Hiring Employees: 8 Steps For Small Businesses

Hiring employees is a critical process for small business owners and growing companies. Done right, it builds a strong team that drives success; done poorly, it leads to costly turnover and productivity losses. This guide outlines every step, drawing from proven strategies used by HR professionals who have hired hundreds of candidates.

1. Determine Your Hiring Needs

Before posting a job, assess whether you truly need to hire. Evaluate workload, revenue projections, and current team capacity. Ask: Can existing employees handle more with training? Is this a replacement or new role?

• Conduct a job analysis: Document required skills, responsibilities, and qualifications. Use tools like position description templates from the U.S. Department of Labor.
• Budget check: Calculate total costs including salary, benefits (health insurance, payroll taxes ~7.65% FICA), training, and equipment. Average U.S. employee cost is 1.25–1.4 times base salary.
• Forecast growth: Hire proactively for anticipated expansion, but avoid overstaffing in lean times.

High turnover costs average 1.5–2 times salary per employee, per Society for Human Resource Management data. Precise needs assessment prevents this.

2. Write an Effective Job Description

A compelling job posting attracts qualified candidates and deters mismatches. Keep it concise (300–500 words), specific, and engaging.

Avoid discriminatory language (age, gender, etc.) per EEOC guidelines. Post on Indeed, LinkedIn, and industry sites for broad reach.

3. Source and Attract Candidates

Cast a wide net using multiple channels to build a diverse applicant pool.

• Job boards: Indeed, LinkedIn, Glassdoor—free and paid options yield 250+ applicants per posting.
• Social media: Share on company LinkedIn, Facebook; use hashtags like #NowHiring.
• Employee referrals: Offer $500–$2,000 bonuses; hires stay longer (45% vs. 20% external).
• Recruiters: For specialized roles; fees 15–25% of first-year salary.
• Networking: Attend industry events, alumni groups.

Track sources to refine future efforts. Aim for 50–100 applicants per role.

4. Screen Resumes and Applications

Review 30–60 seconds per resume. Use applicant tracking systems (ATS) like BambooHR for small businesses.

• Keywords: Match job description terms (e.g., “SEO optimization”).
• Red flags: Employment gaps >6 months unexplained, frequent job-hopping (<1 year), typos.
• Green flags: Quantified achievements (“Increased sales 30%”), relevant experience.

Phone screen top 10–20 candidates (10–15 mins): Confirm interest, salary expectations, availability. Narrow to 5–10 for interviews.

5. Conduct Interviews

Structure interviews for fairness and insight. Use panel (2–3 interviewers) for key hires.

Phone/Video Screening

Assess communication, basics. Questions: “Walk me through your resume.” “Why this role?”

In-Person/Zoom Interviews

1–3 rounds: Behavioral (“Tell me about a time…”), situational (“How would you handle…”), skills tests.

• Common questions:
• Tell me about yourself. (Keep professional, 2 mins.)
• Strengths/weaknesses. (e.g., Weakness: “Perfectionist” with improvement plan.)
• Why should we hire you? (Tie skills to company needs.)

Score candidates on a 1–5 scale per competency. Check cultural fit subtly.

6. Check References and Background

Verify claims; 86% of employers report discrepancies.

• References: Contact 2–3 provided; ask about performance, rehire eligibility.
• Background checks: Criminal, credit (job-related only), education via services like Checkr ($30–$50).
• Legal note: Comply with FCRA; get written consent.

Drug tests if industry standard (e.g., safety roles).

7. Make the Offer

Top candidate selected? Extend verbal offer, then written.

• Components: Salary, benefits, start date, contingencies (e.g., background check).
• Negotiation: Budget 10–15% flexibility; highlight total value (PTO, 401k match).
• Timeline: 48 hours to accept; have backup ready.

Reject others promptly and professionally to maintain goodwill.

8. Onboarding New Hires

First 90 days set success trajectory; poor onboarding costs $10K+ per employee in turnover.

• Day 1: Welcome, paperwork (I-9, W-4), tour, manager intro.
• Week 1: Training plan, buddy system, goals.
• Ongoing: 30/60/90-day reviews, feedback loops.

Use checklists from SHRM. Foster belonging to boost retention 82%.

Legal Considerations in Hiring

Comply with federal/state laws to avoid lawsuits (average $125K settlement).

• EEOC: No discrimination on race, gender, age (40+), disability.
• FLSA: Minimum wage ($7.25 federal), overtime.
• ADA: Reasonable accommodations.
• Documentation: Keep all records 1–3 years.

Consult attorney/HR service like Gusto for compliance.

Common Hiring Mistakes to Avoid

• Rushing: Leads to bad fits.
• Ignoring culture: 89% turnover due to fit.
• No diversity: Limits innovation.
• Skipping tests: Misses skill gaps.

Frequently Asked Questions (FAQs)

Q: How long does hiring take?

A: 24–40 days average; plan 6–8 weeks.

Q: What’s the best way to find candidates cheaply?

A: Referrals and LinkedIn organic posts.

Q: Should I use contractors first?

A: Yes for trials, but convert thoughtfully to avoid misclassification fines.

Q: How to handle salary negotiations?

A: Anchor high, emphasize total comp; know market rates via BLS.gov.

Q: What if the hire doesn’t work out?

A: Probation period (30–90 days); have at-will employment policy.

Hiring transforms businesses. Follow these steps for hires who thrive long-term.

This article is general information, not personal financial advice. Consider your own situation, or speak with a licensed adviser, before acting on it.