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Resource Center / Becoming a Founder

HR Best Practices for Small Businesses

You're ready to bring on your first employees and grow your small business. First, learn these key HR tips for compliant hiring and onboarding.

The letter "J" for Justworks.
May 20, 20205 minutes

So you’ve decided to start a business and realized you can’t do it all yourself. Nor should you! Entrepreneurs are champions of ideas, and the best ones identify their strengths and weaknesses, and learn where to supplement their leadership with the acumen and experience of others. Hiring your first employees is an exciting and daunting task — one you should be prepared for. Consider the cultural and compliance implications of this monumental next step.

Your First Employees

Your first employees can set the tone of your company culture for years to come. No pressure. Of course, you might not have seasoned engineering managers and college graduates with summa cum laudes lining up to work for your budding organization. Who do you pick, and using what qualifications?

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Hiring the Right People

Hiring your first employees is difficult. To the extent possible, try to be choosy and identify candidates who are aligned with the values you hope to foster within your organization. The right people will make your organization thrive. This might sound cookie-cutter, but it’s not. What values will contribute to the growth and advancement of your business objectives?

You might not be able to plan out and define your company culture before you hire the employees that will come to shape it, but you can definitely draft a mission statement. A mission statement is a summary of the specific aims and values of a company or organization. If culture is, “we work hard and support each other,” then an example mission statement is, “we are going to make tax season more fun for everyone.”

David Ogilvy, the advertising magnate, notably said, “If each of us hires people who are bigger than we are, we shall become a company of giants.” Through example, coach hiring managers to put ego aside and seek to hire people who can take your business, and your mission, to the next level. Absent top talent, hire candidates that will propagate the values that support your mission. They might not be the future leaders of your organization, but they’ll probably interview them.

Onboarding Process and Compliance

Considerations of people and talent aside for a moment, you need to make sure to hire and onboard your employees in compliance with labor and employment law regulations.

Here are four key considerations around onboarding requirements for your first employees.

1. Employment Agreements - In most states, employment is presumed to be “at-will.” This means that either the employer or employee can terminate the employment relationship at any time, for any or no reason. There are several exceptions to the “at-will” doctrine (e.g., terminations that violate public policy or state and federal laws, express or implied contracts).

Typically, employment contracts write away the “at-will” doctrine and indicate certain stipulations, such as the requirement of the business to establish cause for termination of employment. This is typically used as a means of establishing a degree of job security in exchange for business performance expectations pertaining to leadership positions at large companies. As a small and growing business, in almost all cases you do not want to surrender your right to the “at-will” doctrine!

2. Pay Requirements - Among other requirements, consider your statutory obligation to pay overtime. In order to be exempt from overtime, employees must meet requirements pertaining to a certain level of compensation and the nature of their roles. The most common white collar exemption under federal law, officially called the administrative exemption from overtime, requires that employees be paid on a salary basis of at least $35,568 annually and “exercise independent judgment and discretion with respect to matters of significance.”

Of course, it's important to note that many states have wage and hour requirements that are more stringent than the federal requirements. As an employer, you must be sure to comply with all applicable wage and hour requirements, including those around minimum wage and pay frequency.

3. New Hire Forms - Upon hire, employees are required to fill out a Form W-4 (and usually a state-level equivalent) in order to establish their income tax withholding. A PEO like Justworks has functionality to complete this information electronically, in a way that directly integrates with payroll processing.

4. I-9s - Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the US. Form I-9 must be filled out for every US-based employee that works for your company, not only non-citizens. The form requires that the employee present documents to you verifying their identity and authorization to work in the US. You must sign a statement affirming that the presented documents are genuine to the best of your knowledge. Most PEOs — including Justworks — also have this functionality digitally available.

Employee Handbooks

Every mature organization should have an employee handbook that details the fundamental procedures and policies of their organization.

Why they’re important

Consider your handbook a reflection of your culture and business ethics. It should be an introduction for a new employee to life at your company. You’ll want to show that you care about your team and the future of the company by taking things like federal, state, and local laws seriously, but also that you want to create a helpful resource for your employees that covers frequently asked questions and benefits.

How to build one

Going through the process of creating an employee handbook will also prompt you to determine what, exactly, you want your policies and procedures to be. For example, how generous is your vacation or parental leave policy? In addition, some company policies are required by law (e.g., a sexual harassment prevention policy and paid sick leave may be required under applicable state and local laws).

If the prospect of crafting an employee handbook feels daunting, consider a human resources solution that provides a resource, such as the Living Handbook to which Justworks provides access via Mineral, that provides you with a robust and compliant template to start from. This saves you from drafting policies from scratch, and you’ll be kept abreast in real time of compliance updates to mandatory policies.

Conclusion: Your First HR Solution

We could write all day about why PEOs are a natural HR solution for small and growing businesses. When it comes to employment law and tax compliance and providing access to top-notch employee benefits, don’t go at it alone. Justworks can help you grow your business with confidence.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.