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Originally Published: Dec 30, 2021
Originally Published: Dec 30, 2021 Last Updated: Oct 26, 2023 14 min read
Illustration of a telescope looking into the sky, searching for the brightest star
Rangely GarcĂ­a / Money

Hiring the right employees for your business can mean the difference between thriving or folding in the hard times. It only makes sense to take the time to pin down a hiring process that brings in the best talent possible.

If you’re wondering how to go about hiring employees, this guide will give you tips on getting started — from posting your position to interviewing, all the way up to sending your potential candidate their job offer letter. Here’s how you can find employees who’ll support your business goals.

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How to Hire Employees for Your Small Business

Once you get a system in place for attracting, hiring and retaining qualified job candidates, you’ll be able to improve on it and duplicate it as needed. Here’s how to get started with hiring the employees your business needs.

Research and understand your local job market

Before you create the perfect job post and publish it in every place possible, you should familiarize yourself with your local job market, and what your competitors are offering for similar positions. For instance, knowing whether there’s a shortage versus an excess of available labor helps determine how you set your pay rate, employee benefits and any additional perks.

How competitive is your job market?

If your area is experiencing a competitive job market, you’ll need to adjust your hiring strategy accordingly. You may have to offer a higher salary to make your job openings more desirable to top candidates. If the opposite is true, you may be able to save a bit more money with lower wages, allowing you to invest in other areas of your business.

Labor laws

You should also understand local, state, and federal labor laws, which may affect how you handle your employees. For instance, right-to-work states may have different requirements than at-will states. Further, exempt and nonexempt employees are treated differently for payroll purposes.

Some states now have stipulations that could require some employers to hire contract workers as employees. Finally, you need to know how to handle time-off requests for family emergencies, provide accommodations for employees with disabilities, and a safe working environment for all.

If all of this seems overwhelming, not to worry. There’s plenty of help and resources out there. The U.S. Department of Labor website is a great resource to inform your employee handbook and related policies. It can also help with compliance on labor issues pertaining to hiring and retaining your workers.

Get your Employer Identification Number (EIN)

An EIN is a unique identifier for your business. Without this number, your business can’t remit the trust fund taxes (income taxes, social security taxes and Medicare taxes) required by the IRS and state revenue department(s) where you do business.

Fortunately, it’s extremely simple to get your EIN from the IRS. You can apply by mail, telephone, fax or online. If you need your EIN quickly, online is the way to go. Once your online application is complete, the information is validated during the online session, and your EIN is issued immediately. If you have questions about this process, you can refer to the IRS guide to getting an EIN.

Define the positions that you need to fill

You can frustrate good employees if they feel there’s no clear description of their job duties. They won’t know what they should be doing or how you’ll evaluate their performance.

The best way to avoid this confusion for both potential and current employees is for business owners to define, in detail, each position’s responsibilities and success metrics. If possible, consult with different people in your organization for feedback on the job description, especially those who will interact with your new employee. Allowing collaboration and feedback over several drafts of the job posting and description would be a good start.

Establish all tax-related procedures

Once you know what jobs must be filled, it’s a good idea to make sure you're following the legal requirements for payroll and employment tax purposes — and what IRS forms you’ll need to fill out. Important questions to answer include:

  • Will they be hourly or salaried?
  • Will they be on-site or remote?
  • Will this worker be part-time, full-time, or an independent contractor?

If you’re hiring across state lines, you should understand which circumstances might trigger a tax nexus, which means you must register, collect and remit sales tax in the state that requires it.

Finally, check if your business is eligible for any tax credits based on hiring practices or other criteria, such as being a small business. There are credits available on both the federal and state level.

After you iron out these details, it’s time to set up payroll and benefits, which we’ll discuss below.

Set up payroll and benefits

Offering competitive salaries and benefits is key to finding the best job candidates for your business. If finding and keeping the best talent is your goal, you should put real effort into crafting a desirable compensation package.

Although you’ll want to invest as much as possible when it comes to attracting and retaining good employees, you’d be surprised at how much the little things can make the difference in sealing the deal for your best job candidates. Workplace trends include:

  • a flexible working schedule or the ability to work remotely
  • paid volunteer days
  • a pet-friendly office

Once you finalize these details, make sure you have the means to process payroll and related benefits such as health care premiums and retirement plan contributions. You’ll also need a system in place to file and remit your payroll taxes.

Ideally, you’d submit your forms and payments electronically. You’ll need to do this for both federal taxes and local state taxes. The good news is that payroll software can help you track, file and make payments. At the beginning of each year, this software can also help you prepare tax forms such as W-2s, W-4s, and 1099s for both employees and independent contractors.

