How to Hire an Employee

A Step-by-Step Guide for Small Business Owners

how to hire an employee

Hiring your first employee is one of the most exciting steps in growing your business. It means you’re ready to share the workload, expand your impact, and free up time for what you do best. But it can also feel intimidating if you’ve never gone through the process before.

This guide will walk you through the basics of how to hire an employee — from figuring out who to hire, to handling the paperwork, to making sure your new team member feels welcome and supported. This goes a long way towards employee retention; important because you want to retain good employees!

At Templates Fox, we create tools and templates that help small business owners save time and stay organized. Use this guide as your roadmap, and grab the free checklist at the end to stay on track.

Step 1: Clarify the Role You Need to Fill

Before you put out a job posting, take time to decide exactly what you need help with.

Think about which tasks are taking up too much of your time or slowing down your business growth. Separate those into two groups: daily operations (such as scheduling, billing, or customer service) and growth tasks (such as marketing or sales support).

Decide whether this role should be full-time, part-time, or contract. Once you’re clear, create a simple job description that explains the responsibilities and the skills you’re looking for.

Step 2: Understand the Legal Requirements

Hiring an employee means stepping into new responsibilities. Here are some common steps:

  • Apply for an Employer Identification Number (EIN) with the IRS.
  • Register as an employer with your state labor department.
  • Learn about federal and state wage laws, including minimum wage and overtime rules.
  • Make sure you display the required workplace posters (these can usually be ordered free from the U.S. Department of Labor).

Taking care of these early helps you avoid headaches later.

Step 3: Set a Realistic Budget

Estimate how much this new employee will earn, and whether or not they are a salary or hourly-wage employee. The cost of hiring goes beyond the paycheck. Remember to include:

  • Payroll taxes such as Social Security, Medicare, and unemployment.
  • Workers’ compensation insurance (required in most states).
  • Possible benefits, even if modest at first (like paid time off or health insurance contributions).
  • Time and resources for training.

Planning for these upfront keeps you from surprises later.

Step 4: Create a Simple Hiring Process

A consistent process makes hiring smoother for you and fairer for your candidates. Try this approach:

  1. Create the job description – Use our Template for Job Description to walk you through it
  2. Post your job on places like Indeed, LinkedIn, or local job boards.
  3. Get your job application ready – Use our Template for Job Application in Word format to print out and have the applicant complete in-person, or the PDF format to send to applicants electronically
  4. Review resumes and quickly screen for 2–3 must-have qualifications.
  5. Interview your top candidates with the same set of questions.
  6. Always check references before you decide.

Step 5: Extend the Job Offer

When you’ve found the right person, it’s time to make the offer. Use our Template for Job Offer Letter to make sure you don’t miss anything important. A job offer letter should include:

  • The job title and start date
  • Pay rate and work schedule
  • A statement about at-will employment (if it applies in your state)
  • Any basic benefits

Using a job offer template can save you time and ensure you include the important details.

Step 6: Onboard with Care

Onboarding is more than paperwork. It’s your chance to make your new employee feel welcome and confident (and give them a good first impression of you and your business)

Complete the required forms (like the W-4 and I-9), provide your policies or employee handbook, and schedule the first week with clear goals. Make sure they know who to turn to with questions and training.

A thoughtful onboarding experience sets the stage for long-term success.

Step 7: Keep Up with Ongoing Responsibilities

Once your employee is on board, you’ll have ongoing obligations such as:

  • Filing payroll taxes on time
  • Keeping accurate employee records
  • Following labor laws on hours, breaks, and overtime

These steps help you stay compliant and protect your business.

Wrapping It Up

Hiring your first employee doesn’t have to feel overwhelming. When you break it down step by step, it becomes a manageable process that sets your business up for growth.

To make it even easier, we’ve created a free checklist: “Hiring Your First Employee: Step-by-Step Checklist.” Download it below today and keep it handy as you move through the process.

And when you’re ready for more support, Templates Fox has done-for-you HR templates like job descriptions, offer letters, and a job application template — all designed to help small business owners hire with confidence.

Legal Disclaimer

This article provides general educational information and is not legal or tax advice. Employment laws vary by state and may change over time. Always check your federal, state, and local requirements, and consider consulting with an HR professional, accountant, or attorney before making employment decisions.

Happy hiring!