Hiring employees is a practice that gets easier with time. Craig Lewis shares a few hiring practices to give you a peace of mind about hiring your first employee.
For months, possibly even years, you’ve been going at this alone. Overextending yourself to fill every position needed is just one of the ways you’ve kept your vision alive. But now, you’ve turned the metaphorical business corner and have decided to hire your first employee.
Both a sign of success and added pressure, you realize that the implications for this first hire are real. With extra manpower comes a string of responsibilities: liabilities, expenses and paperwork … a lot of paperwork.
The temptation to focus solely on hiring logistics will be strong, however even the most organized business can catch a case of "bad corporate culture" if they don't plan ahead. Take some time in the midst of this hiring process to reflect on the environment you want to create for your team and the relationship you want to establish from the start.
This exercise for hiring employees will yield different results for every business, but here are some basic guidelines to help ensure you are creating a successful environment for employee #1 and employee #100.
Take some time in the midst of this hiring process to reflect on the environment you want to create for your team and the relationship you want to establish from the start.
Now that you've developed a cultural foundation for employee on-boarding, it's time to get into the weeds of hiring practices. One of the first decisions you need to make is how to classify your employees. Ultimately, this will need to be determined by the Common Law Test or by filing an SS-8 Form with the IRS.
Behavioral: Do you have control over what the worker does and how the work is completed?
Financial: Are you providing the tools and supplies the worker needs to perform their work or are they supplying their own? Are wages paid per job completed or ongoing hourly wages? Can the worker potentially take a financial loss from the job?
Type of Relationship: Is there a contract in place for specific jobs? Do you provide any benefits to the worker like a retirement plan, health benefits, or paid vacation time? Can the worker provide similar services to a variety of employers at the same time?
Keep in mind all of these three categories need to be reviewed in totality – no specific category should solely determine the worker’s classification. In cases where you are unsure you can file an SS-8 Form with the IRS to receive a clear determination.
What happens if you misclassify a worker as a contractor when, in reality, they should be a W-2 employee? In some cases, the IRS can require you to pay both the employer’s share of payroll taxes, as well as the employee’s share and penalties/interest. Hence the need to take this process seriously.
In summary, you've come this far by being equal parts visionary and tactician. Maintain that balance through this process and you are bound to succeed.