Small Business Hiring Guide

1. How to Hire Employees for Your Small Business

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Running A Business

How to Hire Employees for Your Small Business

Jun 13, 2023 • 10+ min read
New employee accepting a job offer
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      Business growth ultimately means an expansion of the workforce as well. When your small business is ready and it’s time to hire, you will want to know how to hire employees. The goal is to find the right employees in a manner that complies with state and federal laws.

      Hiring for small businesses does not have to be complicated. Your business can achieve success when you understand relevant legal requirements and find the right job candidates for your open positions.

      Legally preparing your business to hire employees.

      The first step in the hiring process is getting your business ready to hire candidates. There are multiple issues you’ll want to address during this preparation stage.

      Form a legal entity.

      If you haven’t already, you need to determine if you’re going to form a legal entity, such as a limited liability company (LLC) or limited liability partnership (LLP). Although you are not required to form a legal entity to hire employees, it can be beneficial. By forming a legal entity, you will be separating your own personal assets and liabilities from those of the business.

      Get tax identification numbers.

      Your business should have an Employer Identification Number (EIN), which identifies you with the Internal Revenue Service (IRS), as well as a state tax ID. Your EIN is similar to a Social Security number and is used for tax purposes.

      Consult with an employment lawyer.

      When preparing your business to hire employees, you should also consult with an employment law attorney. They can help you figure out which business structure is right for you, as well as whether you will need employment contracts, noncompete agreements, and other employment-related legal documents.

      Get employment paperwork in order.

      You will need to have all employees complete certain paperwork to maintain legal status with state and federal government entities. Some of the new-hire paperwork you need includes:

      • Form W-4 – This form helps you determine how much money to withhold in taxes from paychecks.
      • Form I-9 – This form verifies employment eligibility of new hires.
      • Employee handbook – This lays out the company’s mission, vision, values, policies, and specific codes new hires need to know.
      • Direct deposit form – This collects employees’ banking information to expedite the payment process.
      • Non-compete agreement – This contract prohibits employees from using information they obtain from your company for their own benefit.
      • Acknowledgement form – This form is signed by the employee and confirms that they received and understand all documents.

      Get business-related insurance.

      You may also need to carry various types of insurance when you hire employees. Many states require businesses to have unemployment insurance, workers’ compensation insurance, and general liability insurance to protect employees. An employment lawyer can also help you remain compliant with necessary insurance regulations.

      Hang Department of Labor posters.

      The U.S. Department of Labor (DOL) publishes a series of notifications that can be obtained as posters. All businesses with employees must display those notices in a visible space for employees. They refer to minimum wages, overtime, and how to handle an on-the-job injury.

      Establish how you will pay employees.

      You will need to develop employee payroll and establish the frequency of that pay. There is specific software that can help you do that or service providers who can handle all the payroll details, including taxes, for a low rate.

      How to write a job description.

      Build the right team for your business by writing well-crafted job descriptions. Your job descriptions should clearly identify your business, as well as the type of person you are looking for. Some tips for writing a good job description include:

      • Provide information about your company culture.
      • Explain the level of autonomy and decision-making the role involves.
      • Detail whether the job will involve supervision of other people.
      • State how the work will impact the company and your clients.
      • Describe required skills, experience, and education.
      • Add detailed opportunities for growth with the role.
      • Explain day-to-day work expectations.

      Your job description should also have a clear statement of your business values, including dedication to diversity and inclusion. Ensure that you provide accommodations and how those can be worked into the hiring process and working environment for all job candidates.

      Don’t forget to include contact information for your human resources (HR) department or an individual who can provide additional information about the position.

      Finding good job candidates for your small business.

      There are many ways to find the best job candidates for your business. You might use word of mouth to find people who work well with current employees or recruit from online job boards. Some small businesses use the services of a recruiting agency to find potential candidates. Whichever option you use, consider the costs of putting your job description out there with the time and effort you will have to input to find your employees.

      Review applications to narrow the candidates.

      In this economy, you will likely receive many applications for your open position. Technology can help you sift through resumes, or you might opt to use humans to review applicants’ materials. Both methods can be equally effective. Here are some tips to help you narrow down your applications before scheduling a few for interviews:

      • You should have written criteria to avoid bias and illegal discrimination.
      • Audit the tools you use to review applications to avoid bias.
      • Notify applicants if you will be using technology to review their materials.
      • Review a candidate’s entire application package.
      • Keep applications that are accurate and complete without excessive errors.
      • Determine which applicants most match your company culture and values.
      • Try to determine if the applicant’s personality would be a good fit.
      • Review patterns in past job experience.
      • Determine if the applicant would be innovative and has a potential for growth.

