How to Hire Employees for Your Small Business

Are you ready to build an incredible team to take your small business to the next level? 

Hiring employees for any company is a huge undertaking and can be intimidating, especially for small businesses. But don’t worry—it doesn’t have to be overwhelming! 

Hi, my name is AJ! I recently sold my business for a multi-million dollar exit. I learned a lot during that journey and want to share my experience with you!

I created this guide to help you navigate the process of hiring employees so you can start building a robust and successful team.

So let’s get started!

Step 1: Regiester Your Business With the State

I’m sure if you’re hiring employees, you’ve already gotten a business entity.

If you have, move on to step 3, if not, let’s move forward! 

What is a Business Entity?

The term “business entity” describes organizations designed to conduct business. 

The business entity you choose is (semi) crucial because it will determine how you conduct business, your tax liability, and business rights. 

Here is a quick list of the most common business entities. 

• Sole Proprietorships
• Partnerships 
• Corporations 
  • C-Corporation 
  • S-Corporation 
• LLC (Limited Liability Company)

How to Get a Business Entity. 

You can pay the fee’s and apply for a business entity through your state’s secretary of state website. 

Go to Google and type in “Your State + Secretary of State” to find it. 

My recommendation (if you’re still reading) is to go with an LLC. It’s inexpensive, and easy to setup. 

Step 1.1: Get State or Local Tax IDs

The next step is to get any necessary state or local tax IDs.

These are required by the state or local government to ensure you pay taxes on the wages you’re paying your employees.

What is a State Tax ID?

A State Tax ID is a unique number issued by the state or local government.

It’s used to collect and report taxes on your business, employees, and other activities in the state.

For example, if you’re doing business in Minnesota, you must obtain a Minnesota State Tax ID.

How to Get a State Tax ID

You can apply for a State Tax ID online or through your local government office.

Each state has its process and requirements, so make sure you research the requirements for your state.

Once you’ve applied and been approved, you will receive a State Tax ID in the mail.

Step 2: Get an EIN

The first step in hiring small business employees is getting an Employer Identification Number (EIN).

What is an EIN?

An Employer Identification Number (EIN) is a unique, nine-digit number issued by the Internal Revenue Service (IRS) to identify your business.

It’s used for tax purposes and to report wages and taxes on employee W-2 forms.

Think of it like a Social Security Number (SSN) for your business.

How to Get an EIN

You can easily apply for an EIN online with the IRS. All you have to do is fill out a form and submit it.

Once your application has been approved, you will receive an EIN immediately by email.

Step 3: Decide the Employees Status

Once you have your EIN and State Tax ID, the next step is to decide how you want to classify your employees.

Below is an overview of the different employee statuses.

Full-Time Employee

A full-time employee works at least 40 hours per week and is eligible for benefits such as health insurance, vacation days, and other perks.

Part-Time Employee

A part-time employee works fewer than 40 hours per week.

Depending on your company’s policy, they may or may not be eligible for benefits.

Temporary Employees

Temporary employees are hired for a specific period of time and are not eligible for benefits.

They may fill in for a full-time or part-time employee on vacation, sick leave, or maternity/paternity leave.

Seasonal Employee

Seasonal employees are hired for a specific period of time, usually during certain times of the year.

They may fill in for a full-time or part-time employee during peak business times. Or, they may be used to help with a particular project or event.

Independent Contractor

Independent contractors are not employees of your business.

Instead, they are self-employed individuals hired to complete a specific project or task.

They are not eligible for benefits and are paid a flat fee or commission for their services.

Intern

Interns are students or recent graduates who are hired for a temporary period of time to gain experience in the field.

They may be paid or receive college credit for their work.

Step 4: Decide on Your Pay Periods

When hiring employees, you need to decide on your pay periods. There is no set rule for what your pay periods should be.

However, most businesses use biweekly or semi-monthly pay periods.

Weekly Pay Period

Weekly pay periods are when you pay employees every week, usually on Fridays.

This is the most common pay period used for hourly and part-time employees but can also be used for full-time employees.

Biweekly Pay Period

Biweekly pay periods are when you pay employees every two weeks, usually on Fridays.

In total, employees are paid 26 times per year.

Semi-monthly Pay Period

Semi-monthly pay periods are when you pay employees twice a month, usually on the 15th and last day of the month.

This differs from biweekly pay periods in that employees are paid 24 times per year.

Pro Tip: In my businesses, we pay our employees twice a month (on the 15th and the last day of the month). It’s clean, and easy. 

Step 5: Create a Compensation Plan for Holiday/Vacation Leave

Once you’ve decided on your pay periods, the next step is to create a compensation plan for holiday/vacation leave.

