Q: I am a sole proprietor and my business has grown so much that I think I need to hire one or more employees.  How do I do that and are there any resources to assist me?

NH Business Resource Center Seacoast Business Services Specialist Christine J. Davis

A: Congratulations on growing your business!  Hiring your first employee is a big step and there are a few hoops you will need to jump through and important things to consider before you hang out the “help wanted” sign.

I did a bit of digging on the Internet and the good news is that there are a bunch of free resources available to educate you on what you need to know when hiring employees.  I visited a couple of sites that were full of information about hiring as well as other business issues.  The Small Business Administration, www.sba.gov, is a great tool for business owners looking for information.  They listed “10 Steps to Hiring Your First Employee”:

1. Obtain an Employer Identification Number (EIN) if you don’t have one already.
2. Set up records for withholding taxes-you can have an accountant work with you on this if desired.
3. Employee Eligibility Verification (Form I-9)-this does not need to be filed with the federal govt. but does need to be kept on file.
4. Register with the State’s New Hire Reporting Program.
5. Obtain Worker’s Compensation Insurance.
6. Unemployment Insurance Tax Registration-some exclusions may apply.
7. Obtain Disability Insurance-NOT required in New Hampshire.
8. Post required notices (finally, something easy to do!)  Here is a link to the notices required by the federal and NH government:   www.labor.state.nh.us/wage_hour_mandatory_posters.asp?ptype=
9. File Your Taxes-Can be done monthly or quarterly.
10. Get organized and keep yourself informed.

So those are some of the “hoops” that need to be dealt with.  What about the other issues such as how do I advertise for the position, what questions do I ask during the interview, should I do a background check, do I need to offer benefits and can I hire an independent contractor instead of a regular employee?  These are some pretty important questions too and are not to be taken lightly.  I will touch upon these a bit, but you can get more in-depth information from the Small Business Development Center’s Web site, www.nhsbdc.org.  If you are not yet familiar with the SBDC or SCORE, you should spend some time on their Web sites and take advantage of their free business counseling and low cost seminars.

Before you put out an advertisement, you should have a job description ready that clearly describes the position including:  job objective, scope of position, duties, responsibilities and necessary qualifications.  Be prepared to receive a number of applications that don’t fit the description, however, as there are still a lot of people looking for work.  It is good to be a bit flexible but you want to be sure the candidate has the tools and education to fulfill their role.  There are a number of ways to find candidates from using a temp agency, to the State’s Employment Security office, to traditional newspapers and online.  The type of position will also be a factor in which avenue you choose.   The job description also determines if the position should be classified as hourly (non-exempt) or salary (exempt). Many employers are under the false assumption they can make this determination because it is more cost effective for example, to pay someone a salary rather than have to pay them overtime. Actually the federal government’s Fair Labor Standards Act outlines which positions are eligible to receive salary/exempt status as determined by the job duties the individual will perform. Employers can receive hefty fines for misclassification.

Though not legally required, consider offering some benefits for your employee(s).  Many small businesses are unable to afford health insurance but if you can offer it you will be able to attract more candidates.  Other things to consider are holidays, vacation and sick time as well as whether or not you are open to (and the job is conducive to) having your employee work from home.  Again, so much is industry specific so there isn’t a one size fits all answer to these questions.  Some businesses hire Professional Employer Organizations or professional Human Resource firms to handle these issues for them.  These groups can assist with the intricacies of HR and take responsibility off of your plate so you can focus on your business (Wouldn’t that be nice!).

Some businesses may be best served by hiring an independent contractor versus a traditional employee.   A business benefits by using an independent contractor with savings in labor, reduced liability and more flexibility in hiring and firing (source:  www.SBA.gov).  However, there are distinct differences between the two and a misclassification could be costly.  A few of the descriptive for an independent contractor are:

• Operates under a business name
• May have their own employees
• Invoices for work done and keeps records
• May have multiple clients

This is not an exhaustive list, so please do some research if you are contemplating going down this road and know that different government entities such as the IRS and the NH Department of Labor, have differing “tests” to determine whether the individual is eligible to be an independent contractor.   Another good site to visit to learn more about hiring issues and concerns is www.business.gov.  I have hired both employees and independent contractors in the past and always checked with a professional before offering employment.

There are lots of hoops to jump through and much to consider before you hire that first employee.  I also recommend that you spend a good deal of time talking with that person and making sure they are a good fit for your organization.  You can have a seemingly perfect fit on paper but a personality clash that just won’t work.  Don’t forget to check references and perhaps even conduct a background check.  That’s so important to the decision making process as well. 

If you do your due diligence, you are quite likely to bring on a person that will help you grow your business.  There aren’t any guarantees but I do believe that the better you educate and prepare yourself, the more likely you will be successful.

Special thanks to Delise West of Human Resource Partners in Dover, NH for her contributions to this article, www.h-rpartners.com. 

Whether you have been in business for 20 years or just getting started, we have the resources and the expertise to answer your questions. You can e-mail me at Christine.Davis@dred.state.nh.us. I look forward to hearing from you.