      If there are some issues with a candidate or you have some questions, you can make notes and ask clarifying questions during the interview process.

      How to screen and interview job candidates.

      Once you narrow your applicants to a manageable number, you should conduct a quick screening phone call, as well as a larger interview for candidates who seem like they would fit the job position.

      Screen job candidates with a short phone call.

      A screening phone call should last only 15 to 20 minutes. It can give you a clear understanding of what you and the candidate expect and help clear up any confusion. You should keep questions brief and focus on reviewing the job description along with the candidate’s background to ensure they meet all the necessary requirements for the position.

      Conduct a thorough job interview.

      Some companies engage applicants in a series of job interviews, but it’s best to keep things simple. If you can do one interview with all key stakeholders at once, that will get the best outcome. Some questions you can ask during an interview include:

      • How is your experience relevant to this position?
      • Why do you want to work for this company?
      • What are your strengths and weaknesses?
      • What type of work environment is best for you?
      • Do you prefer to work alone or with a team?

      Make sure you give the individual a chance to ask you any questions they might have about the company or position as well.

      Avoid all questions that might indicate a candidate’s race, religion, skin color, gender identity, sexual orientation, national origin, pregnancy or parenthood status, ability, age, or genetic information. Stick to questions that are relevant to the job requirements.

      Select a candidate and extend a job offer.

      Once you select the job candidate that you think would be the best fit for your position, you need to extend the job offer. It is customary to do this via phone and then follow up with an email or letter that details the following:

      • Job title
      • Pay rate
      • Expected start date
      • Supervisor’s name
      • Summary of benefits
      • Full or part time status
      • Exempt or non-exempt status

      You should also include a statement that the job is an at-will relationship (which is recognized in nearly all states). If it is contingent on background checks or reference checks, that information should also be discussed. Your state laws may require additional disclosures during the onboarding process.

      Onboard your new employee.

      The onboarding process can be complex, depending on how much training is required. If this is one of your first hires, make sure you document the process and develop standard operating procedures (SOPs) that will make things easier in the future.

      It’s important to start off on the right foot. You want to build trust with your new employee immediately. Orientation should take place in a welcoming environment, where your new employee can learn about your company, mission, values, and history.

      Introduce your new employee to their colleagues at appropriate intervals. While people may be excited to meet a new person, it can be overwhelming to be thrown into a group quickly. It’s important for your new employee to know their supervisor and anyone they will be working with on a daily basis. Anyone outside of their department can wait until they are settled into their position.

      Training should include information about safety and productivity on the job. You might have to bring them up to speed on specific software that your company uses or tools they need to know how to use. Ensure you give the new employee plenty of time to ask questions throughout the process.

      Additionally, learning opportunities should extend beyond the onboarding process. Human resources should frequently check in with newer employees to determine their training needs for long-term growth and development.

      How to hire remote employees.

      If you are hiring remote employees, you will face additional challenges. However, with attention to the details of the remote hiring process, you can get a successful outcome with these individuals as well. Some tips for hiring remote employees include:

      • Use technology effectively – Video conferencing will enable face-to-face interviews when in-person meetings are not possible.
      • Write the job description with remote work in mind Tailor job requirements to include self-disciplined individuals who will be able to stay engaged with their team remotely.
      • Provide employees with necessary tools – Remote workers need hardware and software to do their jobs just like workers who are on the job site. All necessary equipment should be provided before the remote employee’s start date.
      • Maintain open lines of communication – Since there is a lack of in-person communication, supervisors and HR departments will need to have an open line of contact with the new employee. Be sure you are clear about your expectations regarding meetings.

      Using freelancers in your small business.

      If you are not ready to hire, or want to avoid overstaffing and understaffing, you might opt to use freelancers or contract workers. You can find freelance workers in much the same way that you can find employees. However, it’s important to know that you will not have as much control over how, when, and where a freelance worker completes their work.

      In general, most freelance workers are highly skilled and bring specific knowledge to the table. They are a great way to expand your workforce without the expenditure of benefits and other onboarding costs.

      When your small business is ready to hire new employees, you will want to think about growth in other areas as well. You may need a new office or equipment to prepare those employees for work. Lendio offers small business loans that will help you provide those needs.

      Contact Lendio for information about how we can help your business expand.

      About the author
      Brandy Abalos

      Brandy Abalos is a licensed attorney, content strategist, and marketing consultant for small businesses. She uses SEO tools to develop strong digital content for audiences who are learning how to navigate complex topics in law and business. When she is not writing, she seeks adventures with her three children, partner, and two corgis in Ohio.

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