You need to decide what holidays and how many vacation days you will offer employees.

The most common holidays are:

• New Year’s Day
• Memorial Day
• Independence Day
• Labor Day
• Thanksgiving
• Christmas Eve
• Christmas Day

You must also decide how many vacation days employees should receive each year.

Most companies offer between 10-15 days of paid vacation per year.

Some companies now have unlimited vacation policies. Be careful with unlimited vacation policies, though, as you don’t want employees taking too much time off.

But it can be a great way to attract and retain top talent.

Pro Tip: It’s easier to give additional vacation time than it is to take time away from your employees. 

Step 6: Create a Position Contract

Once you’ve decided on your pay periods and compensation plan, the next step is to create a position contract.

What to Include in Your Position Contract

A position contract outlines the job duties and other terms of employment.

Position Title 

This is the name of the position.

Managers Position 

This is the name of the person directly managing this position.

Results Statement 

This brief statement outlines what results the employee is expected to achieve for the company. It should include measurable performance outcomes.

Tactical Work Listing 

This is the list of measurable tasks with specific outcomes for which the employee will be responsible. Depending on the job, you can create a list of everyday tasks or major projects.

Standards 

• This is a list of qualities or behaviors the employee should adhere to to perform their job successfully.

These standards should be broken down into position-specific and company-wide standards.

• Position Specific – These are qualities or behaviors that should be demonstrated for the employee to successfully perform their job (e.g., punctuality, problem-solving, customer service).
• Company Wide – These qualities or behaviors should be demonstrated to maintain a positive work environment (e.g., respect, communication, collaboration).

Signatures

This is the signature of both parties that is required to make the contract legally binding.

Step 7: Find Candidates

Once you’ve created a position contract, the next step is to find job candidates.

Write a Job Description

The first step is to write a well-written description of the job. It should include the following.

Brief Company Overview 

The job description should include a brief overview of the company.

This should include information about the company’s mission, values, and any awards or recognition they have received.

You want to give applicants a sense of who you are and the culture of your workplace.

Qualifications Needed 

Qualifications needed for the position should be clearly outlined in the job description.

This could include education, experience, technical skills, or other traits needed to perform the job.

You want to be as specific as possible so the right candidates apply.

Job Responsibilities 

Job responsibilities are tasks that the employee will be expected to perform.

This will help applicants understand the job’s scope and determine if it’s a good fit for them.

You should include a list of everyday tasks and any major projects they will be responsible for.

Ensure to be as detailed as possible, giving the candidate a clear idea of what to expect.

Salary Range 

The job description should include the salary range for the position.

This is the salary range you are willing to offer the successful candidate.

You want to include a range rather than a specific number. This will give you some flexibility during negotiations.

Job Location 

A job description should include the location of the position.

This is important for applicants needing to relocate or commute to take the job.

It’s also important to specify if the position is remote or in-person.

Post Your Job

Once you’ve written your job description, the next step is to post it.

Below are some of the most popular ways to post a job.

Online Job Boards

Online job boards are one of the most popular ways to post a job. There are a variety of free and paid job boards available.

Some of the most popular job boards are Indeed, Monster, and Glassdoor.

Research the different job boards and find the one that best fits your needs.

Linkedin 

Linkedin is a great way to post jobs and reach qualified candidates.

Not only can you post the job on your company page, but you can also share it in relevant groups and on your personal page.

Job Specific Boards 

There are also job-specific boards that you can use to post your jobs.

For example, if you’re looking for a web developer, you could post the job on GitHub or Stack Overflow.

These types of boards often have more qualified candidates that are looking for specific kinds of jobs.

College Career Centers

If you’re looking for recent graduates, you can post your job at a college or university career center.

These centers are often free to use and are a great way to reach qualified candidates who may not be actively looking for a job yet or may not have the experience needed for more competitive positions.

Professional Associations 

Another way to post your job is through professional associations.

These are organizations that are specific to an industry or profession.

They often have job boards where you can post jobs and reach qualified candidates.

Step 8: Conduct Interviews

The next step in the hiring process is to conduct interviews. Interviews are a great way to get to know the candidates and assess their qualifications.

I have a process that I like to follow when conducting interviews.

Narrow Down Resumes to Ten Candidates

The first step is to narrow down all applicants’ resumes to 10 candidates.

These should be the ten that you think are most qualified for the position.

Complete a discovery call with all the candidates to get an initial feel for the person and discuss the job position.

A discovery call should be conducted on the phone and only needs to be about 20 min long.

Narrow the Search to Five Rockstars

The next step is to narrow the search from ten candidates down to five rockstars.

