Even in normal times, some small businesses may struggle to hire employees. You may not know how to hire employees because you haven’t done so in the past, or you may have issues attracting the right talent.
With the current labor shortages, small business hiring has become even more challenging. In addition to the typical challenges, there is tough competition among other businesses to attract the small number of people considering applying. Unfortunately, small businesses are among the hardest hit during this staffing shortage, as they don’t have the resources or reputation for keeping up with larger companies’ hiring.
That being said, the right checklist can get you on your way to hiring with a lot more ease. The following should help you fill your employee roster back up.
Labor shortages in 2022
We have already touched on the current labor shortages, but they require a closer look, as they will influence your ability to attract job seekers. As of September, the United States had 10 million job openings but over 8.4 million unemployed people.
There are numerous reasons for the labor shortage, including:
- No urgency to return to work (including financial concerns or concerns about childcare costs)
- People have changed careers
- Demands for higher wages and more benefits
- Desire to work from home
- Concerns about the pandemic
Many small businesses have been facing the strain of the labor shortage. Some have had to reduce hours or ask current employees to work overtime.
Because of this, it is in your best interests to learn how to hire employees for small businesses.
Getting your business ready for your first hire
If you haven’t previously hired anyone for your small business, you will have to do a few things before getting started. Since you likely don’t have a hiring manager, you will have to do the following yourself before you look for a first or new employee.
If you already have some employees and want to expand your roster, just take a second to make sure you have the following taken care of. Some, like the EIN, are legal requirements, so you want to correct any mistakes immediately.
Get your EIN
Before you can even start hiring employees, you need to make sure you have an EIN. This is your Employer Identification Number, and you get it from the IRS. It is crucial for filing your business taxes. It is simple to apply for your EIN online.
Know your business tax requirements
You also need to make sure that you understand your business tax requirements, including those as an employer. Many small businesses find it easiest to hire a tax accountant to explain this to them and handle all aspects of it. The IRS also offers information via its Employer’s Tax Guide.
The most important aspect of this to remember is to withhold taxes from your employees. Your employees will fill out W-4s before starting to work, and you will provide them with W-2s every year.
You also need to report employment taxes and deposit them. You will need to withhold Medicare and Social Security from wages in addition to paying a matching amount.
Make sure you can handle all of this before hiring employees.
Do you need an employee?
Hiring an employee for your business lets you delegate work, but it also comes with legal requirements and extra paperwork. As such, you want to make sure that you actually need an employee before hiring one.
Start by considering how many hours of work you would have for an employee each week. This is the time to think about tasks to complete that you don’t have the time to do or situations where you can’t be in more than one place at once.
You also want to think about whether you will permanently need the help or just temporarily. For example, maybe you just need someone to help with an upcoming event at your store.
Your answers to those considerations will help you decide if you need to hire someone at all and whether you want an employee or contractor.
Employees vs. independent contractors
Once you decide that you do need an employee, it is time to determine if you want to hire independent contractors or employees. Your decision will affect your federal income tax and what benefits you provide.
For example, your state may require the following benefits:
- Social Security taxes (required everywhere)
- Workers’ compensation (required everywhere)
- Disability insurance (required in some states)
- Leave benefits (may be required)
- Unemployment insurance (required in some states)
You can also offer your employees other benefits, such as group health plans and other employee incentives like stock options, wellness programs, company events, or flex time.
The following should help clarify the differences between employees and contractors.
Employees work for just one company. They use your tools and resources and work where and when you tell them to. You assign tasks to complete, and they earn an hourly wage or salary.
Contractors can work for as many companies as they want. They use their own tools and will work when and where they want. They are usually paid flat fees or per project, although compensation can vary.
As implied above, employees come with more legal requirements than contractors. For example, you don’t have to obtain workers’ compensation insurance for contractors. But you can’t call someone a contractor if they are an employee just to get out of providing those benefits and legal requirements.
Six ways to find employees and recruit the right talent
Once you know you want to hire employees for your small business, it is time to go about finding them. The following tips can serve as a checklist to help you find and recruit the right talent.
Create a job description that knocks their socks off
One of the most important parts of attracting potential employees is the job description. You don’t want your job description to be too vague, as candidates want to know what job they are applying for. But you also don’t want to be overly enthusiastic or too salesy.
Choose a tone for your job description that matches the traits you want in your employees. A conversational tone indicates a fun, creative workplace, while a straightforward tone indicates a more analytical and serious workplace.
Some highlights to include in your job description are:
- The job title (preferably one that will come up in a search for relevant jobs)
- A description of day-to-day activities and responsibilities
- An outline of the employee benefits (such as flexibility, discounts for local businesses, or allowances for parking or coffee)
Get your job ads up online
If your town has a local job listing website, post it there as well. Or, if there is an industry-specific website, consider posting the job ad there, too.
Post in private groups
Don’t just post your job description on a few websites and call it a day. The best way to make sure that your posting is seen is to post it in groups as well. Specifically, look at private groups on LinkedIn, Facebook, and Slack that would be relevant to your industry and location. If you can find an industry-specific group, you will get the benefit of finding more highly qualified candidates.
Use screening techniques to narrow down your options
Assuming all of the above steps went well, you likely have a long list of applications after posting your job description. This is the time to rely on screening techniques to limit your options and weed out people who aren’t likely a good fit.
Start with the basics and eliminate candidates with spelling or grammatical errors. This is also the time to eliminate anyone who didn’t follow your specific instructions. For example, if you asked for something in the cover letter, did they do it? If not, skip them.
You can also eliminate anyone who doesn’t seem to address the job requirements from the description in their cover letter.
Ask other employees who they might know
Assuming you already have employees, get right to the point and ask them for referrals. This is an excellent option because it requires minimal effort and tends to give you great results. After all, your existing team members already know what you expect from them and therefore what you would want from a new hire.
You can take this to the next level and offer an incentive, such as a cash bonus, to employees for referrals.
Conduct a great job interview
You’ve narrowed down your candidates and are ready for the interview, one of the key parts of the hiring process. Remember that you will need to convince them to work for you while they convince you to hire them. Don’t waste candidates’ time with too many interviews. You should be able to tell if they’re a good fit for your small business in just one or two interviews. Pay extra attention to their personality, skills, and culture.
You can even offer a trial work period.
Even with the labor shortage, small businesses should be able to attract talent, get new hires and retain employees. Effective business hiring requires you to offer benefits employees want, have good job listings, spread the word about the job opening, and conduct great interviews. With the above advice, you should be on your way to filling your role and grow your business.