Hiring Your First Employee

Key takeaways:

• Define your goals first: Understand why you’re hiring and what tasks you need help with, this will guide whether you need an assistant or partner.
• Plan for costs: Hiring involves more than salary. Factor in payroll taxes, insurance, and training time.
• Write a clear job description: Outline responsibilities, required skills, and reporting structure to set expectations.
• Screen carefully: Look for problem-solving skills, startup experience, and growth potential. Always check references.

As an entrepreneur, making your first hire is a huge step for your business. Before you post a job ad online, you need to carefully evaluate what role the new employee will play in your small business and consider the financial impact on the company.

Before you start interviewing potential candidates, here are some tips on how to handle the process:

When to hire your first employee

One of the main reasons that entrepreneurs begin hiring others is because they’ve reached the point where they’ve become too busy to handle the business on their own, and they want to continue to grow the business. But it’s important to think through which types of tasks you want the new employee to take on to meet those goals. Ask yourself:

• Is my current workload taking away from my personal time or investment into the business?
• Can my business financially support a new employee?
• Do I need a part-time or full-time employee?
• What tasks do I need help, and what skillsets support those tasks?
• Am I ready to manage someone?

What is the financial impact of hiring?

Bringing another person into your company is exciting, but it can also be expensive. Accounting for hires in your business cash flow isn’t something to overlook. In addition to paying their salary, you’ll also need to cover your share of taxes, including Social Security and Medicare (15.3% of their salary) as well as purchase workers’ compensation and unemployment insurance.

While the goal of hiring is to increase revenue over time, remember that hiring an employee is an investment that may not deliver immediate returns. Your new employee will need time to learn the role, and you’ll need to dedicate time to training.

Looking to manage costs? Consider hiring recent graduates you can train or offering remote positions, which may allow for a lower salary in exchange for flexibility.

How to hire your first small business employee

Knowing how to hire your first employee isn’t just about posting a job listing—it’s about understanding when you’re ready, defining the right role, setting up proper systems, and making a smart investment in your company’s future. With the right preparation, your first hire can free up your time, increase revenue, and accelerate long-term growth.

Let’s break down the steps to hire your first employee set your business up for success:

1. Set up legal requirements before hiring

Before hiring your first employee, you must complete the essential legal steps to hire an employee and meet small business hiring requirements.

• Obtain an Employer Identification Number (EIN) from the Internal Revenue Service if needed, and register as an employer with your state for payroll taxes and unemployment insurance.
• You’ll also need workers’ compensation insurance, a reliable payroll setup for your first employee, and proper employment eligibility verification (Form I-9) through the U.S. Citizenship and Immigration Services.
• Finally, understand W-2 vs. 1099 classification rules to avoid costly misclassification penalties.

2. Determine salary, benefits, and budget

Before making your first hire, it’s crucial to establish a clear budget for salary, benefits, and related costs. Start with salary range research to ensure your offer is competitive for your industry and location. Remember to factor in payroll taxes, which are an additional cost on top of base salary. Even basic insurance and benefits, such as health coverage or retirement contributions, should be included to attract and retain talent.

Planning ahead helps you hire confidently without straining your business finances. Connect with a business banking advisorfor additional support.

3. Create a job description

Once you’ve decided that you’re ready to hire your first employee, spend some time writing a job description that spells out the roles and responsibilities that person will take on. While it’s common for employees at a startup to wear many hats and take on many different roles, the more transparent you can be about your expectations, the more prepared they will be to understand the role into which they’re stepping.

The Society for Human Resource Management (SHRM) suggests performing a job analysis before writing a job description. That requires interviewing current employees about the required job tasks and collecting third-party data such as salary surveys on the position.

Your job description should include:

• The position title.
• A detailed list of duties and responsibilities.
• Required skills, experience, and qualifications.
• Benefits, if applicable.
• Reporting structure (make it clear they’ll report to you as the owner).

4. How to interview and choose your first employee

Selecting your first employee is one of the most important decisions you’ll make as a business owner. After pre-screening promising candidates, you’ll want to interview several of the top candidates in person (one-on-one or with a panel) or virtually, recommends SHRM.

During the interview process, look for:

• Demonstrate strong problem-solving skills – they should think critically and adapt to challenges.
• Have experience in startups or small businesses – these environments move faster and require flexibility compared to larger organizations.
• Show clear growth potential – they should be able to take on more responsibility and grow with your company.

Finally, always ask for references and follow up. Speaking with previous employers or colleagues helps confirm the candidate’s reliability, work style, and overall fit for your business. A thoughtful interview and reference process ensures your first hire sets your company up for long-term success.

Onboarding your first employee

Once you’ve hired your first employee, it’s time to set them up for success. A structured onboarding process helps them understand their role, learn your business systems, and start contributing quickly. Cover key areas like training, company policies, expectations, and regular check-ins during the first few weeks.

Shift from doer to leader

Hiring your first employee is more than just adding help—it’s the moment you transition from doing all the work yourself to leading someone else to do it.

To make this shift effectively, start by delegating tasks clearly. Break down responsibilities, set priorities, and provide the tools or systems your employee needs to succeed. Next, focus on coaching rather than micromanaging. Offer guidance, feedback, and support, but give them space to take ownership of their work. Establish regular check-ins—weekly or biweekly—to discuss progress, challenges, and goals.

Encourage questions, clarify expectations, and celebrate wins. Over time, you’ll move from doing day-to-day tasks to strategic leadership, focusing on growth, vision, and building your team. By intentionally stepping into this leadership role, you empower your first hire to thrive while creating a strong foundation for scaling your business.