Last Updated: February 16, 2024, 1:55 pm by TRUiC Team

Hiring for Your Small Business

Ch3. 08

Small business success hinges on building a formidable team. Dive into our hiring guide to ensure you find, retain, and manage the best talent, all while staying compliant with state and federal regulations.

This video is part of the free Small Business Startup Course designed to help walk you through the entire process of business formation from idea to launch. 

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Hiring Considerations

Before embarking on your hiring journey, you’ll need to determine the number of employees you need, set a budget, and align your expectations with your business goals. Understand the balance between opportunity costs and potential hiring risks, ensuring your decisions are well-informed and beneficial in the long run.

Hiring for Your Small Business – Transcript

As a small business owner, hiring the right people at the right time will have a huge impact on the long-term growth and success of your business. This video is designed to walk you through the hiring process, help you find employees that will make your business thrive, and figure out how to pay them – all while ensuring that you comply with the state and federal laws in place concerning hiring practices. 

Hey everybody, Will Scheren here from Small Business Startup Guide by TRUiC. This video is part of a larger course dedicated to helping small business owners cut through the noise and get to the essentials of starting and operating their business. If that sounds like it would be really useful to you, be sure to like and subscribe. 

The hiring process can be a difficult challenge for your business. Not only is it a costly process if you hire someone that doesn't work out, but there are also legal issues that need to be considered with hiring. And there's a human element that must be considered when hiring someone as well. 

In this video, we’ll help you out by helping you consider what to organize before you hire, types of employees, how to find qualified candidates, where to find qualified candidates, how to attract qualified candidates, interviewing best practices, legal considerations for interviewing, how to select the best candidate, how to hire a candidate, legal considerations for hiring, and how to set up payroll for your business. 

What to consider and organize before you hire – before beginning any hiring process, you should calculate the number of employees that you'll need, set a hiring budget, create a timeline, and consider your workplace culture. 

To calculate how many employees you're looking to hire, start by creating a list of the roles and tasks that need to be filled in your organization for you to be able to achieve the goals that you created for your business earlier in the course. For example, if you're in the business of selling toys that you manufacture, someone at your organization would need to make the toys. Someone would also need to be responsible for selling them. Then see if you can create quantifiable metrics that would need to be completed by each person filling each role. How many toys will you manufacture? How many of them need to be sold? 

While considering these quantifiable metrics, also consider to what extent the completion of these roles will affect your business's profitability. And then consider how much you'd be willing to spend to have these roles taken care of by someone other than the owner of the business. While considering this, don't forget the opportunity cost involved if you, as the owner, do not free up your time by having those rules filled. And weigh that costs against the risk that comes from spending money on a new hire. Not all new hires work out, so be sure to pad what you're willing to spend on having these roles filled, knowing that they will not be completed perfectly. 

After considering these three items, consider which of these roles you'd like to hire for and consolidate multiple roles into single hires if you can. After creating a list of the hires that you'd like to make for your business, you need to set a hiring budget. Make sure that you not only budget for the cost of the wages associated with the hire but also for any of the money that you'll spend finding the right candidate. After creating a budget, put yourself on the clock by creating a timeline. 

Earlier in the course, we encourage you to set a goal for your business that had a completion date. So for that reason, you should also set a target date to complete your hiring by. Set a date for getting the positions listed where they could be seen and applied for by a potential candidate. A date for reviewing applications of potential hires, a date for completing the interview process, and a date for hiring employees that you intend to hire. 

Finally, before beginning the hiring process, especially if you're considering making the first hires for your business, take some time to consider the workplace culture that you'd like to foster. Everyone wants to have a positive, cohesive, and peaceful workplace. Don't waste too much thought ensuring that you can articulate these desirable traits of a workplace environment. Instead, focus on the brand adjectives that you selected for your company earlier in the course, and consider how the people you hire will affect your customers' experience with your brand. All employees will have an effect on your company's brand, whether directly with customer-facing employees or indirectly with back-of-house employees. The culture that you create for your workplace will have an impact on how your products are viewed by your customers. 

The types of employees – there are two types of employees that you can hire for your business Contracted workers, who fill out a 1099 form before doing work for your business, and W-2 employees, who fill out a W-2 before doing work for your business. Each of these worker types should be utilized in different scenarios and come with pros and cons as it relates to your business. Let's explore that now. 

A 1099 worker or independent contractor generally provides specific services as defined by a written contract. They're oftentimes business owners themselves and are contracted by the companies they work for for a defined period of time. Independent contractors define for themselves when and where they work and what tools and methods they use to complete the work that you hire them for. Since your level of oversight over independent contractors is relatively low, your level of legal and financial responsibility is low. You also don't need to pay payroll taxes or benefit packages to contracted workers. However, if you need to hire an employee and define where, when, and how they will work for your organization, you'll need to hire a W-2 employee. 

