How To Hire Employees: A Complete Guide

Hiring employees is a pivotal step in growing your business, offering opportunities to increase productivity, bring in fresh skills, and scale operations effectively.

However, the process comes with its own set of challenges, from navigating legal requirements to finding the right talent to grow your team.

This guide will walk you through a full process of how to hire employees from start to finish.

Before Hiring Employees

1. Legal and administrative preparation

Before you can hire someone, there are a couple of legal boxes to check first. While we recommend getting some legal counsel, you’ll likely need to complete the following requirements:

1.1 Tax registration

You knew this was coming! Of course, to legally hire someone you need to fill out the necessary forms to pay Uncle Sam’s federal and state taxes.

Federal Forms (required for all US businesses):

1. Form SS-4:
   • Purpose: Apply for an EIN (Employer Identification Number) through the IRS.
   • Where to File: IRS website.
2. Form 940:
   • Purpose: Report and pay federal unemployment tax (FUTA).
   • Frequency: Annually.
3. Form 941:
   • Purpose: Report federal income tax, Social Security, and Medicare tax withholding.
   • Frequency: Quarterly.
4. Form W-2:
   • Purpose: Report wages paid and taxes withheld for employees.
   • Frequency: Annually (submitted to employees and the IRS).
5. Form 1099-NEC (if applicable):
   • Purpose: Report payments made to independent contractors.
   • Frequency: Annually.

State Tax Forms (varies by state):

1. State Payroll Tax Registration Forms:
   • Purpose: Register for state income tax withholding accounts.
   • Where to File: Your state’s Department of Revenue or Tax Office website.
2. State Unemployment Insurance (SUI) Registration:
   • Purpose: Register to pay unemployment insurance taxes.
   • Where to File: State Workforce or Labor Department website.
3. State Disability Insurance (SDI) Registration (if required):
   • States Involved: California, New York, New Jersey, Rhode Island, Hawaii.
4. New Hire Reporting Form:
   • Purpose: Report newly hired employees to your state’s New Hire Registry.
   • Where to File: State’s Child Support or Labor Office website.
5. Local Tax and Business License Forms:
   • Purpose: Register for local payroll or business tax requirements if applicable.

1.2. Set up payroll

Employees won’t stick around for too long if you don’t pay them. Setting up payroll involves creating a process to calculate and pay employee wages while ensuring compliance with federal, state, and local tax laws. 

We advise choosing a payroll service provider or using payroll software to automate calculations, tax filings, and direct deposits.

1.3 Understand employment laws

Familiarize yourself with employment laws at the federal, state, and local levels. These laws cover areas like minimum wage, overtime pay, anti-discrimination policies, workplace safety standards, and certifications or background checks required for your field.

Good places to find info include official sites like the U.S. Department of Labor (DOL), Equal Employment Opportunity Commission (EEOC), and your state’s labor department.

1.4 Obtain workers’ compensation insurance

Workers’ compensation insurance covers employees’ medical expenses and lost wages in case of work-related injuries or illnesses.

Most states require businesses with employees to carry this insurance (although requirements vary considerably) and failure to have this coverage can result in significant fines and legal consequences.

Contact an insurance provider licensed in your state to compare policies and premiums.

1.5 Prepare employment contracts

Draft employment contracts or offer letters that clearly outline job roles, compensation, benefits, and company policies.

While not mandatory for most jobs, employment agreements can help set expectations and reduce the likelihood of disputes.

Things to include are terms regarding confidentiality, intellectual property, and termination conditions if relevant.

Consider using legal templates or working with an attorney to ensure compliance with state and federal labor laws.

2. Financial preparation

2.1 Budget for salaries and benefits

To budget for salaries and benefits, start by researching industry-standard wages for each role based on experience and location using tools like the Bureau of Labor Statistics (BLS) or job sites like Glassdoor.

Add mandatory employer costs such as payroll taxes (Social Security, Medicare, and unemployment insurance) and benefits like health insurance, retirement contributions, and paid time off.

2.2 Set up employee benefits

To set up employee benefits, identify the mandatory benefits required by law, such as workers’ compensation, unemployment insurance, and Social Security contributions.

Next, consider what voluntary benefits you’ll offer such as health insurance, retirement plans, paid time off, and wellness programs based on industry standards in your location(s) and your budget.

Partner with reputable benefits providers with a solid track record of serving businesses in your industry or company size.

Another thing to look for is how long they’ve been in business and whether they specialize in specific types of benefits like health insurance, retirement plans, or wellness programs.

