One of the most exciting things a small business owner will do is hire their first employee. Though it make take some time to find the right person, after you're through the interview and references check process, and you're ready to say, "You're hired!", there are a few things you need to plan for on your end. We have some tips to help you get started.
1. Budget for the Addition
Have you calculated the full cost of an employee in your budget? In addition to salary, you have to pay employer taxes, state and federal unemployment insurance and worker’s compensation. You may need to budget close to 12% for these costs alone. If you provide health insurance or other benefits, you'll need to include these costs as well. This is important for any small business budget. You should also post your Certificate of Workers' Compensation with the other labor posters. You can reprint a copy from your state's Bureau of Worker's Compensation website.
2. Determine Pay Periods
Pay employees monthly to minimize the time you need to spend on approving and recording your payroll. Payroll processing fees are based on number of pay periods, so monthly payroll reduces your payroll processing fees.
You may think that monthly pay is a hardship on your employees. Actually, employees easily adapt to monthly pay. If you must have more frequent periods, go with twice a month.
3. Find a Payroll Provider
Get recommendations and interview two providers. See our blog post, “How to Choose a Payroll Provider.” The fines for not paying payroll taxes withheld are high.
4. Collect the Required Forms
Have your new employees fill out a W-4. You can download the form from here.
5. Time Tracking
If you are a non-profit, government grant recipient or want to track your labor cost by client/job, look for a seamless time tracking system. Discuss your needs with your bookkeeper to set up the most cost effective system.
6. Policy Manual
Write a policy manual; however simple it may be. Include pertinent policies, such as: causes for termination (attendance), internet policies, sexual harassment policies, and reporting procedures.
7. Post Labor Laws
Post Labor Laws near restroom or in your lunchroom. Your payroll provider can give you the poster. There's no need to purchase one.
Need help budgeting for your first hire or any other bookkeeping problems? Give BudgetEase a call. We can make QuickBooks work for you!