What this lesson covers
The practical mechanics of hiring employees for the first time — from determining when to hire and what the job actually is, through posting, interviewing, making offers, handling legal requirements, and onboarding. This lesson focuses on the small business context where the owner is often doing the hiring personally, with no HR department.
When to hire
Hire when the cost of not hiring exceeds the cost of hiring. Signs:
- You’re turning away business because you can’t handle the volume alone
- Quality is slipping because you’re stretched too thin
- You’re spending time on tasks that someone else could do for less than your time is worth (you’re doing dishes instead of managing the business)
- Growth is blocked by your personal capacity
Don’t hire based on projected growth that hasn’t happened yet. Hire when current demand justifies it. The exception is pre-opening: you need staff trained and ready before day one.
Defining the job
Before posting anything, write down what the person will actually do. Not a formal job description — a clear list:
- Tasks: What specific things will this person do every day? (Take orders, prep food, clean equipment, manage inventory, answer phones)
- Schedule: What hours and days? Is it consistent or variable?
- Skills required: What must they already know? What can you teach?
- Skills preferred: What would be nice to have but isn’t essential?
- Physical requirements: Standing for 8 hours, lifting 50 pounds, working in a hot kitchen — state these honestly.
- Pay: What can you afford? What does the market pay for this role?
Determining pay
Research what comparable businesses pay for comparable roles:
- Check job postings on Indeed, Craigslist, and local job boards for similar positions in your area
- Ask other business owners (if you have those relationships)
- Check Bureau of Labor Statistics occupational wage data for your metro area
Pay at or slightly above market rate. Paying below market gets you a smaller applicant pool and higher turnover — and turnover is expensive (recruiting, training, lost productivity during the gap).
Know your state and local minimum wage — it may be higher than the federal minimum. For tipped positions, understand tip credit rules (the amount an employer can count tips toward minimum wage obligations) in your state.
Writing the job posting
A job posting is a sales document. You’re selling the job to candidates. Be honest and specific.
What to include
- Job title: Use a standard title people search for (“Line Cook,” “Server,” “Barista”), not a creative one (“Sandwich Artist,” “Flavor Specialist”).
- Location: Specific address or neighborhood. Commute is a major factor.
- Hours and schedule: Be specific. “Full-time” means different things to different people. “Tuesday–Saturday, 10am–6pm” is clear.
- Pay: Post the pay range. Postings without pay get fewer applicants, and in many states, pay transparency is legally required.
- What they’ll do: The top 3–5 tasks, in plain language.
- What they need: Required experience and skills. Keep it realistic — “5 years of experience” for a $15/hour position screens out good candidates unnecessarily.
- What you offer: Benefits, even small ones — free meals during shifts, flexible scheduling, a pathway to more hours or a better role.
What to avoid
- “Fast-paced environment” (every job posting says this; it means nothing)
- “Must be a team player” (vague; describe the actual team dynamics)
- “Rockstar” or “ninja” (signals unprofessional management)
- Listing every possible task the person might ever do (overwhelming; stick to the primary duties)
Where to post
For most small businesses, these channels produce the best results:
- Indeed and Craigslist: High volume, broad reach
- Local Facebook groups: Community-oriented, good for part-time and entry-level
- In-store signage: Reaches people already in the neighborhood who may be interested
- Word of mouth: Ask current employees, friends, suppliers. Referrals often produce the best hires.
- Local community organizations: Job training programs, workforce development agencies, school career offices
Interviewing
Before the interview
- Review the application or resume. Note questions about gaps, unclear experience, or relevant skills.
- Prepare 5–7 questions in advance. Ask every candidate the same core questions so you can compare fairly.
- Schedule a specific time and keep it. Being late to your own interview signals disrespect.
Questions that work
| Question | What it reveals |
|---|---|
| ”Walk me through a typical shift at your last job.” | Whether they’ve actually done similar work; how they describe tasks |
| ”Tell me about a time a customer was unhappy. What did you do?” | Customer service instinct; problem-solving under pressure |
| ”What hours are you available? Any days you can’t work?” | Schedule compatibility — find out now, not after hiring |
| ”Why are you leaving your current job?” (or “Why did you leave?”) | Red flags (fired for cause, pattern of short tenure) or neutral reasons (schedule, relocation, closed) |
| “What questions do you have for me?” | Whether they’re genuinely interested; what they care about |
Questions to avoid
Federal and state employment laws prohibit asking about: age (beyond confirming they’re old enough to work), religion, national origin, marital/family status, disability, pregnancy, and arrest record (in many states). Don’t ask. These questions create legal liability even if you didn’t intend to discriminate.