3. Policies and procedures

3.1 Develop an employee handbook

Create an employee handbook that outlines company policies, workplace expectations, employee rights, and procedures such as attendance, conduct, and leave. 

Include legal policies like anti-discrimination, harassment prevention, and workplace safety guidelines. It’s important to make the handbook clear, concise, and accessible, updating it regularly as policies change—Slite or Notion are good tools for this.

3.2 Establish workplace safety standards

Ensure your workplace meets safety regulations established by OSHA or industry-specific authorities. 

Conduct safety assessments, provide necessary protective equipment, create emergency response procedures and train employees on safety protocols regularly and document compliance to avoid potential violations.

4. Recruitment and onboarding readiness

4.1 Create a job description

Write a detailed job description that clearly defines the role’s responsibilities (and how they’ll contribute to the org’s success), qualifications, required skills, and expected outcomes.

Make sure to use clear, action-oriented and unbiased language to attract the right candidates and set clear expectations from the start. 

Learn more about crafting effective JDs in Mariya Hristova’s excellent article on how to write a job description.

4.2 Design a hiring process

Start developing a structured hiring process that includes creating job postings, screening resumes, conducting interviews, and administering skills assessments.

Define clear hiring criteria, decide which team members will be involved in the selection process and standardize evaluation methods to ensure consistency, fairness, and compliance with labor laws.

Hiring Process

5.1 Source Candidates

Sourcing candidates involves finding potential hires through recruitment marketing and active sourcing strategies. 

Recruitment marketing includes promoting your employer brand through job boards, social media, and your company’s website, and posting regular updates like employee testimonials and company videos to showcase the value of your org as a potential employer.

Active sourcing involves searching for candidates directly through your network, any existing employee referrals, LinkedIn, professional forums, and industry-specific job sites.

 5.2 Screen candidates

The candidate screening process begins with reviewing resumes and applications to evaluate candidates' work experience, skills, and educational background. 

Modern applicant tracking systems can help automate this step by filtering resumes and grading them based on job-specific keywords or requirements e.g. eligibility. 

After initial review, a quick phone or video screenings allow hiring managers to gauge candidates' communication skills, availability, and interest in the role.

During this conversation, clarify job expectations and ensure the candidate understands the company's values.

Shortlisting follows, where candidates are ranked based on qualifications and screening outcomes. This step narrows down the pool to those most suitable for further evaluation.

5.3 Interviewing

Interviewing involves meeting with shortlisted candidates to assess their qualifications, skills, and cultural fit. 

A well-structured interview includes questions targeting technical abilities, problem-solving skills, and behavioral traits.

Behavioral interview questions can be useful for providing insight into how a candidate has applied their skills and handled real-life situations—a strong predictor of their future behavior in similar scenarios and how they’d work within your org.

Interviews can be conducted individually, virtually, or as part of a panel, involving key team members and decision-makers.

To maintain fairness, evaluators should use a standardized scoring system or feedback form. This ensures that each candidate is judged on the same criteria, promoting an objective and inclusive selection process.

Read more in Hristova’s excellent article on how to interview someone.

5.4 Make an offer

You’ve found a match, now comes the slightly nervewracking stage of making them offer. As Hristova points out in her excellent article on how to make a job offer, it’s best to call someone first to let them know before sending them a formal letter with the  role’s title, salary, start date, benefits, and conditions of employment etc.

I highly recommend you read Hristova’s article to help you approach this crucial stage and hire more of the candidates you want.

5.5 Background and eligibility checks

Before making the hire official, conduct background and eligibility checks to verify the candidate’s credentials and legal work status.

Employment and education history should be confirmed through official records or reputable verification services. 

Reference checks provide insight into the candidate’s past job performance, work ethic, and character by contacting previous employers or professional contacts.

Legal eligibility checks include verifying the right to work using Form I-9 in the US or ensuring appropriate visas and permits are in place.

If criminal background checks are required, ensure compliance with relevant laws and make sure the checks are appropriate for the job role. 

Transparency about the process builds trust and ensures candidates are informed throughout.

