How to Hire Your First Employee: 5 Mistakes to Avoid

How to Hire Your First Employee

Hiring your first employee is a big step, and poor hiring can cost your business.

Running a small business is as thrilling as it is challenging. You're finally getting really busy, but that means you need some extra help. How do you know whom to bring in? How much will it cost you? What are your responsibilities? How do you go about the whole process?

Here are five mistakes to avoid when considering the exciting challenge of how to hire your first employee.

Not Setting a Hiring Budget

While you may be seeing more success lately, you need to take costs into account when hiring your first employee. And "cost" equals more than just salary, according to Entrepreneur. In addition to salary, don't forget the six payroll taxes you'll have to cover, as well as the cost of any benefits and perks that you offer to employees. These can quickly add up. And make sure to calculate overhead for your employee: office space, supplies, technology, training and anything else that employee may need to do their job.

Not Identifying Your Exact Needs

When hiring your first employee, it's important to identify your need. What, specifically, are you looking for? Take some time to identify the job responsibilities, skills and qualifications you're seeking and write out a job description. This process will help you understand exactly what you're looking for — and what you're not. Having a grasp on your needs will make screening and interviewing that much smoother.

Looking for Applicants, Not Qualified Applicants

It's the "qualified" part that's likely to pose the most difficulty. Your best bet is to post the job opening to a targeted audience. If you're looking for less skilled labor, think more strategically than just a Craigslist ad. See if local universities offer places to post off-campus jobs or ask coffeeshops and other hangout spots if you can post on their listings board. If your job relates to a hobby (such as baking) reach out to local enthusiast clubs and see who's looking to go full time. Having someone on staff with real passion can make a huge difference.

If you're looking for high-skilled labor, you'll need to find prospects where they are. Job posting opportunities can be found in local or regional trade publications, through national sites like LinkedIn or Monster can work, too. Not all qualified candidates are actively searching for jobs, but they may be interested in pursuing a promising opportunity if you can present them with one.

Knowing what qualifications you desire, develop a screening method to sort through responses. If you require a certain degree or certification, for example, filter out all other applicants. If you value certain technical skills, like working knowledge of specific software, exclude resumes that don't list those skills.

Interviewing can also be difficult. Human resources professional Paul Falcone warns in a Monster article that "more new hires fail due to personality-culture mismatch than technical skills mismatch." So pay attention in conversation with applicants to their styles of communication, the attitudes they express and their interest in your business's mission.

Not Properly Onboarding Your New Employee

Once you hire your employee, the onboarding and training process begins. Here's where you'll get your employee set up in payroll, including setting up withholdings. It's important to get this right because being out of compliance can cost you. Because tax laws can be cumbersome, working with a reliable payroll provider can be crucial, even if you have just one employee.

If you've made sure training is in your hiring budget, don't fall short on putting it into action. While your time is already tight, without proper training at the outset, your new employee could turn out to add to your workload, not reduce it.

Not Understanding Your Compliance Requirements

Finally, know your compliance requirements: what you can and cannot do when you hire. To get a grasp on employment laws, applicable workplace policies, wage and hour requirements and interview do's and don'ts, consider seeking guidance from an employment attorney who can help you walk through the process of how to hire your first employee.

Hiring your first employee is a big step. Poor hiring can cost your business almost a third of your employee's yearly earnings. So prepare yourself to bring on not just any employee, but the right employee.

Ready to become a first-time employer? Check out our Hiring 101 report for what you need to know.

This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. ADP shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.