How to hire your first employee

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Hiring the first employee for your small business can be an overwhelming endeavor. There are lots of stressful moments: from dealing with the administrative requirements, to budgeting for the considerable expense, to accepting the fact that you’re now responsible for someone else’s paycheck. Here’s a list of questions you should be asking yourself through the process.

Do I really need to hire?

Before you decide to hire an employee, think about how much help you need, and whether you need it on a regular basis or sporadically.

Many businesses outsource a lot of their work (bookkeeping, content creation, logo design, web design, etc.) to freelancers or outside companies. For example, you could hire a personal assistant via Upwork, get bookkeeping services through Bench, and hire a local photographer to take a few photos for your website and social media accounts.

This can be an easy and efficient way to get extra help since there’s less paperwork (though you may have to send freelancers a 1099-MISC) and you can pay on a per-project basis. You can also hire a variety of experts rather than having one person manage many different tasks. As your business grows, however, it’s likely that you’ll need to hire someone to work with you on a more substantial, ongoing basis.

Independent contractor or a W-2 employee?

Once you’ve decided to hire someone, the next decision is whether you need to hire a W-2 employee or an independent contractor. This decision is an important one because the tax and legal requirements are different, and there can be penalties for misclassifying your workers. Luckily, the IRS offers guidelines you can use to determine whether or not the person you’ll hire will be considered an employee or contractor. Here’s a quick summary: two important factors to consider are “control and independence.” Independent contractors maintain control over their work processes, their schedule, and how they’ll be compensated; employees do not.

Generally, contractors don’t get health insurance or other benefits and the employer doesn’t withhold taxes from their paycheck. This means it’s generally easier, from an administrative perspective, to hire independent contractors. There are advantages to the employer/employee relationship, however, so be sure to consider all the pros and cons before making a decision.

Make sure you are aware of your legal and tax obligations, which can vary from state to state. For example, you’ll need to manage tax paperwork and set up a payroll system. If you're not sure where to get started, consider consulting or hiring a professional to help. There are also many online services (such as Gusto or Rippling} that can help you through the process.

In many states, you’re also required to register with the state labor department and pay workers comp insurance. Check with your Secretary of State or state business department to make sure you’re taking all the required steps.

How do I recruit good candidates?

A clear, compelling job description will encourage the right people to apply for the role. Once you get candidates, it’s time to start screening their applications and inviting them in for interviews. When you’re preparing for an interview, be sure to select strong interview questions and avoid illegal ones.

How will I train my new employee?

In many industries, payroll will be your biggest expense, so setting your employees up for success is critical for your bottom line. Don’t underestimate the amount of time and attention your new employee will need in order to get the job done.

Since your company is small, you probably have limited time for training, so be strategic. Think about the tasks they’ll need to perform, the background information they should know, and how you’ll communicate. Give them documentation and clear objectives, and then check in regularly to make sure they have everything they need.

An employee handbook can be an especially helpful piece of documentation. Handbooks typically include information on the company’s core mission and values, as well as answers to common questions. While creating an employee handbook seems like a big task, it will pay off in the long run when you end up making your second hire, your third, and so on.

Why it’s worth all the work

When you find the right person—someone who shares your vision while bringing their own valuable skills and perspectives to the table—they’ll have a profound and positive impact on your business. So, when it’s time to hire your first employee, embrace the process. Although hiring a new employee is a lot of work, building a strong team will allow you to do exponentially more than you could alone.


Hi there! This post exists to offer you (hopefully) useful information but it cannot take the place of personalized professional advice. Please consult a qualified expert if you have questions about your business. Also, Azlo doesn’t endorse any third-party sites that are linked here.


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