Hiring your first employee as a small business owner

Hiring your first employee as a small business owner
Photo by Christina @ wocintechchat.com / Unsplash

What to do when finding the right employee for a position in your growing business

Creating your first business is both exciting and somewhat frightening. It all started with one passion and a dream—a vision of regaining control of your valuable time, leaving your mark in the world, and creating a small corner for a future community to flourish.

And so, you’ve done the long hours. You’ve tirelessly spearheaded every side and field of your business—bootstrapping it all the way. But for the next phase, you feel like you’ll need more help.

Therefore, the most natural step of growing your business is to now hire a new employee. Or perhaps, multiple employees. Great! Not only will the right employee reduce your workload, allowing you to redirect your energy back into your strengths, but they will also increase both the capacity and output of your business.

How to know when you’re ready to hire

It’s a big step for any business, old or new, to hire new staff. Even more so when it’s your first time. You, and many business owners, may worry that Covid has exposed a genuine instability and realm of uncertainty when it comes to how well we can survive while affording staff. Honestly, with the right team of committed, passionate, and disciplined people—and excellent systems in place—you will undoubtedly prosper as you hire new members.

When hiring the first employee, being able to commit to paying their wages no matter what is crucial. I say this because it’s good to consider whether you’ll have the funds keep them on the team in case times get tough.

Survivability is essential. For many businesses, is good to ask questions like, “how long could I keep my business and team afloat if our revenue ceased? How much money do I need to be saved so I can survive for six months or a year? What’s the minimum viable product, or audience, I need to keep running?” Especially if you’re a solo entrepreneur, an established shop owner, or working strictly with a niche audience.

Hiring your first employee will also be your opportunity to delegate control of specific functions and duties. You’ll get to offload essential projects that you struggle to make time for or lack the right skills in, such as accounting, digital marketing, or content creation.

There are a few signs to look for to tell you when it’s time to hire an employee:

  • You need a specific, high-value skillset, like web developing or copywriting.
  • You need help in increasing sales or you’ve had to turn down work.
  • There’s a new revenue stream you’re venturing into but can’t handle alone.
  • You need support; there’s simply not enough time to get everything done.

Being “busier” is not enough.

Hiring an employee just because you are now “busier” is not the right reason to hire them.

You should know the exact tasks you need doing over the coming period. The role should have work that’s highly repeatable—tasks that positively impact the business and can be repeated every week. For a business owner selling products, the role could be customer service. For an entrepreneur, it could be accounting or maintenance of the eCommerce site or weekly blog content.

But even repeatable tasks could be mistaken for “busy work”, it may not always contribute to growing your business. So, a good idea is to list the most critical responsibilities and bottlenecks you have to help plan your employee role around that.

Many businesses will need to identify the strategies and high-level processes that’ll consistently produce results and facilitate growth, so they can then normalise them into daily and weekly tasks to be delegated to their employees. The 20-hour rule is a good benchmark for this. Once you can list 20 hours worth of repeatable, meaningful work, then you’re ready to fill that as a role.

Before hiring your first employee

1. The role

As mentioned earlier, the role needs to be clearly defined before making any hiring decisions.

New employees need their position and vision of the company’s growth to be aligned with the current state the business is in, and that’s hard to do without knowing that what they do on a daily basis consistently adds value to it.

Although, leaving room for changes in your strategy will help enable the new role to adjust and grow as the business does. But it’s important to have a standardised set of tasks they must stick to.

Types of Employee Impact

Different businesses require different types of specialisation and therefore impact from their employees. A good understanding of the employee impact will help you calculate the long-term contribution they will make to you, and how much value you’ll be getting back from your investment. Here are three types to consider:

Direct - this is labour that directly contributes to the final product or service. A direct impact would be the work of an individual employee rather than a collective effort. For example, a salesman, painter, or Uber driver. It’s someone who can determine their own pace and can be more independent of intra-organisational influences.

Indirect - this is the work that doesn’t directly impact, correlate with or convert into the final product or service. They are necessary and somewhat vital to supporting the overall operation or business, such as a receptionist, project manager, or finance clerk. But they are not necessarily independent roles.

Nominal - these are “no effect” jobs. Many of these occur within an organisation. They are essential, but they provide no direct effect on the totality of your final product or service. They instead focus on helping direct workers to be productive. Examples include security, custodial services or food services. You can often subcontract this type of work from a larger organisation.

The type of business you run will create the particular need for different forms of impact. For example, an eCommerce business selling digital products could only require a direct impact to run successfully, whereas one selling physical products could require all three.

Standardising the work

Anything you appoint to another employee should be classed as standardised work. You could consider whether they’ll offer enough value to your business to be worth the hiring costs. That could mean tweaking your services so they’re centred around doing one or two things exceptionally well.

Document the procedures

Once you’ve nailed your business model and the service you wish to deliver, you’re ready to begin documenting procedures.

For any business, it’s good to get this done early and often. Writing out your necessary repeatable processes will help to formalise them and give all workers clarity with what duties are most important.

  • Doing this before hiring someone will help you get into a “systems” mindset as you will have outlined the framework with which the employee works around and your business now adapts to.
  • Start and keep it simple. We’d recommend you write a bullet list to start, and expand on it as your processes grow and change over time.

