5 steps to hiring employees

Hiring employees can be time-consuming, but get it right and they’ll become your most valuable asset.

Whether you’re hiring one employee or several, it’s important to remember that they’re your company’s most valuable asset. Hiring can be time consuming and expensive, and sometimes the right person is hard to find. If you get the process right, you’ll ensure you hire the right people who’ll contribute to your business and boost your performance.

Follow these 5 steps to help with hiring employees.

1. Create a clear job description

Make sure you are clear about the type of person you want to hire, the skills they require and the amount (or the range) you are willing to pay. Job descriptions should include:

  • Catchy information about your business
  • Main goals of the job, what success looks like, core tasks and responsibilities
  • Essential information like hours, place of work and reporting lines
  • Experience and skills needed, as well as the attitude and character you’re looking for
  • What’s in it for potential employees, including perks and benefits

Throughout the hiring process, keep an accurate record of each candidate, including their strengths, weaknesses, expectations and interview notes.

2. Understand your obligations as an employer

Registering as an employer may take time, so start the process early. You’ll need an employer identification number (EIN), which you can apply for on the IRS website. You may also need to get a state employer identification number. For more information, visit your state’s labor department website.

As an employer, you have certain tax and employment responsibilities for your staff at a federal and state level. Some examples include ensuring each new employee is eligible to work in the US, provides a signed Form-W 4 (plus applicable state forms) and has a Social Security number (SSN). Additionally, all businesses are required to have workers compensation insurance.

Talk to your accountant or check with the IRS, your state tax agency and Department of Labor to ensure you understand your obligations and get everything right.

3. Understand the rights of your employees

All employees are entitled to certain minimum rights under state and federal law. However, many employees may not be aware of their rights or understand them. To help your employees out, you are required to display posters about employees’ rights in your workplace. You can find out more about the Department of Labor’s workplace poster requirements for small businesses and also download the posters you need.

As an employer, you can find out more about your obligations to your employees at Employer.gov.

4. Keep a file for each employee

It’s important to keep up-to-date and accurate records for all your employees so that you can use them to figure out their pay and entitlements. You will also need records to give to your employee or their union/representative, or a regulator if requested. Each employee’s file should include their:

  • full name, address and contact details
  • emergency contact details
  • tax details
  • preferred payment method and details, for example direct deposit information
  • any other important information about them

Consider using an HR system that includes these features. These records must be kept for at least seven years after the employee has left. If you’re not sure about what information you can and should collect for each employee, contact your advisor.

5. Run payroll for your employees

Payroll is a list of your employees and the total amount of money you pay them. It includes salaries or wages, bonuses, allowances, and benefits. Deductions such as tax are also part of payroll. Use this flowchart to see how to keep your business transactions separate from your payroll transactions.

Whether you do it yourself, outsource the setup to an accountant,bookkeeper or payroll service, look for accounting or payroll software that:

  • makes it simple to stay compliant
  • can pay your employees efficiently
  • files reports with the IRS and other agencies

For more hiring information check out our hiring guide.

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

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