5 Best HR Essentials for Perfectly Hiring Your First Employee

Introduction

Starting a business is a huge undertaking, and as a company grows, more and more responsibilities emerge. Eventually, the scale becomes too much for one person and it’s time for a significant milestone in an entrepreneur’s career, i.e, adding another employee to your organization. 

So in this article, we’ll look at the five HR essentials for hiring your first employee. We’ll cover the basics of compliance and paperwork plus how to compensate your new hire and set them up for success. By the end, you’ll have everything you need to know to confidently grow your organization’s team. We’ll discuss getting an EIN, completing essential paperwork, classifying your employee correctly, setting up payroll, and establishing a performance management process. So, let’s get started. 

Getting An EIN

An Employer Identification Number(EIN) is a nine-digit number the IRS assigns to businesses for tax and record-keeping purposes. It’s like the social security number of your organization. 

An EIN is required for most businesses classified as an LLC, a corporation, or a partnership. If you hire employees, you need an EIN. 

If you have a business bank account, you probably already have an EIN. Check a previously filed tax return for your existing business, or ask the IRS to find it for you by calling their hotline number. 

If you don’t have an EIN, you’ll need to apply for one with the IRS. But don’t worry, it’s simple and only takes a few minutes. You can apply for free on the IRS website. Just click “apply online now”, and follow the instructions. When you’re done, there’s no waiting or processing period. You’ll get an EIN that you can save, download, and print right away. 

Completing Essential Paperwork

Lots of paperwork comes in with hiring and eventually bringing an employee onto your team. But, two forms are absolutely essential for this purpose, i.e, form I-9 and form W-4.

According to the U.S. citizenship and immigration services(USCIS), form I-9 is designed to “verify the identity and employment authorization of individuals hired for employment in the United States”. 

In other words, form I-9 confirms that your workers are who they say they are and that they are legally authorized to work in the country. 

You must complete form I-9 for every employee you hire for work in the United States. To validate the form, employees must validate the form, employees must present documentation that establishes both their identity and their clearance to work in the U.S.

The form includes three lists of acceptable documentation.

List A includes documents that establish both identity and work authorization, such as a U.S. passport or permanent resident card.
 

List B includes documents that establish identity only, such as a driver’s license or voter registration card. 

List C includes employment authorization documents like a social security card or birth certificate.

Your new employee must be able to show you either something from List A or both a document from List B and a document from List C.

While the I-9 ensures you’re hiring an employee who can legally work in the U.S., form W-4 ensures you withhold the correct federal income tax from their wages. Your new employee should complete their W-4 immediately upon hire to give you the information you need to manage their withholdings. 

Keep in mind that while employers can explain elements of the form, such as wage thresholds and base withholding amounts, you are not authorized to advise an employee on how much they should withhold or expect to have withheld.

Classifying Employees Correctly

There are two basic categories of employee classification and it’s important to classify with care

Hourly or “Non-exempt” Employees

Hourly employees, also known as “non-exempt” employees are protected by the Fair Labor Standards Act. 

You are required to pay them at least the minimum wage in your state and pay overtime at one and half times their hourly rate for any time worked beyond a 40-hour work week.

Salaried or “Exempt” Employee

Exempt employees, on the other hand, are not covered by the FLSA, they are “exempt” from its protections.

To qualify as exempt, an employee must receive a salary (not hourly wages) of at least $684 a week, or $35,568 a year. Their job responsibilities must also fit into one of the FLSA’s six exemption categories:

1. Executive

2. Administrative

3. Professional(learned and creative)

4. Computer-related

5. Outside Sales

6. Highly compensated

These nuances can be tricky and classification rules occasionally change. So, here are two tips. First, if you’re hiring your first employee, odds are they’re an hourly or non-exempt worker. Second, the cost of non-compliance is highest when you misclassify a non-exempt worker as an exempt worker. After all, accidentally protecting an employee with overtime and minimum wage is a lot better than accidentally not protecting them. So, when in doubt, treat your first employee as non-exempt to cover all your bases

Setting Up Payroll

After hiring your first employee, it’s tempting to write them a cheque on payday. But because of tax obligations and employment law compliance running payroll is a lot more complicated than that 

There are three options for payroll processing;
do it yourself,
hire an accountant, or
use a payroll service provider. 

With only one employee you might have the bandwidth to handle payroll yourself. It may be simpler that way at first and it’s obviously the most affordable option but it also comes with a higher risk of error and takes considerably more time. It becomes less viable as your organization grows. Consider partnering with a payroll service provider from the beginning. Payroll software is more reliable and convenient than doing it yourself and it’s more affordable than hiring an accountant.

Especially, when it’s part of an all-in-one human resource information system(HRIS). An HRIS can distribute and collect the necessary tax forms, track time and attendance, host tax reporting documentation, and automate payroll so your first employee gets paid correctly and on time and you know you’re staying compliant as your company grows.

Establish A Performance Management Process 

Picture this, you’ve applied for an EIN, collected and filled out all the proper forms, carefully classified your new hire, and figured out how to pay them. But a few weeks or months go by and you’re just not seeing the impact you hoped hiring your first employee would have. If this happens, you’ve likely missed a crucial step, i.e, establishing a strategic performance management process. 

A new hire who is not doing well may be a bad fit, or they may just not have the tools they need to succeed. To set your new hire up for success.

We recommend three performance management strategies;

a culture guide,

a 30-60-90 plan, and

regular one-on-one meetings.

A culture guide goes beyond the typical employee handbook by explaining the history of your organization, its Mission, and its Vision. Culture guides include how colleagues treat each other, compensation, philosophies, and information on employment law. In addition, they should discuss housekeeping items that help employees navigate daily life such as how to connect to the printer

You may not think you need a culture guide for just one employee. But when your organization continues to grow you’ll be glad you took care of this crucial step from the beginning. Plus, even your first employee will perform better if they understand why the work matters and how it’s making an impact 

A 30-60-90 plan is a list of expectations projects, and responsibilities your new hire can follow to be successful in the first three months of their job. You could review their progress during a weekly or bi-weekly one-on-one meeting. During these meetings, if you find the employee struggles with certain projects or processes. You can work with them to identify solutions instead of leaving them to flounder. 

With this approach, your first employee will know exactly what you expect of them in the first three months of their role and you’ll work alongside them to help them meet these expectations. Before long your new hire will be a confident and capable member of your team. Further, you may also include such employees in the career pathing plan.

Keynote

So, we discussed everything you need to know about hiring your first employee, from paperwork to performance management. Growing your business is a big responsibility and staying compliant and strategic throughout the process will help you hire with confidence now and in the future. This same attitude can help you work enthusiastically to set the stage for the successful career of your new hires. As always, remember that your role is as strategic as you make it.