2. The timing of your hire

when to hire your first employee is just as important as why. There’s little use having your first employee when they can’t be utilised enough or complete valuable work each week. Hiring them too early can cause problems to the cash flow of your business, such as creating unnecessary additional overhead costs.

Hiring an employee when it’s too late could lead to missed opportunities and if you’re unable to meet your demand. For example, if you’re an entrepreneur, you could analyse whether not having an employee is leaving money on the table/losing income for you, or whether there are critical tasks that fall out of your skill set which you need help with.

On the other hand, consider whether you even need a full-time employee right now. Is it essential? Or would a freelancer/intern/contractor be more cost-effective? The cost can vary significantly between an employee and contractor, which is why it’s helpful to ask these questions.

3. Advertising for your role

In the world of business, everybody is a marketer. From the way we speak, think, negotiate, and promote ourselves, it’s all the beauty of authentic marketing.

Marketing is what gives your brand its feel. It confirms or refutes what people think about you. And the employee who represents your brand is just as important.

With the increasing trend of online job-seeking and promotion through social media, now is more essential than ever to make strong advertising efforts for your business using online services, such as your website or social media.

You could network with the companies or clients you deal with to see if they may know of anyone looking for work or search for candidates via LinkedIn to reach out to them personally. But in doing so, specify what you’re looking for, how the candidate should apply and when the deadline is. Clarity and honesty are key when marketing online.

4. The Hiring Process

Your first employee is crucial to the first stages of growth in your business. While it’s an exciting time as your business takes a leap in the right direction, it’s essential to be sure whether you’ve completed the necessary checks beforehand.

If done right, this can bring new opportunities you’ve never experienced before. So it’s good to keep a list of precisely what you’re looking for in an employee. It’s not just about their skill set, but their values, mindset and work ethic too.

Consider preparing your contract well in advance before you make your offer. Having an official document communicates professionalism, and it ensures everyone is aware of the legal standing of employment.

After you’ve hired your first employee

When do you need a HR department?

There’s no clear-cut answer for when a business should invest in a Human Resources department. It really depends on your industry, growth rate, strategic planning and workload. Although, there are a few indicators that can help you decide when to bring a dedicated HR specialist on board.

When business roles become specialised

As your business grows and a large number of staff start accumulating into your specialised and narrowly focused departments, it makes sense, from that point, to look into a HR department.

A small business often finds itself with its staff playing “all hands on deck” a lot of the time due to budget constraints. But with any successful business, you will reach a point where your staff can be kept in their specific roles. And this is when a HR person can be a good option.

When the business grows to a certain number of employees

You can also judge your need for a HR manager by the number of employees you have. It can be 50 full-time workers or 100. However, specialisation remains the strongest indicator of your need for a HR expert.

“Having a HR manager will probably be a necessity when the company approaches 100 or more employees, but the telltale sign is when a business starts to specialise into functions such as IT, sales and operations,” says Doug Coffey, HR expert and teaching instructor at the Rutgers School of Management and Labour Relations. “If you need a dedicated manager in those areas, you probably need the specialised knowledge of a human resources manager as well.

The risks of operating without a human resources specialist

Human resources are an essential part of a business. There is no escaping the need as they:

  • Get the right people in the right place at the right time
  • Keep staff through motivators such as salary and benefits, job satisfaction, and development and progression
  • Get the most out of staff by helping them perform at their maximum

“A human resource manager helps establish fairness and consistency throughout the organisation,” says Coffey. "Employees come to know what to expect with policy development in hiring, performance management, reward allocation [and] leave policies. By not hiring HR managers, businesses may add to employee turnover, one of the highest HR-related costs. This happens when dissatisfied employees leave due to inconsistent, time-wasting, unfair policies."

Without a HR manager, things can be missed, such as important paperwork, completed photo releases that can lead to lawsuits, updating out-of-date paperwork, optimising incorrect forms, and keeping employee tax information up to date.

All these issues can quickly balloon into legal problems, potentially resulting in fines or lawsuits. It may not seem as a threat at first, but it can create a lot of work and problems if ignored.

Final checklist

Once you’ve found the ideal candidate for your business, you must ensure:

  1. They have the legal right to work in the UK or country which you operate.
  2. They meet the requirements of any employment check necessary for their permission (working with children).

Disclosure and Barring Service Check

You may need to apply for a Disclosure and Barring Service Check. The DBS check which now replaces the old Criminal Records Bureau (CRB) checks.

This is most relevant if you plan on having your staff member work in a field that requires it, such as working with vulnerable people or those with security risks.

Employment Insurance

In most cases, you’ll need employment insurance. Becoming an employer would mean getting Employers’ liability insurance, which will help cover the business from workplace health and safety claims made by staff members.

Workplace Pension Schemes

Finally, you may need to set up automatic enrolment in a workplace pension scheme when you start hiring new staff members. You as an employer must automatically enroll your employee into a pension scheme and make contributions to your pension if:

  • You’re classed as a ‘worker’
  • You’re aged between 22 and State Pension age
  • You earn at least £10,000 per year
  • You usually work in the UK