Small business and HR: A quick guide to the basics

It's not uncommon for a small start-up to lack an official human resources department. Just more than half (54%) of small-business owners handle this function themselves, according to the Society for Human Resource Management. Whether that means hiring one or 15 employees, a certain amount of your time would be spent on human resources management. That entails recruiting, hiring, training, payroll, as well as making sure you’re following the laws and best practices to create a safe, positive workplace that people love to call their place of employment.

So when you get to the phase where it’s time to hire your first employees, congratulations. It's an exciting time of growth, but it also means adding more tasks to your expanding to-do list. As a founder and entrepreneur, that is life.

What do you need to hire your first employees?

If you’re hiring your first round of employees, and serving as your own HR department, there’s an impressive to-do list to get that started.

• Get an Employer Identification Number. You can apply online via the IRS.
• If you don’t already have one, apply for a Minnesota Taxpayer ID Number. This can be done online through the Minnesota Department of Revenue.
• Determine how employees should be classified: independent contractors, part-time employees or full-time employees.
• Obtain W-4 forms and ensure employees fill them out, and file these with the Social Security Administration.
• Choose a pay period. Most experts recommend weekly or biweekly pay periods for hourly employees.
• Create a compensation and benefits plan for employees. Workers' compensation and unemployment insurance are both required, but you’ll also want to make decisions on holiday, leave and vacation benefits.
• Choose a payroll system, and make sure you’re withholding the right amount of payroll taxes and reporting them on time, on schedule. Payroll can be complex and time-consuming. Just under half (49%) of small-business owners surveyed say they spend 40 hours a year completing tasks like calculating federal tax withholdings and filing reports, according to the 2017 Small Business Taxation Survey. Investing in software or online services may be worth your while.
• Set up a secure employee records system, and make sure you’re keeping the right records for the right length of time.

When hiring your first official employees, you’ll also need to file numerous documents with the Minnesota Department of Employment and Economic Development. Keep this page bookmarked and easy to access while you’re setting up.

Creating your company culture

A good HR department in any firm will be focused on creating a safe, professional and positive environment where employees can grow and thrive. Until the day comes when your business reaches that stage, that task falls on your shoulders.

While you’re at it, this is also your chance to decide what it would mean for someone to work for you. With Minnesota unemployment figures at a near all-time low, competition for strong workers is fierce, and it’s more important than ever to present your business so it’s a place for people to build their careers and thrive.

While perks and wellness benefits always stand out in recruiting materials, at the end of the day, it comes down to the mission, core values and beliefs of the company. A great place to start when inspiring action is answering the question: Why?

At Minnwest Bank, we thrive on working with doers like you. With our community roots and deep expertise on the local market, you’ll have the right tools to get your business off the ground. Contact a banker today.

For more information about starting your own business, please see our related posts in our #smallbusinessjourney series:

Is your dream job working for yourself? 3 steps to launching your startup
The 411 on getting financing for your Minnesota startup
The dreaded bank visit: How to get ready for your business loan interview
Small business journey: Getting ready for the ups and downs