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THE YCEO: 4 Things You Should Do Before You Hire An Employee

Hiring your first employee is a milestone that many small businesses will never reach. Before you run off to create a job posting or start scheduling interviews, though, there are a few things you should do.

1. Register with the IRS.
Your business needs to be set up to collect and pay taxes to the IRS. To do this, you will need an employer identification number (EIN), which you can apply to on the IRS website for free. Once you have an EIN, you need to set up your employment income taxes at the federal and state level. I had a client who completely skipped this step, and his employees were not happy when it came time to file their income taxes.

2. Set up a payroll system
I always recommend that my clients consult with a human resource specialist and use a payroll company. Your business account is going to be vital when it comes time to pay your employees and independent contractors. You don’t want payroll payments getting mixed up with your personal bills. The payroll company can process 401(k), medical and other employee deductions so you don’t have to.

I would also recommend using a payroll service that provides tax filing services and can handle tax payments. The last thing you want to do is not pay your taxes or send out the wrong tax forms to employees and contractors.

Whether you hire an employee or contractor, you need a system to track their time. You don’t want to end up in a situation where your salary employee sues you for overtime pay. The time tracking system can be as simple as the employee writing his/her time on a spreadsheet or using a program to “punch” in and out. Regardless of the method used, you must track their hours to ensure you are paying them the right amount. Additionally, you may need this information if an employee decides to sue your business, files for workers’ compensation or unemployment.

Get into the habit of keeping good records and the easiest way to do this is by using a payroll system that includes a time tracking system.

3. Create an employee handbook.
Employees need to know what you expect from them, and the employee handbook provides you a chance to set the ground rules, describe employees' legal obligations as an employee and inform them of their rights.

You can add all sorts of broad or specific specific information, ranging from the work schedule for a specific employee’s position to company policy on paid leave. You can add other materials, too, like a contact sheet, so employees know who to contact and when.

Whatever's in the handbook, though, it's always a good idea to have it reviewed by a lawyer before you pass it out.

4. Create a training manual.
Start creating this document right now. Create a document in Word or Google docs and record the steps for everything you use for your business, then update the manual to reflect the changes as you go along.

The goal is to provide the employee with a resource that can provide the basics and have them come to you with specific questions. Save step-by-step, screen-recorded videos, screenshots and other documents in a folder and provide that folder to your employees.

Once you’ve completed these tasks, your business should be in a better position to handle your new addition. Trust me: It’s worth it. It's definitely better to set this up now than later.


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