After You Hire Employees

6.1 Report new hires

More admin, yay! Here’s what you and the new hire need to complete from a legal standpoint:

For the employer (your responsibilities):

• Complete Form I-9 (Employment Eligibility Verification):
  • You must verify the employee’s identity and legal authorization to work in the US.
  • Review and retain supporting documents like passports or driver’s licenses.
• Report the new hire to your state:
  • Register the employee with your state’s New Hire Reporting Program within 20 days of hire (or sooner, depending on your state).
• Set up payroll:
  • Register for federal and state payroll tax accounts if you haven’t already.
• Obtain workers’ compensation insurance:
  • Purchase this insurance if required by your state, covering work-related injuries or illnesses.
• Display mandatory workplace posters:
  • Post federal and state labor law notices in a visible location, covering minimum wage, workplace safety, and anti-discrimination policies.
• Create an employee file:
  • Maintain a confidential file for the employee, including completed forms, signed offer letters, and performance records.
• Provide required benefits (if applicable):
  • Offer benefits like health insurance, retirement plans, and paid leave if required by law or your company policy.

For the employee (their responsibilities)

1. Complete Form W-4 (Employee’s Withholding Certificate):
   • This form determines how much federal income tax should be withheld from their paychecks.
2. Complete state tax withholding forms (if applicable):
   • Depending on your state, employees may need to fill out state-specific withholding forms.
3. Provide Form I-9 documents:
   • The employee must provide valid documents proving their identity and work eligibility within three days of hire.
4. Enroll in benefits (if offered):
   • Employees should review and enroll in company-sponsored benefits like health insurance, retirement plans, and paid leave.
5. Sign the offer letter/employment contract:
   • If required, they should formally accept the role by signing the employment agreement or offer letter.
6. Acknowledge company policies:
   • Employees should sign acknowledgments for key policies such as anti-harassment, confidentiality, and workplace safety if applicable.

6.2 Onboarding

Onboarding covers some of the legal and admin requirements listed above, but really it’s about ensuring your new hire gets off to the best possible start.

This means providing them with the tools, knowledge, and support needed to succeed. Common elements include job-specific training, introductions to team members, and an overview of company culture, values, and expectations. 

A well-structured onboarding program improves employee engagement, job satisfaction, and long-term retention. Read more in our article on creating an effective 30-60-90 day onboarding program.

How To Hire Employees: 5 Best Practices

People are people and they do strange things. What motivates them isn’t always clear and life happens.

Successful recruitment is built on trust, transparency, organization, grit, and communication. 

Here are some best practices to help you attract and retain the talent you need:

1. Create an EVP 

An employer value proposition (EVP) is a set of unique benefits and offerings that an employer promises to deliver to its employees in exchange for their skills, expertise, and commitment.

It's essentially the value that an organization provides to its employees in return for their contributions.

The EVP helps attract, retain, and engage talent by effectively communicating and driving what makes the organization a desirable place to work. It encompasses various components such as:

• Purpose, vision, and mission
• Organizational values
• Total compensation
• Culture
• Career development opportunities
• Flexibility
• Work-life balance
• The overall employee experience. 

For a deeper dive, I suggest Hristova’s excellent guide on creating an EVP.

2. Cultivate a strong employer brand

Following on from your EVP creation is your cultivating your employer brand.

In essence, your employer brand is your reputation as an employer. It’s how you present yourself on your socials, job descriptions, interviews, and anything candidate facing.

It’s also how you conduct yourself as a company. Are you ethical, are workers treated well, do you live by your values?

One quote that has always stuck with me regarding branding is from Warren Buffet: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”

For a deeper dive, check out Mariya’s guide to employer branding.

3. Use a structured interview process

We touched on the importance of interviews above and I’m reiterating here.

Building a consistent interview structure is important to ensure that all candidates are evaluated based on the same criteria. This helps create a consistent candidate experience and can help reduce biases and make the process fairer.

4. Leverage technology

During the early days, you can probably get by with a simple employee management system to help you build your team.

However, if hiring picks up there are some useful tools to help improve the process for all involved parties and track KPIs for recruitment that will keep your efforts aligned with business goals.

The undisputed king/queen of recruiting software is the applicant tracking system (ATS). These systems use recruiting automation tools to help post jobs, schedule interviews, track and communicate with candidates throughout the hiring process, screen resumes, and interpret feedback.

5. Leverage professionals

Hiring is notoriously tricky, especially the sourcing part, so sometimes it’s beneficial to hire or contract a professional. You have a few options here depending on your budget for recruiting:

• Build an internal recruitment team.
• Make sure of a specialist recruitment agency, either on a retainer or pay-on-delivery basis. These tend to be especially handy for recruiting executives or tough-to-find candidates.
• Make use of a professional employer organization or employer of record. These are particularly useful for recruiting talent outside of your home jurisdiction.

For more, check out our article on how to hire a recruiter and how to hire a manager.

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