how to hire employees for startup

How to Hire Employees for Startups and Small Business

How to Hire Employees for Startups: An Entrepreneur’s Guide

Your daily operations are going well—so well, in fact, that you need help delivering on your contracts. Unfortunately, a sudden spike in orders or profits can easily lead to rushed hiring decisions that CEOs later regret. As a small business owner myself, I have a few tips on how to hire employees for your startup that will grow along with you.

TABLE OF CONTENTS

Early Hires Can Make or Break a Startup

First rule: don’t rush it! The people you have on your team at the very beginning are crucial to your venture’s long-term success. Consider the impact your first hires will have on:

  • Company Culture: The first people you hire set the tone for your startup’s operations. Their attitudes and work habits become the norms that shape how everyone works together and how the company is perceived.
  • Creativity: Early hires are often key players in brainstorming and developing new ideas. Their creativity and input can help your startup stand out and make a mark in the industry.
  • Growth Pace: The decisions and work of your initial hires can greatly influence how quickly and in what direction your startup grows. They play a big role in steering the company’s early success.
  • Daily Operations: How your first team tackles problems and manages tasks often becomes the way things are done day-to-day. Their methods can set a standard for how the business operates moving forward.
  • Building the Brand: Your early hires are often the first people customers and investors interact with. Their work and behavior help shape your startup’s reputation and brand image.
  • Impressing Investors: Investors pay close attention to the quality of your initial hires. A strong early team can boost their confidence, potentially leading to better funding and more favorable terms.
  • Innovation: Early hires set the stage for how your startup approaches learning and improvement. Their openness to new ideas and feedback can help create a culture of continuous growth.
  • Mentoring New Hires: As your company grows, your initial team members often take on mentorship roles. Their experience and knowledge are key to maintaining quality and helping new hires succeed.

How to Decide When to Hire an Employee

Before you start headhunting for talent, you must examine the potential for a new hire from all angles, ensuring that the pros of adding team members outweigh the cons. Advice from mentors and industry experts can provide valuable insights into the options and timeframe for hiring. 

You can begin by answering a few critical questions:

Workload and Capacity

  • Is your team handling the current workload effectively?
  • Are crucial tasks often delayed?
  • Are you expecting increased sales activity or new projects?
  • How long do you think your current operations can continue before expanding?
  • Can your current staff take on the additional responsibilities without loss of morale or burnout?

Finances

  • Is the financial situation stable enough to support a new hire’s additional salary, benefits, and associated costs?
  • Has your accountant set a reasonable payroll budget for new employees?
  • Is the startup in a growth phase that requires additional staff to scale operations?
  • Are you expanding into new markets or launching new products?
  • Would a new employee generate significant income for the business?
  • Would you pay new hires from profits, or use a business loan to finance the hiring process?

Skills Gap

  • Are there any skill gaps in your current team?
  • Are the skills that your existing team lacks putting you at a disadvantage?
  • Would hiring someone with the right skills boost the whole team’s performance?
  • What specific roles need to be filled to streamline operations or improve efficiency?

What Are the Additional Costs When Hiring an Employee?

Hiring requires legal compliance with state and federal laws, which means a bunch of paperwork on your end. Have someone on your team who knows about employment laws and regulations that may impact hiring, including contracts, benefits, and workplace standards. At a minimum, you will need:

Tax and Immigration Forms

  • An Employee Identification Number (EIN) for tax purposes
  • An I-9 statement from your employee to verify they are eligible to work in the U.S. 
  • A W2 form showing employee tax withholding preferences for income tax, Social Security, Medicare taxes, and state or local taxes
  • Form 941 for your business’ quarterly tax return (if you withhold taxes from your employee’s earnings)

Labor Compliance

  • Notices of state and federal labor laws posted at your work site
  • If you’re hiring an employee in Florida, you must report all new hires or independent contractors who earn more than $600 per calendar year to the state Department of Revenue
  • Employment contracts (including full-time, part-time, or contractor agreements) explicitly outlining the terms of employment and termination, compensation, benefits, and confidentiality conditions
  • Payroll systems that keep accurate and detailed records of all payroll activities, including gross pay, net pay, and deductions
  • An employee handbook that covers workplace policies, PTO, employee behavior, and dispute resolution

Benefits

  • A competitive salary based on your startup’s industry and budget
  • Health insurance, 401k options, retirement plans, life insurance, or other benefits
  • If appropriate, offers of equity in the company

Insurance

  • When hiring in-house staff, purchase workers’ compensation insurance to protect both your business and your employees in case of work-related injuries or accidents.
  • Check your business umbrella coverage to provide extra protection beyond your standard policies. 
  • Update your insurance provider about your new hires to make sure your coverage remains adequate. 

