How to Hire Your First Employee as a Freelancer

Written by Bethany Johnson on May 1, 2017

There’s more work out there — and it could be yours if you went out and nabbed it. The market is ripe, you have an outstanding portfolio, and referrals are knocking on your door. The only problem? You’re maxed out. You’re working as many hours as you can without compromising your happiness. You’ve already applied automation tools to streamline your process, and you’re not dawdling during work hours.

It might be time to hire a helper. But do you know how to hire your first employee? As a freelancer, you know firsthand that traditional hiring methods are outdated. Technology has changed, regulations have morphed and our culture is evolving to a gig-based economy. If you’re ready to hire help, you may find yourself faced with the same amount of risks as options.

Start Small

One option — the one I began with — is starting small and dabbling in the gig economy as an employer instead of as a service provider. Hire a virtual assistant on a freelance basis, so you can adapt to the skills needed to supervise someone. This will teach you what works and what doesn’t when training, communicating with and managing employees. All without the risk of an expensive turnover.

Ready? Time to Learn How to Hire Your First Employee

At some point, the benefits of hiring a traditional, on-the-payroll, permanent employee will feel more attractive. You may even want to hire the virtual assistant you previously contracted as a freelancer. Here’s how to get started:

  • Get an employer identification number (EIN). Your single-member LLC or sole proprietorship likely doesn’t have an EIN, so even if you’ve registered your business, you’ll need to ensure you get an EIN. Obtaining an employer tax number takes a few short minutes, and better yet, you can do it all online.
  • Establish record keeping for employment taxes. Long before employing people, you should deploy accounting software. Choose a program that tracks everything, including income, deductions and credits. Use a software that easily integrates payroll and withholding taxes. For about two years, I’ve used Xero’s standard plan for payroll, and I highly recommend it for the headaches it’s reduced in my life.
  • Learn the different types of employer withholding taxes. The Small Business Administration lists each tax requirement separately, based on where you live. Plus, their clickable, state-specific page explains when and how to file each.
  • Buy workers’ compensation insurance. A good workers’ comp policy protects both you (the business owner) and your employees from exorbitant medical costs, should anything go amiss on the job site. Check your trade association for sponsored policy options to save on your plan. And finally, familiarize yourself with the U.S. Department of Labor’s Occupational Safety and Health Administration for Small Businesses page for up-to-date information and tips for freelancers hiring their first employee.
  • Register with E-Verify. All U.S. companies must verify legal employment eligibility before hiring. Fortunately, though, E-Verify does all the work for you. To complete this step, enroll your business online. It’s free, and you’ll finish in around five minutes.
  • Know your state’s new-hire reporting requirements. The U.S. Department of Health and Human Services has an interactive map that shows you exactly where to go to register your company for the reporting of new hires and rehires.
  • Talk with your legal team. Up to this point, the do-it-yourself approach has worked. But before hiring anyone, talk with your own business attorney and tax expert to ensure all your ducks are in a row. Show them everything, and ask if they know of anything else you should do to prepare.

In the end, simply reevaluate where you’re at. If you’re at a crossroad, there are only a few routes you can take from here. You can continue on your current trajectory and stay at the same income level, workload and output, or you can hire help. Knowing how to hire your first employee is the first step to providing someone else a steady, permanent employment package that benefits everyone.

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