As a small business owner, you can expect to wear many hats. Creating a successful business is about much more than bringing the right product to the market. It also entails having the right people behind your product.
Once you have recognized the promising signs, it`s time to hire your first employee; it`s not just about recruiting the right worker for the job description but presenting yourself as an employer that attracts the right talent. Whether you are looking to build an executive team for your business or expand your administrative and customer service team, there are certain legal conditions an employer must fulfill when recruiting.
Taking on the role of an employer means taking steps to protect your member of staff, your business, and yourself before you finalize your recruit- and even later down the line when you expand your workforce.
1Create A Clear Job Description And Employee Policy Handbook
A job description should set out the employee’s duties, job title, and required job skills. Not only is this a high starting point for your recruitment process, but it also acts as a reference during the term of employment for both the business and member of staff. During negotiations for pay raises or disputes over job performance, a clear job description can help clarify whether the member of staff is fulfilling their duties or performing more than they are contracted to do.
A member of staff`s handbook on employee and company policies should also be prepared and given to any new hire during their induction. Employee handbooks clearly outline what is expected of an employee, including their behavior towards colleagues and customers. It also states employee rights and standardized procedures for employee complaints or any disputes that may arise during employment. It is also advisable to obtain the employee’s signature confirming receipt of the handbook.
2Implement An Adequate Background Check Process
A comprehensive and thorough background screening on potential hires for your business ensures you recruit the right employee for your business culture, the advertised role. It also protects your business from possible legal action.
According to the statistics, companies spend around $4,129 to hire a new employee, which can be a sizeable cost to smaller companies. Hence many business owners may question the need to add the value of a pre-employment background check to that.
However, keep in mind that resumes are simply a summary of professional suitability for the role. There is much more to a worker, including their creditworthiness and past behaviors in employment roles.
The Society of Human Resource Management estimates that 50 percent of employment applications contain inaccuracies regarding employment history and qualifications. An alternative is outsourcing your recruitment needs to an employment agency that includes background checks in their services.
3Determine Financial Remuneration Rules Including Minimum Wage Rates
In 2019, the minimum wage was $7.29 per hour, but many states have enforced their minimum wage recommendations of a higher value. That can be determined by checking your state information website or the National Conference of State Legislatures website. In 2024, 21 states, including Florida and Arizona, increased their minimum wage rates automatically or due to approved legislation.
Current news reports are also useful in determining the wage you offer since future wage hikes may influence potential candidates to expect a higher rate. Industry averages can also help. Recently, industry leaders like Bank of America have announced a wage hike to $20.
4Draft An Employment Contract
You will also need to draft an official contract of employment, setting out the terms and conditions of work for your first employee. Typical sections covered include company policies to be followed, contracted hours of work, the rate for overtime, and any maternity/paternity remuneration.
The details of the role will dictate the kind of employment contract you need to draft and what should be included. If you plan on hiring your first worker permanently (1 month or more), be sure to draw up and send out a statement of employment within two months of them commencing work in your business.
5Clarify Mandatory Business Taxation Rules And Insurance Needs
As an employer, you will need to also cover the cost of federal and state payroll taxes along with health insurance costs such as FICA and Unemployment Insurance. The Federal Insurance Contributions Act covers both Social Security and Medicare costs and rings in at 6.2 and 1.45 percent each. Meanwhile, the value of the Federal Unemployment Tax Act is 6 percent of the first $7,000 earned by your worker.
You will also need to look into securing a worker’s compensation insurance policy for your member of staff. According to cerity.com, most states across America require employers (including small businesses) to have workers compensation insurance to protect worker from wage loss and unexpected medical expenses in the event of a workplace accident.
Employer’s liability insurance also covers legal expenses in the event an worker takes legal action against you or the business i.e., attorney fees and settlement costs. The government also requires companies with employees to have disability insurance.
If your business provides a service to customers, you may want to consider securing or extending your professional liability insurance when hiring your first employee if they will be providing services to customers such as a law or accounting advice. Additional insurance coverage, such as motor insurance, may also need to be reviewed and amended if your employee benefits package includes the use of a company car or equipment like a mobile phone or laptop.
6Define The Rules On Contract Termination And Redundancy
Finally, be clear on the process going forward should your initial hire not work out. Take the time to research and get familiar with the laws on fair dismissal and workplace termination.
As an employer, you can terminate your employee’s contract at any time, as long as it does not violate any of the protected classes such as sex, race, or disability (also known as employment at will). The same goes for your workers.
It would be best if you also got to know the rights of employees post-termination, including the right to insurance coverage for a limited time after dismissal and their final pay. Various states will also have their labor laws.
Recruiting your first worker is an exciting time of expansion for your business. However, like it is with the securing of all assets, you must first take the time to prepare your firm correctly to work with this asset, in this case, with someone else. Covering your legal bases means you not only protect your business’s future and bottom line but that you are also displaying the signs of a responsible employer.