How Long Does It Take to Hire Employees for a Startup?

Short answer: don’t wait until the last minute to post on LinkedIn. Hiring can have a long lead time, especially for specialized or highly skilled positions. It can take weeks before you start onboarding a new employee, and months before you see a return on investment. Plan ahead to ensure you have the time, budget, and flexibility to get the right person for the job. Then, follow each of these steps closely:

Define the Role

Job postings tend to focus on a prospect’s skills and qualifications. However, the right candidate should have both the “on paper” and “in person” requirements of the position. In a startup, everyone often wears multiple hats. If your team members regularly juggle various tasks or step into each other’s roles, be upfront about this in your job description. This will help attract flexible staff who are ready to dive into different responsibilities as your business grows. 

Recruit

From Indeed and LinkedIn to industry-specific recruitment channels, you should cast a wide net to find candidates with the specific skills you need. Attend industry events and conferences to meet potential candidates in person and get a sense of their fit for your startup. Ask for referrals from your personal and professional network, as trusted contacts can often suggest great candidates who might be open to opportunities. 

Interview

The interview process is as much about the candidate evaluating your startup as it is about you assessing them. It’s a two-way street, ensuring that both the candidate and your startup are a good match. Clearly communicate your company’s vision, culture, and opportunities for growth so the candidate can gauge if your startup aligns with their career goals.

If possible, use a mix of interview formats to get a comprehensive view of the candidate. Start with a phone screen to assess basic qualifications, followed by a technical or skills-based interview to evaluate their expertise. Finally, conduct a cultural fit interview to determine how well they align with your company’s values and work environment.

Onboard

The hiring process may end with onboarding, but this step is critical for new hires and your business. An effective onboarding plan is two-pronged: introducing them to their role and immersing them in the company culture. 

In addition to providing equipment, tools, and software access, plan welcome activities so they can connect with their colleagues. Active training may not be required, but they may need to “shadow” a key employee to understand how things are done. Don’t rush the process—an employee is an investment, not a purchase.

Alternatives to Hiring Employees

Before asking how to hire employees for a startup, ask yourself: Do you need a full-time skilled employee to lighten the load? These alternatives to traditional employment might delay the hiring process or even fulfill your current needs:

Seasonal Help

If your business runs smoothly apart from one or two busy seasons, you might consider hiring seasonal workers. If some tasks don’t require immediate expert input, you can postpone hiring specialists for those roles to make your hiring process more efficient and cost-effective.

Freelancers and Contractors

If you’re unsure about the need for a full-time employee, consider starting with freelancers or independent contractors vs. employees. Freelancers often offer short-term contracts as trial periods to test the value of their services, moving to annual (or longer) agreements. Outsourcing services allows for predictable costs and is often cheaper than hiring new staff.

Software/Automation

Technology might solve your problem without adding to your labor costs. But beware: the more complicated and time-consuming the program, the more likely you’ll need to hire someone to run it.

Temporary Workers and Interns

Temp agencies can provide you with much-needed office staff, such as personal assistants and administrative support. This can help you gauge the need and fit of potential employees without a long-term commitment. Similarly, interns provide labor in exchange for experience and business contacts, lowering your labor costs and giving the next generation a leg-up in the industry. 

Keeping Employees

“Hire slow. Fire fast.” All the screening, interviewing, and evaluation might not catch a habit or quirk of a new employee. The newcomer might not have the work ethic or experience they claimed. If someone doesn’t fit in your organization, the best thing for everyone involved is to show the new person the exit door as soon as possible. One great way to phrase this type of conversation is to say “At (your business’ name), we want everyone to live their best life. It seems that you would better apply your talents and skills elsewhere.” Give yourself the grace to fix a mistake.  

Helping You Grow Your Business Every Step of the Way

Hiring your first employee is a great achievement—and one of a thousand milestones we can help your small business reach. At Yolofsky Law, we offer legal and financial guidance throughout the hiring process, ensuring you’re meeting your goals and complying with the law. Email us at [email protected] today or schedule a 15-minute call to learn more.