Recruitment and Training Costs – These can run into the thousands, but, you can reduce them by using networking and referrals to uncover candidates.
• Benefits – Optional!
• Payroll Costs – It takes time and money to administer payroll and calculate taxes and withholding. Examine the cost of payroll software that can help streamline this task.
• New Equipment – Computer, desk, other tools.
• Software Licenses and Phone Data Plans
• Insurance for Company Vehicles

Next, look at last year’s income and expenses and factor in the projected annual cost of an employee and the extra income one might make possible. Then, consider your pipeline and cash flow. Can you afford to live with reduced profitability for a few months as your business ramps up? Calculate what you can put into generating new business if you are freed up.

You don’t have to do this all on your own. Organizations like SCORE, Small Business Development Centers and Women’s Business Centers have resources and experts on hand to help small business owners navigate this process. Find assistance in your community here.

Additional Resources

• Steps to Hiring your First Employee – Explains the tax, legal and regulatory steps required by law.
• 4 Interview Questions That Get to the Heart of a Candidate’s Potential

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley