Hiring Your First Employee: A Guide for Service Business Owners

1. Decide what you’re hiring for

What you’re hiring for is made up of more than just the position you’re looking to fill. You also need to consider other factors, such as: 

• What the job title will be and what responsibilities come with it
• Whether it’s a part- or full-time position
• What the starting pay is and how you will make payments
• What benefits you plan to provide
• What the employee will need, like office space, a work vehicle, or tools, and what you will provide
• If you want to hire an employee or a subcontractor

For example, do you have a lawn care business and need someone full-time to provide mowing and trimming services to your clients? Or do you need a part-time administrative assistant to help manage bookings and customer communications?

The more specific you are about what you’re looking for, the easier it will be to find the right person for the job.

READ MORE: 23 unique and budget-friendly employee benefit ideas

2. Consider labor and employment laws

Once you know exactly what you’re looking for, you should consider any labor laws related to fair employment practices for the position. 

For example, there are limits and requirements around overtime, minimum employee wages, and record keeping that you need to be aware of. Read through the Fair Labor Standards Act (FLSA) to learn the basics. 

If you don’t follow fair labor laws you put your business at risk of financial penalties from the Department of Labor or even lawsuits.

3. Get set up for an employee

Bringing on a new hire isn’t as simple as choosing the best candidate. Before you start looking for the right person, you need to get your business ready to support an employee. Get started by completing these tasks. 

Follow tax requirements

Hiring your first employee makes your business taxes more complicated. To make things easier, prepare in advance by:

• Applying for an Employer Identification Number (EIN) through the Internal Revenue Service (IRS).
• Registering with your state labor department to pay unemployment compensation taxes.
• Completing Form I-9 to verify your new employee’s identity and employment authorization (within three days of hire).

Once your new hire arrives, you’ll need to complete and submit more paperwork. You’ll also have new tax responsibilities as an employer. Get started by:

• Having your employee complete Form W-4 to determine the amount of federal income tax to withhold from their wages.
• Withholding and depositing the employee’s Social Security, Medicare taxes (FICA), and federal income tax.
• Filing Form W-2 at the end of the year to report annual wages and FICA taxes you withheld, and providing a copy to your employee.

If you’re in the U.S., you’ll also need to report the new employee’s information to your state’s new hire reporting agency shortly after hire (usually within 20 days, but check your state’s specific requirements).

Pro Tip: Keep copies of each form you submit, along with records of payments and taxes, for at least four years in case you need to refer back to them.

READ MORE:30 small business tax deductions to save money when filing

Get payroll software

As an employer, you’re legally required to track certain employee information. Set up a payroll system to help you keep accurate records of required tax information like the employee’s:

• Full name and Social Security number
• Address (street, city, state, zip code)
• Birth date (if the employee is under 18)
• Occupation or job title
• The starting day and time of the workweek
• Daily and weekly hours worked
• Pay rate and wage structure (e.g., hourly or salary)
• Total daily or weekly straight-time wages
• Pay period wages and pay dates
• Overtime earnings (if applicable)
• Any additions to or deductions from wages

READ MORE: Best payroll services for small businesses: top 8 picks

Get insurance

Depending on where you live, you may be required to provide your own workers’ compensation insurance for workplace injuries. But even if it’s not necessary, it’s still recommended.

You can choose short-term (12–52 weeks) or long-term (over a year) coverage. The waiting period for each type is different, as are premiums.

READ MORE: What business insurance do I need?

Pro Tip: Read up on the Family and Medical Leave Act (FMLA) to make sure you’ll be compliant with federal law around unpaid, job-protected leave.

4. Write a job posting

After all the paperwork is done, it’s time to start your search for the perfect hire. Your first step is to write an appealing job posting that clearly outlines important information such as: 

• The job requirements, like experience, certifications, licenses, lifting specific amounts of weight, a vehicle, etc. 
• Position details, including hours, wage or salary, and employee benefits
• A company overview (what you do, how long you’ve been in business, your values)
• Job responsibilities, like what they’ll be doing on a daily basis
• Any important personality characteristics you want them to have
• Additional information, like whether a background check or drug test is required
• If you would like them to provide references
• How to apply for the job (through an online form, email, etc.)

Remember, it’s just as important for you to impress the potential employee as it is for them to impress you. As Danielle Rossi from the Tree Lady Company says, 

“One of the things that I think business owners forget is important is really taking time to understand the role that you’re looking to fill and market it to potential employees in a way that they can see the benefit and the positive aspects of working for you before they ever speak to you.”

READ MORE: How to write a job posting [free template]

Pro Tip: Make sure to offer competitive pay in order to entice the best candidates to apply for your open position. Otherwise, you risk being overlooked by talented and experienced job seekers.

5. Spread the word

When your job description is ready, it’s time to spread the word. But where do you post it so people will actually see it and apply? 