A W-2 employee is what we typically think of when we think of a salaried or hourly waged employee. Unlike independent contractors, W-2 workers are not their own business owners. By law, these workers are guaranteed a minimum wage, which is currently $7.25 federally, but various states have their own minimum wage laws as well. Employers are also required to withhold their W-2 employees’ Social Security and Medicare taxes and pay employer payroll taxes. Employers provide all of the necessary tools and supplies for W-2 employees and are required to provide equal opportunities for benefits like health insurance, retirement contributions, and flexible spending accounts to all employees if they offer any of these benefits to any of their qualified employees. 

We've provided links below this video where you can get access to 1099 and W-2 forms, which you should have anyone who does any work for your business fill out. 

Where to find qualified candidates - finding a qualified candidate for your business is done through a process called recruiting. And there are four methods of recruiting that are helpful in finding qualified candidates to hire. Word-of-mouth recruiting, recruiting via online job boards, recruiting via recruiting agencies, and recruiting from within your own company. 

Word-of-mouth recruiting – no matter what type of business you own, word-of-mouth recruiting is a tried and true method of finding qualified employees. In fact, the vast majority of positions are filled through word-of-mouth referrals. For this reason, your first step in recruiting should always be to tap into your social media and professional networks. For your first few hires, you can find high-quality prescreened candidates through your friends, industry colleagues, and other associates like your attorney, accountant, or members of any professional organization. After your first round of hiring, employee referrals will also become an invaluable resource. 

Recruiting via online job boards – nearly four out of five Americans use online job boards when seeking employment, so this is absolutely a resource you should not ignore. Popular job posting sites include Indeed, Workable, ZipRecruiter, and LinkedIn. We've provided links to each of the job posting pages on these sites below for your convenience. While all of these sites can be excellent places to advertise your job openings, for various small businesses, it may be difficult to manage the number of applications you receive. If that becomes the case, consider finding more niche online job boards that cater specifically to your industry. This can save you a great deal of time and resources. 

Recruiting agencies – most recruiting agencies specialize in a specific industry and are most helpful when looking for highly specialized talent. The upside of recruiting agencies is they only get paid when they are successful and match a candidate with your business. This allows you to budget a certain amount for the roles that you need and let the agency take care of the grunt work. While recruiting agencies can be a great way of bringing effective talent into your organization, their fees can be steep. Some charge up to 35% of a new hire's first-year wages, but different agencies have different billing models. For most, this tool is not necessary and not advised for businesses in the early stage of the hiring process. However, for some fast-growing companies, bringing on an agency to fill high-level positions is beneficial. 

Recruiting within your own company – finally, do not overlook the talent that you've cultivated within your own business when looking to fill positions. Once you've completed your first round of hiring, your current team members can be great candidates for positions of promotion with greater responsibility. When chosen wisely, internal hires can save you a great amount of time and resources. 

Best practices for attracting candidates – well-designed job listing is a great opportunity to advertise your company. All the work that you put into this point will be nothing if you can't attract the candidates that you want. Here are six tips for putting together a successful job listing. 

Choose a job title people want. When looking for jobs, the first thing that jumps out to potential candidates is the position title. This is the job title a potential hire will add to their resume if they're hired at your company. You can get an edge on competitors by using the most current and popular language when referring to the roles that you want to fill. 

2: Sell your company. The best recruits are those that are excited about being part of your team. Use the introduction of your job listing to share what you think sets your business apart from others in your industry. This section not only makes clear what your company does but also what it's like to work there. Share your story, the benefits of working at your organization, and what your business cares about most. 

3: Ask for what you want. Take a few sentences in your introductory paragraph to describe the type of person that you're hoping to recruit. This should include both skillset and personality. Do your employees have to work closely as a team or spend a great deal of time doing independent research? Should a new hire be willing to work long hours, travel, or participate in company-wide activities? This will help weed out job seekers who know right off the bat that they would be a bad fit. 

4: Be specific about the role and its requirements. A great job listing gives a vivid picture of the roles and what it looks like working at your company on a day-to-day basis. The job requirements and qualifications section should be as specific and clear as possible. This helps encourage qualified candidates to apply and dissuades unqualified candidates, thus saving you valuable time. 

5: Be clear about what you want from qualified applicants. Do you want to see their resume? A cover letter? A headshot? All of the above? Be clear about what you need from applicants. This saves your time and theirs. 

6: Ask qualifying questions. By asking a few questions related to the technical requirements of the job, you'll be able to disqualify some applicants who simply do not have the technical or physical skills required to accomplish the job's tasks. 

