The Entrepreneur’s Checklist For Hiring New Employees.
Checklist For Hiring Employees: Everything You Need To Know
Startups that succeed start lean. It’s a mindset you need to have because a bad employee is incredibly expensive. “The U.S. Department of Labor estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first year potential earning” says HR Exchange Network. If you’re a startup with little to no sustainable income then a bad employee ranges from disastrous to fatal. Not only does a bad hire waste productivity, but the bad apple can actually cause surrounding employees to lose effectiveness. Misery loves company, as the saying goes. However, there is a shining light. Follow this checklist when hiring new employees for the best odds of picking a superstar!
1. Make Your Job Description Clear
Often the determining factor when hiring a bad employee is an unclear job description. It’s crucial you’re crystal clear about what exactly the job entails, with a detailed description of how the employee is expected to perform. In addition, you must know exactly what type of person fits the job description well. Every employee is just as important as your technology. For instance, salespeople generally need an extraverted attitude, along with low levels of neuroticism as a personality for the highest probability of success. Those same people would not likely do well as an HR representative, or anything with isolated work.
2. Have A Way Of Keeping Record Of Potential Employees
You need to track each candidate, including their strengths, weaknesses, expectations and interview notes. Throughout the hiring process this information becomes valuable when you begin to cross names off your list.
3. Run A Background Check
It’s highly recommended you run a background check on every employee. Ensure you have a consistent policy in place so every employee knows what is being checked. For instance, as the founder you will want to choose a background check which reviews criminal records, driving records, and any watch lists. It’s also recommended to run a check of credentials and/or credit score.
4. Know your EIN
Once you’re ready to hire employees you will need an Employer Identification Number from the IRS. An EIN is required to pay business taxes based on the number of employees you have. You only need 1 EIN number which covers the entire business.
5. Have Your Taxes In Order
Every business in the United States must keep records of their taxes. As you onboard employees you will need to keep the tax information on your accounting software. The business is required to withhold money from every employee’s paycheck to ensure taxes are paid correctly. There are two forms which must be completed:
A) W-4: The form every employee must fill out before they begin work. This provides you with the correct information for taxes.
B) W-2: This report is sent to the employee and IRS. It shows all taxable income including retirement contributions, and benefits.
6. Have A Proper Payroll System
7. Obtain Business Insurance
All businesses with employees are required to have workers compensation insurance. You can do this through a couple of ways, the most common are to have a broker, self-insure, or through your state’s Workers Comp Insurance Program (this is found by going to the department of labor). Many startup founders neglect to buy insurance until it’s too late, and they’re forced to pay out of pocket for issues which will eventually happen. Don’t let that happen to you.
8. Keep A File Of Every Employee
It’s vital to keep information on file for all employees. This provides the company with a barrier for any problems which could or could not occur. For instance, some of the data you’ll want to keep is full name, address, emergency contact, a copy of signed contract, and any reprimands or accolades within the company.
This checklist provides you with all the necessary steps to onboard a new employee. Your staff are crucial to the company’s success. Nobody can run a business in a vacuum, and now you’ll know what to look for and what to avoid. Good people are difficult to find, but if you’re at this stage then luckily you already know what you’re doing! If you want more help than please reach out to The Tandon Group. We’ve invested in dozens of startups, and helped many of them with successful exits.