Hiring Your First Employee

Most small businesses start out with only one or two people - the owners of the business. Whether you have an actual storefront or not, a startup business doesn't require lots of employees to handle the initial tasks; the owners are able to pull together enough resources to handle it themselves.

But there comes a time - a great time, really - when business is growing so fast that additional help is needed. Maybe you require a secretary to handle administrative tasks, leaving you available to work with customers and to provide products or services. Or mayby you need an accounting associate to work with the books and to keep finances in line. Or perhaps it is a sales associate that will help you the most, a body behind the counter to ring up sales and package goods. Regardless of the type of employee you need to hire, this poses cause for concern and prudency on your part.

Hiring your first employee will change your business. You will have to pay payroll taxes, organize benefits, set up a schedule and make sure your end is covered. While the employee will no doubt be an enormous asset to your business, he or she can also create a score of problems.

1. Perform a Background Check

My first-time employers trust their gut when it comes to hiring and believe everything printed on the resume. Remember that criminals, crooks and frauds come from all walks of life, and that unless you check out the background of an individual, you can never be certain that it doesn't contain any blemishes.

When you interview applicants, make sure that they sign a waiver allowing you to run a background and credit check. Inform them that employment is subject to the background check, and that if there are any problems that you should know about, the applicant should state them on his or her application. Problems of the past shouldn't make or break your decision to hire an individual, but if they lie about them or conceal them from you, it's a red flag to their character.

Remember that background checks can be incomplete due to the expunging of records after the statute of limitations is up. For example, if an applicant was arrested for stealing ten years ago, that deviance will not be found in a standard background check because the statute of limitations is seven years.

When performing your background checks, make sure to use a reliable, legitimate company or firm. The Internet has become a breeding ground for unscrupulous companies claiming to have "all-inclusive" background checks for enormous fees. These companies are often scam artists that make up information included on background checks in order to keep customers. Try these companies when requesting background checks:

Sterling Testing Systems - Used by several Fortune 500 companies for routine background checks. They have been open since 1975 and have a 99% satisfaction rate from clients. Call 1-800-899-2272 or visit www.sterlingtesting.com.

IntelliCorp - Open since 1996, IntelliCorp is a leading provider of criminal, civil, MVR's, and drug testing services. Call 1-800-539-3717, or visit www.intellicorp.net.

Kroll World Wide - Open since 1972, Kroll World Wide is headquartered in New York with offices in more than 25 different companies. Call 1-212-593-1000 or visit www.krollworldwide.com.

2. Perform Drug & Alcohol Screens

There are numerous reasons why you want to keep your workplace drug free, not the least of which being the mental deficiencies of a drug-riddled mind. There are also a quarter of a million drug- and alcohol-related deaths each year, which means that your business assumes a certain amount of responsibility for this problem. If there were to be a drug-related accident on your property, your business could be sued for negligence, and you could be forced to pay workers' compensation for a drug-related accident.

Let all potential employees know that you require pre-employment testing as well as random testing throughout employment. If a candidate refuses a drug test, you are legally able to retract an offer of employment. Remember, however, that it is illegal for you to inquire about a candidate's prescription drug use.

3. Skills & Aptitude Tests

You are also legally within your rights to screen candidates using skill and aptitude tests. For example, if you are hiring customer service associates for your business, you might want to develop a test regarding customer service and sales knowledge. An applicant can tell you that he or she has worked in customer service for ten years, but that claim can only be tested through knowledge-based questions. Or, if you are hiring an entry-level accounting representative, you might want to give a mathematical test. An accounting representative must be able to perform simple - if not complex - math functions, and if he or she is incapable, then you don't have a good candidate for the position.

Remember, however, that you must be able to display a need for such tests should the application ever be called into question. If you are hiring for an accounting position, it is unethical to administer a writing exam.

4. Interview Questions

The interview should be used to get an idea of how your personality will work with the candidate, and to verify that the person is right for the job. Interviewing has become more complicated because there are certain questions that you are legally unable to ask. Questions about a candidate's age, sex, race, marital status, religious or political affiliation, and sexual orientation are unlawful. And you cannot ask about disabilities or handicaps (physical, mental, or emotional) unless the job requires that those issues be addressed.

For more information about these types of laws, refer to the following websites:

www.myemploymentlawyer.com
www.eeoc.gov
www.dol.gov

5. Request Personal & Professional References

When hiring for a position, I always request three professional references and two personal references. A professional reference is anyone with whom or for whom the candidate has worked. Examples include previous employers, colleagues, associates or teachers. Personal references are friends and relatives. I prefer to have both kinds because it gives a more well-rounded understanding of the candidate.

Many employers ask for references, but never contact them. I can remember calling old employers and friends and asking if they'd heard from a prospective employer when I was searching for a job, only to learn that my listed references were never contacted. I also know from personal experience in calling references for potential employees that candidates will list numbers that are no longer in service or that belong to someone other than the reference they list. This is common. If you don't call, you'll never know.

Please remember that the laws protecting candidates during interviews also apply for reference-checking. Don't ask questions about age, sex, race or creed when calling references; stick to questions that reflect the candidate's ability to perform the required job duties.

6. Classification and Salary

Before your employee spends even one hour on the clock, his or her salary must be set and the classification must be made clear. Employers who fail to properly classify an employee face astranomical fines as well as possible criminal charges, so this is not a step to skip.

The salary will depend largely on the employee's experience and abilities. You can set an hourly wage - which must be at least $5.15 per hour - or an annual salary, to be paid in weekly or bimonthly increments. It is usually advisable to determine the salary for a job before beginning the interview process, and you can always make changes commensurate with the candidate's experience later.

Classification refers to the type of employee you hire. The four classifications are explained in detail below.

Employee - This is an employee that is on the company's payroll, and works a set number of hours for an hourly wage. The employer is required to remove taxes from each paycheck and pay payroll taxes on the employee.

Statutory Employee - A statutory employee can refer to the owners or officers of your business.This is also an individual you hire who presents himself or herself as a business. They are independent of your business, but perform work for you on a per-project basis. Examples of these types of employees are delivery drivers, traveling salespeople, and work-at-home Mom's.

Statutory Non-Employee - A self-employed individual, such as a real estate agent, who lends his or her services to a business, but is self-employed for taxes.

Independent Contractor - This is an employee who works on a per-project or commission basis and who is issued a 1099 tax form at the end of the year. An independent contractor often works for multiple companies, but is technically self-employed.

7.Obtaining Information

As the employer, you are required to have a certain amount of information about each of your employees. This information should be kept in a file that is labeled with the name of the employee, and should be kept locked away so that no one else has access to it. You are required to collect the following information:

- Employee's full name, including aliases
- Employee's Social Security Number or Tax ID Number
- Employee's Mailing Address
- The amount of time, and the exact time, of each day the employee works
- Regular slary or hourly pay rate
- Total normal earnings for each work week
- Total overtime earnings for each work week
- Total wages earned during each pay period
- Date and amount of time of each pay period

With the above information, you should be ready to hire your first employee. For more information about employment law, visit www.myemploymentlawyer.com.