Conduct an in-person or Zoom interview with each of the candidates.

An in-person or Zoom interview should be about 45 minutes long and include questions about their experience, qualifications, and how they would approach the job.

You should assess their skills, knowledge, and cultural fit during this interview. This should be more in-depth than the discovery call.

Narrow the Search Down to Two Elites

The next step is to narrow the search from five candidates down to two elites.

Schedule a second interview with the two finalists.

This interview should be in-depth and focus on technical knowledge, problem-solving, and other job-specific skills.

This is also a great time to discuss salary and benefits. Paying employees competitive salaries is a great way to show them you value their contribution.

At this point, you should have a good sense of the right candidate for the position.

If you’re hiring local, I’ve always thought it was a great idea to meet for a beer to chat. Remember, you’re not only relying on this person to help in your business, you have to work with them too! 

See also

Local Business

What Is Supply Chain Management? Small Business Guide

Step 9: Extend a Job Offer or Trial Period

Once you’ve selected a candidate, extending a job offer is next.

You can extend the job offer for an indefinite position OR create a trial period. 

I’ve always found that setting a three-month trial period (with clear expectations) was great to gauge an employee’s fit for my company. 

When extending an offer, include all the details about salary, benefits, and other perks with the position.

You should also be clear about expectations from the beginning.

Make sure they understand their responsibilities and what tasks they will be expected to complete (review the position contract). 

When you extend the offer, you will give them an offer letter outlining the job details.

Job title

First, it includes the job title. What is the candidate’s role?

Pay

The offer letter will also include the pay rate.

This is the salary you offer for the position and any bonuses or commission structures.

Expected start date

The offer letter will also include the expected start date. This is the date that you expect the candidate to begin their employment.

Usually, this is discussed during the interview process.

Once the offer letter is signed, the candidate should be ready to start work on the specified date.

Supervisor’s name

The offer letter will include the supervisor’s name.

This is the person that the candidate will be reporting to and should be made clear before the candidate begins their employment.

A brief summary of employee benefits

The offer letter should also include a brief summary of the benefits.

This could include health insurance, vacation time, and other perks.

Make sure to include the full details of the benefits in a separate document that you send along with the offer letter.

Exempt or non-exempt classification of the position

The offer letter should also specify if the position is exempt or non-exempt.

Exempt positions are salaried and do not have to track their hours for overtime pay.

Non-exempt positions are hourly and must track their hours for overtime pay.

Including this information in the offer letter will avoid confusion about the position’s classification.

Whether the position is a part-time or full time

The offer letter should also include whether the position is part-time or full-time.

This will clarify to the candidate what kind of commitment they are expected to make and how many hours they will be expected to work per week.

Employment at-will relationship (recognized in all states except Montana)

The offer letter should also include a clause that states that the employee’s relationship with the company is at-will.

This means the employee or the company can terminate the employment relationship at any time, with or without cause.

This clause is recognized in all states except Montana and should be included in the offer letter.

The contingent nature of the offer (contingency based on background check)

The offer letter should also include a clause that states that the offer is contingent upon a successful background check.

This means that the candidate will need to pass a background check before officially beginning employment with the company.

By including this clause, you can ensure that the candidate is qualified for the position and has not misrepresented themselves during the hiring process.

Any other requirements dictated by law

The offer letter should also include any other requirements dictated by law.

For example, if the position requires a degree or certification, this should be included in the offer letter.

This will ensure all legal requirements are met before the candidate begins employment.

Bonus Step: Onboard Your New Employee

The final step in the hiring process is onboarding your new employee. Once the paperwork is completed and the offer letter has been signed, it’s time to welcome your new hire!

Onboarding should include the following:

• A thorough company orientation.
• Job expectations.
• Safety protocols.
• Policies and procedures.
• Other information to help employees acclimate to their new role.

An employee handbook can be a great resource during the onboarding process.

Ensure to introduce new employees to their team members and provide them with the resources they need to succeed.

Hiring remote employees or hiring managers can differ slightly, but the onboarding process should be thorough and comprehensive.

By doing this correctly, you can ensure that your new hire is set up for success.

When you hire an employee for your SMB, it can be a daunting task, but with the right process and knowledge, you can make sure that you find the best candidate for the position.

Take your time, do your research, and make sure to ask the right questions during the interview process. This will help you find a great employee who fits your business well.

Once you’ve selected a candidate, extend an offer letter outlining all the details of the job and any other requirements.

Finally, onboard your new hire properly to ensure they are set up for success in their new role.

Following these steps, you can find the perfect employee to join your team and help your business grow.

Did we miss anything? Let us know in the comments below. Good luck!