If you don’t have a hiring manager that can do this work for you internally, you can always hire a third-party human resources (HR) provider to help with onboarding new hires and payroll and benefits administration. With each new hire, your HR service provider can collect their benefits selection information, withholding preferences and make sure they receive their paychecks, while also ensuring that your federal and state tax filings are complete. They can also manage your payroll system or train you on the administration of these systems.

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Determine your recruiting strategy

Now, it’s time to figure out your head-hunting approach. You can both look for candidates for your internal pool of employees via manager (or any other current employee) referrals and also consider outside recruitment for your available positions. These efforts can either come from your own HR department or you may choose to go with a recruiting agency.

Professional recruiters vs internal hiring managers

Although you might save money by using internal resources to find employees, professional recruiters can both save time and provide more qualified candidates, though at an added cost. Another benefit of recruiters is that they can help with administrative tasks like managing background checks, employment eligibility and references.

Leveraging the best job posting sites for employers

Using the internet to find the right candidate is ideal because the best job search sites can be incredibly efficient. With a keyword-optimized job description, candidates can perform a quick search to find corresponding jobs descriptions that match their skills and experience. Plus, there are plenty of sites where you can post your job openings:

  • Social media (LinkedIn, Facebook, Twitter, etc.)
  • General job search engines like ZipRecruiter
  • Industry-specific job boards and websites

You may also find candidates at industry networking or job fairs, in some cases. Whichever method you choose, it should make sense for your hiring goals.

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Create a noteworthy job posting

At this point, you should have created a description of the position you are trying to fill. You can use this description as the basis for your job posting, but note that they are slightly different. A job description is a detailed list of responsibilities and criteria for success, while a great job posting is more of a marketing tool that depicts what it’s like to work for your company in the role you’re filling.

Your job post is a great place to sell your company culture and mission and how this role fits into this bigger picture. It should be:

  • concise and to the point
  • offer enough information to attract qualified candidates
  • include any unique benefits and perks

Ideally, jobseekers should be able to make an informed decision on whether or not to apply based on your job post. If it’s unclear or leaves room for ambiguous interpretations, you’ll risk getting responses from tons of unqualified candidates — or even miss the opportunity to attract qualified candidates.

Review applications

If your job post is effective, you should expect a healthy influx of resumes. A service that allows you to filter job applications for important criteria such as location, years of experience, or work history can help you whittle down your candidate pool and save you from having to do it manually.

Cover letters

Look for candidates with a customized cover letter. A well-crafted cover letter should communicate their understanding of the position and what they bring to the table. It also shows that they take their job search seriously, which signals that they could be a good employee should you hire them.

Gather feedback

Once you isolate resumes based on your ideal candidate profile, make the decision process for advancing candidates to interview stage a collaborative one. Circulate resumes among other employees who have a stake in this position — starting with potential supervisors and managers (and even co-workers). Get as much feedback from your team members as possible, then choose the top candidates for your interview process.

Interview the best candidates

Once you’ve got a shortlist of candidates from the resume review, it’s time to conduct your interviews. Prepare ahead of time so you can both provide the interviewee with plenty of information about the position, and know exactly what you want to ask. Interview questions that help you get to know the candidate in a short period of time provide the most benefits.

Although it’s tempting to vet your candidates through a rigorous, multi-step interview process, be careful with this approach. Some fast-paced industries have been shying away from the traditional 3-round cycle, as it has meant losing out on good candidates. If interviewing is too intense, a candidate may fear being overworked or perceive your work culture as unhealthy — a sure way to turn job seekers off.

Keeping the essential parts of the interview process, such as a skills assessment or short test project, coupled with a few face-to-face meetings with key personnel shows that you value your candidates’ time and will present a better impression of you as an employer.

Summary of Money’s Guide on How to Hire Employees

Hiring employees doesn’t have to be complicated or difficult, whether it's your first employee or your fiftieth. If you follow these simple steps, you’ll be in a good position to implement, refine and systematize your hiring strategy:

  1. Research and understand your local job market
  2. Get your Employer Identification Number (EIN)
  3. Define the positions that you need to fill
  4. Establish all tax-related procedures
  5. Set up payroll and benefits
  6. Determine your recruitment strategy
  7. Create a noteworthy job posting
  8. Review applications
  9. Interview the best candidates

Hiring is just as much an art as it is science, so don’t feel bad if you don’t knock it out of the park right away. It can take many attempts to create the perfect hiring process that finds the best candidate, identifies red flags or even spots accurate indicators of a good hire. Each time you go through the process, take notes on what worked well and what didn’t. Double down on what works and abandon failed approaches so that you can keep moving forward get the very best talent for your business needs.