Interviewing – after receiving applications, you want to conduct interviews with any applicants whose application seems appealing. Interviews can be done in a group or one on one setting. 

The number one mistake that interviewers make when conducting an interview is that they overcomplicate it. When you're interviewing someone, you're essentially only looking to have three questions answered: Can you do the job? Do you want to do the job? And are you pleasant to work with? 

Can you do the job? After introductions and a few pleasantries, interviewers should quickly turn their attention to the functions of the job they're hiring for and explain how the role will help the company in completing its mission, ensuring to note any quantitative metrics that will be tracked. After explaining the role, the interviewers should ask the applicant if they believe they can complete the functions of the job and why. Allow the interviewee to answer and ask them follow-up questions to ensure that they really do know what they're talking about. 

Do you want to do the job? After ensuring that the applicant is capable of completing the necessary functions that you're hiring for, simply ask them why they want to do the job. Ask them what caused them to apply, how long they see themselves working at your organization if given the position, and what a great work-life balance looks like for them. As they answer, consider if each of their answers align with your company's values and goals. 

Are you pleasant to work with? And finally, ask them some questions that give you a better perspective of who they are and if they'll be a good fit for the culture of the organization that you're building and your brand. While you're interviewing the candidate, remember they're evaluating you too. An interview is not a one-way interaction. Quality candidates often have several job opportunities in the works, and they'll go for whichever one offers the best all-around experience. Spend a portion of the interview sharing highlights of your company and your culture. 

There are some legalities surrounding interview questions, though, so let's take a little bit of time looking at legal considerations for interviewing. Laws differ on the size of your company and the jurisdiction in which you operate. For example, California prohibits employers from asking candidates about their previous salary history, but most states still allow such questions. Be sure to consult with your business's lawyer about the types of things that you can and cannot ask in an interview. 

Generally speaking, companies are prohibited from asking candidates about these topics, either directly or indirectly: Age, citizenship, criminal convictions, disability, family and marital status, gender and gender identity, national origin, medical history, race and ethnicity, religion, salary and benefit history, sexual orientation, and whether the candidate has ever filed a worker's compensation claim. Some interviewers might try to make conversation without realizing what they're doing is illegal. 

Be wary of questions that do not explicitly refer to one of these issues but nonetheless drive at the same information. For example, asking when someone graduated from college can refer to their age “How many sick days did you take this year?” refers to their medical history. “Do you live alone?” refers to their family and marital status. Even indirectly-posed questions like these are discriminatory and illegal. 

How to hire a candidate – before making your first hire for your business, there are a few things that you need to make sure you have in place. First, you'll need to make sure that every employee you're looking to hire is eligible to work in the US. This can be done by having them fill out section one of the employee eligibility verification form, also known as Form I-9. They'll also need to show you valid documentation with their ID and employment authorization, like a driver's license and a Social Security card. For most states, this is all you'll need to verify an employee's eligibility. However, in some cases, you'll need to enroll in an E-Verify program, which we've linked to below this video. This usually only applies to larger employers, so you'll likely be all set with an I-9. 

Next, depending on your state, you may be required to obtain workers’ compensation insurance. This will protect you from workers who are injured or get sick due to workplace exposure. And we have also provided a link to an article that we wrote on workers' compensation where you can get more information on the topic. 

The next step is to set up a payroll method to ensure that you're getting your new employee their paycheck regularly. As well as taking care of payroll taxes. Most employers choose to do payroll through a payroll provider like ADP or QuickBooks, which we also have linked to below. We'll be covering this topic in depth in the next video in the course. 

Then as an employer, you're legally required to display posters in your office or workplace that educate employees on their rights and responsibilities under federal labor laws. You can get more details on which posters are required in your area from the posters webpage on the US Department of Labor's website, which we've link to below this video as well. 

Finally, you should consider what benefits you'll be offering to employees of your company. The most requested employee benefit is health insurance or a similar benefit. However, other employee benefit programs that you may consider offering include retirement programs such as a 401k, wellness programs such as a wellness stipend, remote work, and flexible schedules. 

Legal considerations for hiring – we've provided a link below this video where you can get more access to information on hiring and access to our industry-specific hiring guidelines. 

Hopefully, that video provided you a ton of information and set you up for success regarding hiring employees for your business. In the next video in the course, we'll be taking a look at how to pay your employees and make considerations surrounding payroll taxes using a payroll service. 

This video is part of a step-by-step course that gives business owners all of the essential information for starting and operating their business. We've provided a link to all of the free and discounted business tools we mentioned in this course below this video. 

Be sure to like and subscribe to get more of this content. We’ll see you in the next video, and if you have any questions, let us know.