Mon 19 Jan 2015 | By:

How to Hire Employees the Right Way

How To Hire Employees Without Screwing UpIn the initial stages of starting and registering your small business, you work hard to keep your overhead as low as possible.

You might be using your home as a workspace or you might be working long hours by yourself.

Eventually, as you start to taste a bit of success, you realize that you can no longer do everything yourself. This is the point when you decide to bring on someone to help share the workload. But how can you be sure that the first hire you make helps your business instead of hurts it?

Adding employees adds a whole host of legal issues, including liability and expenses. One study found that the average cost to hire and train a new employee is close to $4,000. This total is before salary or wages is calculated; this is just the cost to get them on board and ready to start working.

Here is a list of guidelines that can make navigating the hiring process easier for you, so you can stay focused on growing your business past the initial planning phase.

When screening employees, just looking at a resume isn’t enough. When hiring someone, you are making an investment.

Use these guidelines to make the hiring process more productive for you because hiring the wrong person could spell more headaches and paperwork than simply shouldering the business on your own.


People lie about…

Their qualifications:

It’s estimated that up to forty percent of job applications and resumes contain false or inflated information. It’s more than just foolishness to hire someone based on a resume alone: it’s dangerous.

If your new employee hurts someone while on the job, you can be held responsible. Any serious candidates for the job should be subjected to a background check, at a bare minimum, and it’s important to remember that some information will not show up on a simple records search.

Hiring this work out -and forking over the cost now- can save you from trouble in the future.


Their references:

Quality references can help you determine which candidate is right for your needs. Be sure to request three references from any serious applicant.

It’s a good idea to have a mix of professional and personal references to get a clearer picture of who you’re hiring.

Verify these references. Ask professional references questions about job performance and verify any details provided on the resume. Ask personal references questions about how long they’ve known the applicant and about their character.


Their drug and alcohol use:

Approximately sixty-five percent of on the job accidents are related to substance abuse, and substance-abusing employees are six times as likely to file worker’s compensation claims than sober staff members.

Drug screenings are an easy way to rule out potential employees with drug and alcohol addictions. Remember, it is illegal to ask about an applicant’s prescription medication use, but employment can be denied if an applicant refuses to take a drug screening test.


Know the about…

About supplemental screenings:

Additional tests can provide valuable information about the stability and preparedness of potential new hires. Psychological screenings, handwriting analyses, and aptitude tests can help you profile candidates in a way that resumes and interviews might hide.

Remember to check the legality of any test you are asking an applicant to take, and be prepared to show how it is relevant to the job they are applying for.


About what you aren’t allowed to ask:

Although you do have quite a bit of leeway about what questions you ask potential employees, there are some questions you simply can’t ask.

You can’t ask about an applicant’s age unless he or she is under age. You can’t ask about an applicant’s sexual orientation. You can’t ask about their marital status.

And you can’t ask about religious affiliations or race. You can only ask questions about physical, emotional, or mental handicaps if the applicant will need special accommodations to perform the job they are applying for.


About the records you must keep:

As an employer, you need to maintain accurate and complete records on all of your employees. There are some pieces of information that you absolutely must have, and it is your job to verify this information to the best of your ability.

Here is a basic list from the U.S. Department of Labor:


Pay your dues to…

To Social Security:

You will need to withhold the appropriate amount from the employee’s wages for Social Security, but you -as the employer- are responsible for a portion of the total tax amount.

The portion you pay is usually equal to that which your employee must pay.

Having a payroll accountant can help make this process easier, especially if you are unfamiliar with current regulations.


To Medicare:

For 2014, the employer’s portion of the Medicare tax is the same as what is to be withheld from the employee’s wages: 1.45%. A total of 2.9% is currently required, but these regulations do change over time, so it’s important to keep current on Medicare tax regulations.

Again, a payroll accountant can be hired or consulted to ensure you are complying with federal law.


To Unemployment:

The employer is responsible for paying both to state and federal unemployment. Most states require that you pay the entire amount of the unemployment tax, and you will almost always see a reduced federal rate if you comply with state regulations regarding payment of unemployment tax.

You may not withhold money from your employees to pay unemployment tax. It is fully on your shoulders to pay this tax.


To Worker Compensation:

Your worker compensation insurance rates are determined by the type of business you have, the type of job the worker is doing, and your history of claims. High-risk jobs require a higher rate of pay than do ones where there is very little risk of injury to the employee.

Hiring office staff could result in a worker’s compensation insurance rate of less than one percent.


To Insurance:

You are required to provide health and disability insurance to full-time employees, and as current healthcare legislation is changing, you need to be aware of your responsibilities and the costs they will add to your bottom line.

Consider consulting with a specialist in this field to ensure you are complying with current regulations.

Transitioning from a one-man (or woman) operation to a company with employees requires knowledge and patience. Even if you aren’t quite at this point in your business growth, it might be wise to take some time to explore the issues surrounding hiring employees.

The process can be overwhelming, from how to select the right candidate to how to manage all that paperwork, so considering these issues now – before you become overwhelmed with work – can prepare you for when the time comes to expand your workforce.

Failure to comply with state and federal regulations can lead to headaches and distractions, not to mention potential legal issues.


Wrapping up

You need to know what things are allowed during the interview process, what questions you simply can’t ask, and how to verify your potential employee’s qualifications and references.

You need to know how to keep accurate and complete records, both for payroll purposes but also for paying your taxes.

Adding to your workforce can be challenging and the details overwhelming at times, but the end result, especially if you’ve done it well, can be worth the hassle.

This is a lot of information, read it thoroughly to make sure you don’t miss anything. This is very important!

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via