Hiring Your First Employee: Must-Knows & Mistakes to Avoid

By Ritika Puri

Congratulations on getting ready to hire your first employee.

This is a great milestone worth celebrating — your business is growing.

But, if you’re not prepared, hiring can create unexpected headaches. As valuable as employees are to an organization, having staff introduces new and complex accounting, compliance, and tax considerations you may not have known about or prepared for.

Regardless, don’t let these complexities stop you.

We interviewed a group of entrepreneurs to share their personal experiences with hiring and the lessons they’ve learned along the way.

As you read through, you’ll notice there are three key themes that come up time and time again:

1. Have the right payroll software and systems in place
2. Give employees a clear roadmap for success
3. Expect to get it wrong

Tip #1: Have the right payroll software and systems in place

Karen D’Souza, owner at Pop + Fizz, an event planning company in Atlanta, GA

“When starting my business, I wasn’t entirely sure of what I needed to do. In the early days of the company, I was a one-woman staff. I was the finance department, the accounting team, marketing department, sales team, social media department, and web development team. You name it, I took care of it. As you can imagine, that’s not a good way to sustain a business long-term.”

Even though she had never managed a team before, she knew she needed to make this critical hiring decision for her business.

“By delegating tasks that I was having to do daily… I was able to really focus on my client experience, growing the business and designing — which are all my favorite things,” she explains.

But time spent managing payroll prevented Karen from running her operations smoothly. She lost many of the hours she had won back managing numbers. As a result, she felt like she took a step backward.

“It’s much easier to keep track of payroll dates and amounts when using an automated system designed for this exact purpose,” she elaborates. “You save hours of time and at the end of the year, receive a consolidated report that you can submit for taxes.”

Payroll software helped Karen determine a set of standards and repeatable practices to follow. These include how often team members get paid and by what method (i.e. paper check or direct deposit)

“These practices will be invaluable in not only staying organized but also in building confidence and trust with your employee and overall running a more efficient business.”

Tip #2: Give employees a clear roadmap for success

Jeff Rizzow, founder at Rizknows, an e-commerce deals site

“The first employee I hired was a video editor and we immediately clicked from the start… I felt we were both on the same page in terms of effort since we worked so closely together.“

Jeff, however, didn’t anticipate the period of ambiguity and uncertainty that was about to happen. Given this was Jeff’s first employee, he didn’t have a roadmap, or processes and procedures manual. He and his new employee had to figure out what success looked like as they went.

“As such, he wasn’t as efficient as I would have liked him to be…” explains Jeff. “…part of the blame falls on me for not being clear with the methods and direction I wanted him to take.”

As a business owner, you never want to be in a position where you’re paying for an employee to waste time. And this was a particularly tough situation. Jeff was paying his team by the hour, to do work that wasn’t aligned with results. Even more challenging: Jeff’s team was committed to doing good work. It wouldn’t have been fair to let the employee go. Jeff was in a situation in which he needed to make a decision. One thing he realized is that, if he ever wanted to scale his business and team, he couldn’t let inefficiencies grow. He decided to set up process efficiencies that would empower his team for success. His advice for fellow business owners?

“When you start hiring employees, don’t underestimate the importance of setting clear guidelines and procedures of how you want things done,” he explains. “If you don’t take the time to properly set your employees up for success, the production output of your business will suffer and your payroll expense will be much higher than you expect, which can seriously hinder a small business trying to grow.”

Tip #3: Expect to get it wrong

Felix Winstone, Managing Director at Talkative, a software company

“What has gone well is hiring people based on their attitude, rather than their experience,” says Felix. “Of course, a certain level of aptitude is required, but we have hired several people with a lack of relevant employment history, but an excellent attitude.”

This perspective is especially important for small business owners that are building teams for the first time.

“Our biggest mistake was hiring someone on the basis of their resume and a referral, but without carefully vetting their technical skills, says Felix. “This was our first hire. Other issues have been less serious, but they have all been due to underestimating the learning curve required for certain skills.”

This was a tough lesson learned for Felix, who started his business in college and grew his team rapidly to 11 people over the period of 18 months. Very quickly, he has learned the lesson to enforce high hiring standards.

“One great employee can do the work of three average ones,” says Felix. “If you hire the right people, you may spend more on payroll, but the results will be so much greater.”

Payroll Guides & Resources

Hiring is one of the valuable strategic decisions that you can make for your business. But it’s important to remember that you’ll be taking on new responsibilities. Not only do you need to make sure that your employee is set up for success, but you also need to make sure that you’re connecting the right dots from a payroll and compliance perspective. For instance, you’ll need to withhold payroll taxes and file forms with regulatory bodies every quarter. You’ll also need to audit your books on a consistent basis to avoid potential mistakes.

The more you focus on automating upfront, the more attention you can give to helping your new employee become successful. And the precedent that you set with your new employee will yield process efficiencies in your business, for years to come. Here are a few articles that can help automate key building blocks of your business, so you can focus on creating a business strategy and enabling your team to succeed:

• A Comprehensive Guide to Avoiding Payroll Blunders
• A Guide to Setting Up Payroll for the First Time, for New Employers
• An Explanation of Payroll Software and How It Works
• A Quick Start Guide to Understanding Payroll for Entrepreneurs

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Originally published at QuickBooks Resource Center.