Working interviews
For hands-on roles (kitchen, counter service, skilled trades), a paid working interview — 2–4 hours on a real shift — reveals more than any conversation. You see their actual skills, speed, cleanliness, and how they interact with the team.
Important: Pay them for the working interview. Unpaid trial shifts violate wage laws in most jurisdictions and signal that you don’t value labor.
Legal requirements for employers
When you hire your first employee, you take on legal obligations. Missing any of these creates liability.
Before they start
- Employer Identification Number (EIN): If you don’t have one yet, get one from the IRS (free, immediate, online).
- State employer registration: Register with your state’s department of revenue and department of labor.
- Workers’ compensation insurance: Required in almost every state. Get a policy before anyone starts work.
- Employment eligibility: Every employee must complete Form I-9 (verifying identity and work authorization) on or before their first day.
- Tax withholding: Employee completes Form W-4 (federal) and any state equivalent. You are responsible for withholding income tax, Social Security, and Medicare from each paycheck.
- Labor law postings: Federal and state law require specific posters displayed in the workplace (minimum wage, OSHA rights, anti-discrimination, family leave). Your state’s department of labor will have the current list and free downloadable posters.
Ongoing obligations
- Payroll taxes: Withhold and remit federal income tax, Social Security (6.2%), and Medicare (1.45%) from employee wages. The employer pays a matching 6.2% Social Security and 1.45% Medicare. File quarterly (Form 941).
- Unemployment tax: Pay federal (FUTA) and state (SUTA) unemployment taxes. Rates vary by state and claims history.
- Wage and hour compliance: Pay at least minimum wage for all hours worked. Pay overtime (1.5× regular rate) for hours over 40 per week (for non-exempt employees). Keep accurate time records.
- Recordkeeping: Maintain employee records (I-9, W-4, time records, pay records) for the legally required retention periods (generally 3–7 years depending on document type).
Payroll options
- Manual payroll: Calculate withholdings yourself, write checks, file tax forms. Only practical for 1–2 employees and requires payroll tax knowledge.
- Payroll software: Gusto, Square Payroll, QuickBooks Payroll. Handles calculations, direct deposit, tax filing, and year-end forms (W-2s). Cost: 80/month plus 12 per employee.
- Payroll service: ADP, Paychex. Full-service for larger operations. More expensive but handles compliance, garnishments, and multi-state issues.
For most small businesses, payroll software is the right choice. The cost is modest and the compliance risk of doing it wrong is high.
Onboarding
A new employee’s first week determines whether they stay. Most turnover in hourly positions happens in the first 30 days.
Day one
- Introduce them to the team. Names and roles.
- Tour the space. Where everything is: supplies, equipment, break area, restrooms, emergency exits.
- Review the SOPs relevant to their role. Don’t just hand them a binder — walk through the procedures together.
- Assign a buddy — an experienced employee who can answer questions in real time.
- Start with low-stakes tasks and build complexity over the first week.
- Complete all legal paperwork (I-9, W-4, emergency contact, direct deposit authorization).
First two weeks
- Check in daily. Ask how it’s going. Ask what’s confusing.
- Provide feedback early and specifically: “You handled that customer complaint really well — you stayed calm and offered a solution” is useful. “You’re doing great” is not.
- Correct mistakes immediately and privately. Don’t let bad habits form.
- At the end of week two, have a conversation: Is this what they expected? Any concerns? What do they need?
Scheduling and labor cost management
Labor is typically a small business’s largest controllable expense. Scheduling is how you manage it.
Principles
- Schedule to demand: More staff during busy periods, fewer during slow ones. Use your POS sales data to identify patterns by day and hour.
- Post schedules in advance: At least one week, ideally two. Last-minute scheduling disrespects employees’ time and increases call-outs.
- Cross-train: When multiple employees can perform multiple roles, scheduling becomes more flexible and coverage gaps are easier to fill.
- Track labor cost percentage: Total labor cost (wages + payroll taxes + benefits) ÷ revenue. For food service, 25–35% is typical. Track weekly and respond to trends.
Overtime management
Overtime (hours over 40/week) costs 1.5× the regular rate. An employee earning 22.50/hour in overtime — before payroll taxes. It is almost always cheaper to hire a part-time employee than to regularly pay overtime to existing staff. Monitor weekly hours by Wednesday so you can adjust the end of the week.
Guidance
- Write a job posting for the first position you’d hire. Apply the principles above. Then read it as if you were the candidate — would you apply?
- Calculate the full cost of one employee: hourly wage × hours/week × 52 weeks + payroll taxes (add ~8%) + workers’ comp premium + any benefits. Compare this to the revenue the employee enables. Is the hire justified?
- Draft an onboarding checklist for the first role. What does the person need to know, see, and do in week one?