What to Do Before Hiring Your First Employee?

What To Do When Hiring First Employee

The time has come to make one of the most memorable decisions in the course of your business: Hiring your first employee. Countless employers before you have (by definition) gotten through this important step, and now it’s your turn!

As exciting (or scary) as hiring your first employee might be, there are several things we urge you to consider before posting that job offer — including the decision between hiring an employee or an independent contractor. You’ll be doing yourself and your future employees a favor by strengthening your business’s foundation before growing your team.

Consider an Accounting Software Suite

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Are you surprised that the first thing we —  TL;DR Accounting — recommend would be accounting software? We sure aren’t! Software is indispensable to efficient, consistent, high-quality bookkeeping. With the right software package (and training) you may find that your bookkeeping is more accurate and takes less time to do.

There is a point where we recommend upgrading from Excel (or bank account statements and cocktail napkins) to a more sophisticated bookkeeping suite for your business. It’s all about whether the upfront setup and low monthly costs of running your QuickBooks Online (or having us process it for you) pays for itself in time saved and headaches avoided.

The fact that you are about to begin running payroll will nudge you closer to the “point” where it’s worth using accounting software. Suddenly you will have a complex group of transactions that run on a regular basis. That’s right — payroll isn’t just about sending money to your employees; it also involves withholdings and taxes paid to various federal and state agencies.

Bookkeeping software will make your payroll transactions easier to reconcile, which is important for ensuring your business bank balances are accurate. This is especially true because bookkeeping software will likely integrate smoothly with your payroll software.

Choose a Payroll Provider

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We mentioned above that you should consider accounting software. When it comes to payroll software, though, the choice isn’t whether or not to get it: it’s which provider to choose. We strongly stand by this opinion: Payroll is way too complex for any sane person to do by hand, especially with quality, cost-effective options out there.

Our company uses QuickBooks Online for bookkeeping and Gusto for payroll, and we heartily recommend that you use both. As a matter of fact, we require this exact pairing of software for any clients we bring on. We can even set them both up for you. Give us a ring!

Many small business owners use QuickBooks Payroll because it’s built into QuickBooks Online, so it seems like the obvious solution. We think that QuickBooks Payroll is “halfway decent” payroll software. But when you are running your payroll, a process in which many things can go wrong and upon which your people depend for rent and groceries, we recommend that you go for better than “halfway decent.”

Don’t worry, if you are currently on QuickBooks Payroll and want to switch to Gusto, either for your own purposes or to become a client of ours, we have experience with this and can help you!

Decide on a Compensation Package

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How much have you thought about the compensation package for your employees? Note that we’re not just talking about salary or hourly rate here. A compensation package can include such sundry things as parking passes, life insurance, education reimbursement, or even a gym membership. Most importantly, though, it is up to you to decide what kind of health plan and retirement benefits you offer.

Now that Joe Biden is President, there’s the off-chance that the nation will switch to some kind of universal healthcare like Medicare for All. Until and unless that happens, many aspects of your employees’ health and well-being fall into your hands as their employer. Choosing a health plan isn’t simple, but there are healthcare options available for all types of small businesses.

If selecting a health plan and being somewhat responsible for your employees’ health was not enough pressure, you’re also partially responsible for their future when it comes to choosing your company retirement plan.

Other Considerations

There are, of course, other things you should consider before hiring your first employee. Here are several important items to keep in mind:

  1. You are legally required to report new hires in Washington State. The process is quick, and you can do it online by logging into DSHS. One major purpose of new hire reporting is to ensure that employees in arrears for child support have their wages garnished appropriately. If you use Gusto, this is done for you.
  2. Plan how you will train your employees. Even if they already generally know what they’re doing, maybe you want things done a certain way at your business. This is your prerogative!
  3. How will you evaluate your employees? It’s a good idea to keep this in mind while developing your training materials. After setting your KPIs (Key Performance Indicators), you can ensure that your training materials lead your team to know how to maximize their KPIs. If your KPIs are selected and calibrated correctly, then high KPIs should correlate to your definition of a successful business.

How are you feeling? That was a lot of ground to cover, and it’s understandable if it feels like too much. There are many successful business owners who have gone through this before you, and perhaps you know some of them personally. Either way, you’re not alone. Contact us for help!

TL;DR: Hiring an employee is one of the biggest “life events” in the course of your business. It’s important to do it right! Before hiring that first employee: 1) Consider upgrading to QuickBooks Online or another kind of bookkeeping software, 2) Select a payroll software package, 3) Select a compensation package including pay, health insurance, and retirement plan, 4) Develop a training plan, and 5) Finalize your employee evaluation method.

P.S. Want to learn how to manage your money better as a therapist? Now you can learn directly from Toni Cameron, CPA with our new on-demand webinars! Check out our most popular webinars here.
Khaled - TLDR

Khaled Albadawi, CPA

Principal & CEO

Khaled joined TL;DR as Principal in December of 2022, and has quickly hit the ground running offering a fresh new perspective for the TL;DR team and clients. He’s a natural entrepreneur & leader, starting his days at 4 AM with a nice cup of coffee to get a jumpstart on projects before the business world wakes up. His one piece of advice to business owners? Ask yourself if you are creating just another job or a business. Ideally, you should be building something that doesn’t require you to be there 40 hours a week!

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