Try these tips for finding potential employees:

• Add a careers page to your website so anyone who visits can see that you’re hiring. 
• Post the job on social media pages like Facebook and LinkedIn as well as job sites like Indeed. Consider paying to advertise the post to increase its reach. 
• Look through sites like TaskRabbit or Thumbtack for potential recruitment opportunities. 
• Attend job fairs or recruiting events for trade schools.
• Ask family members, friends, and industry connections if they know anyone who could be a fit. 
• Print off a copy of your posting and pin it to local bulletin boards. 

Set up an employee referral program that encourages your crew to recommend a potential new hire. 

READ MORE:Where to find employees for your small business

6. Review candidates

Once people start applying for your open position, you need to determine if they’re the right person for the job. Start vetting candidates by following these steps.

Sort through applications

First, read through every application and resume you receive. Some may be immediate ‘nos’, like candidates who are unqualified or who have no experience in the industry, while others may seem like a perfect fit. 

Sort applications into ‘yes’, ‘maybe’, and ‘no’ piles. Then, schedule interviews with the most appealing job seekers. If none work out, you can reconsider whoever’s in your ‘maybe’ pile. 

Remember, the right person isn’t always easy to find. But a willingness to learn and a can-do attitude goes a long way. Don’t dismiss candidates because they aren’t exactly what you’re looking for—if you want for the perfect fit, you’ll have a much harder time hiring. 

If someone is lacking in experience but has a great personality and the right mindset, you can always train them up.

Conduct interviews

Interviewing gives you a chance to get to know a potential hire. Before the interview, prepare a list of questions to ask to help you understand whether they’re right for the job. 

Ask each candidate the same questions to keep things fair, and avoid any questions related to race, ethnicity, religion, gender, sexual orientation, marital status, health, or pardoned offenses. While the candidate can choose to share that information with you, asking about it may count as discrimination. 

Check references

If the interview goes well, let the candidate know you’d like to check their references. The goal is to have a quick discussion about the candidate’s work experience and job performance.  

Potential questions to ask include: 

• When did you work together and what was your working relationship? (as in, was the reference a coworker, or the candidate’s manager?)
• What was the candidate’s role and what were their responsibilities?
• How reliable would you consider this person to be?
• Where did the candidate excel?
• Where could they have improved?
• How would you describe your work culture? Did the candidate thrive in that environment?
• Would you recommend this person for a job?
• Would you hire this person again?

Pro Tip: Give candidates a heads-up that you plan to reach out to references so they can let them know. That way, they’ll be more likely to answer your call, speeding up the process.

7. Run a background check 

Depending on your business and industry, you may choose to run a background check or have the candidate complete a pre-employment drug test. 

A background check confirms a candidate’s employment history and driving record, as well as any criminal history in the last seven years. 

A drug test may be important if the potential employee will be operating heavy equipment or machinery. 

If you plan to run a background check or drug test, include that information in the job description and notify your candidate in writing when it’s time.

8. Make a hiring decision

Based on the job applications and resumes, interviews, and references you received, it’s time to make a hiring decision. 

If you’re lucky enough to have more than one quality candidate, consider which one be the best fit for your business and customers. For example, is one more personable and easy to talk to? Or does another have more specialized skills you could use to expand your service offerings? 

On the other hand, if you don’t feel like you found the right person, it might be time to revisit your ‘maybe’ pile or wait for more applications to come in. 

Either way, you should end this step with a clear decision in mind: to make an offer or to run through the process again.

9. Send an offer

If you have a great candidate you’re ready to hire, you need to make them an offer as soon as possible. You don’t want to risk having them accept a job from a competitor because you took too long to make a decision. 

First, give them a call to let them know you’ve decided to make an offer and let them know you’ll be sending along a formal offer letter in the next 24 hours. Tell them how excited you are to bring them onboard and answer any basic questions they have. 

Next, put together a written offer letter that includes the proposed hours, wage, and start date. Make sure to leave a place for their signature to record their acceptance. 

Some candidates will accept your offer as-is, while others may negotiate certain aspects of the position. Be prepared to discuss salary, vacation time, and hours in case the they come back with a counteroffer.

10. Onboard your new employee

Congratulations, the candidate accepted your offer and now you have a new employee! You’ve successfully made your first hire and the only thing you have left to plan for is onboarding. 

Onboarding usually includes a rough outline of the employee’s first day, week, and month. For example, you’ll want to: 

• Prepare a package of important paperwork (direct deposit form, benefit form etc.) for them to complete on their first day
• Determine how much training the employee needs and when or if you plan to send them to jobs alone
• Consider what their first jobs will be
• Order or purchase any tools, supplies, materials, or safety equipment you plan to provide
• Get them a uniform or branded apparel if required, like a hat and t-shirt 
• Make a list of any tools or software you use and train them on how to use it