How to hire employees for a new business

As a small business owner, you probably started with just one person - you. You started your entrepreneurship journey as the founder, the CEO, the person who does it all. Eventually, you may get to the point where you realize you have more work than you can do on your own. When this moment arrives, you have a decision to make about the next steps for your business and whether to hire someone to help. 

Hiring a staff member is a big decision that will impact your business in many different ways. Finding the right person and getting them in the right role can be a game-changer. It could mean increased revenue, a better customer experience, and it could even improve your own work-life balance by reducing your workload or letting you tackle other projects in your business. On the flip side, a bad hire comes with negative outcomes. It could mean financial deficits like lost revenue and unsatisfied customers. If a new hire doesn’t work out, whether they resign or are asked to leave, the employee turnover will cost you time and money in dealing with any consequences and finding a replacement. The good news is that there’s a system to help you determine if you should hire, who you should hire, and what happens if you need to part ways. 

It's important to note that there are numerous legal and regulatory considerations when it comes to adding and removing personnel in your business. Regulations vary by country, state/province, and city; and they are updated frequently. Please make sure to do your own research, consult with local experts, and ensure that you are following all local and national guidelines during this process. There are resources listed throughout this session. 

For US-based employers, you can learn more through:

• IRS (Internal Revenue Service)
• US Department of Labor
• US EEOC (Equal Employment Opportunity Commission)
• State and local government websites
• Labor unions
• SHRM (Society for Human Resource Management)

In this session, we'll use several terms interchangeably to refer to individuals you hire to perform services in your business, such as: employee, staff, and worker. In this context, we’ll assume these terms mean the same thing and encompass both employees and independent contractors. An employee is someone directly employed by your business, whereas an independent contractor is hired and compensated through a distinct arrangement, or contract. If a certain topic or piece of information is specific for a contractor, we’ll be sure to use that term. We’ll cover more about employees and contractors later in this session. 

When you reach the point where you have more work than you can do on your own, it can feel bittersweet. You may celebrate the fact that you have business and customers. You may also feel overwhelmed by the amount of work and all the different types of work you have to do. When you reach this point, it may be time to hire more help. There are several things to consider, and we’ll walk through them here. 

You may have heard the expression “working IN the business vs. working ON the business.” The first half of that phrase, “working IN the business,” refers to doing the direct work of your business. For example, for a lawn care company, it would mean cutting the grass yourself. For a bakery, it would mean you’re baking the food and ringing up customers. At a barber shop, you’re styling hair and sweeping the floor. In addition to the main focus of the business, some tasks are considered “working ON the business” - this includes “wrap-around” and support work that has to happen, such as paying taxes, purchasing supplies, and conducting sales. Both of these pieces are critical to business success, and it’s important for you to consider which piece is the best fit for a new staff member. Do you need someone to work IN the business or ON the business?

What Type of Help Should You Add?
The first step in hiring is to determine what types of work you want help with. There are a couple of ways to think about this idea, two of the most common are:

• Focus on what you enjoy. Many business owners naturally gravitate to certain aspects of their business. For example, if you started a dog grooming business, it may be because you love working with dogs. Out of all the tasks involved with your business, that’s the part you enjoy the most. As another example, maybe you started a convenience store in your neighborhood because you saw a need. However, rather than interacting with customers, what you really enjoy is keeping the books and ordering inventory. Consider what motivates you and how you would ideally organize your tasks. Ask yourself these questions:
• What parts of the business do I enjoy the most? What do I want to personally continue working on?
• What parts of the business do I wish I could hand off to someone else? What parts of the business make me feel unmotivated?
  
  
• Focus on the bottom line. Another way to approach the idea of adding help is to focus solely on the cost and profit aspects. As an example, consider the cost to hire a specialized skill to your business, like a bookkeeper. That bookkeeper may charge $30 per hour. If you know how to manage the books and finances, you can save money by doing it yourself. Instead, you could hire someone more entry-level for less. For example, you could hire someone to help customers and ring up transactions for $15 an hour. 

How Much Help Do You Need?
Now that you have an idea of WHAT you need help with, the next step is to determine how much help you need and how consistent the work would be. Here are two examples to consider:

• Example 1: You love working with your customers, but you need about five hours each week to step away from the direct work of the business so you can focus on the financials. You could hire a cashier for five hours per week, or you could hire a bookkeeper for five hours per week.
  
  
• Example 2: You have a lot more business than you can handle. That might mean that you don’t have time to work on the business, or it might mean that you have thought about declining new customers because you can’t keep up. If you had someone by your side full-time for 40 hours per week, you would have plenty of work for them to do. 

Employee vs. Contractor
An employee is someone who is employed directly by your business. A contractor is someone who works for themselves or another business in providing services to other organizations or people. Depending on the needs of your business, you can decide whether to hire an employee or a contractor.

Employee structure:

• Employees are directly employed by the business.
• Employers have more control over the work, scope, and hours of the employee.
• Employers pay a portion of the employee’s payroll taxes.
• Employees tend to be more involved and invested in the business’s success.
• Employees may have access to more benefits and perks through the business (like health insurance, vacation time, sick pay).

Contractor structure:

• Contractors work for themselves (or may be hired through another outside business).
• Contractors usually have a short-term, time-limited, or specific scope of work.
• Contractors are responsible for all payroll taxes.
• Contractors have more control over their schedule, scope of work, and how the work is completed.
• Contractors provide their services to multiple businesses at the same time.

In the US, there are legal definitions of employee and “independent contractor” that vary by state. Common law (law that is based on judicial decisions and precedents, rather than written statutes or regulations) considers three main categories in making distinctions between employees and contractors. These are behavioral, financial, and the type of relationship, and key considerations for each are answered through these questions:

Behavioral:

• Who controls the work?
• Who controls when and how the work is done?
• Who controls how the worker does their job?
• Is there intended to be a continuing relationship?

Financial: 

• Who supplies the materials needed? (Laptop, cutting shears, etc.)
• Who sets the rate for compensation?
• Who pays the payroll taxes?
• Does the person in question have other similar customers? (Ex: a bookkeeper with multiple clients is a yes.)

Type of Relationship:

• Is the relationship intended to be ongoing?
• Where does the work happen?
• Does the worker advertise their same services to other prospective employers?
• Does the work engage with your business’s clients or customers?

It's important to understand the requirements where you will be doing business to ensure that you, your business, and your client/employee are following the law. In some cases, what you think of as a contract position may legally qualify as employment, which may require you to provide certain benefits for a person you hire.

MOBI's blog post about how to start a business as an independent contractor discusses this point in relation to California's law in the following paragraph:

For more information visit the IRS website: Independent Contractor (Self-Employed) or Employee? Outside the US, you can visit the specific organization that is in charge of the taxes for your country.

Business Structure and Preparation
As you expand your business with new staff, there are financial and legal guidelines to consider. It’s important to know these in advance because it may affect your cost-benefit analysis and because the failure to comply may have costly consequences. The good news is that you’re considering and planning for these things on the front end so you’re prepared. Here are several structural issues that you should research and consider:

• Are there changes to your business insurance or business filing structure? (Ex: If you are a sole proprietor, you will need to change your business entity.)
• Do you or will you offer benefits such as health insurance, 401Ks, etc? Are there any changes needed? For small businesses without a group health insurance plan, consider offering a QSEHRA (pronounced “Q-Sarah,” Qualified Small Employer Health Reimbursement Account).
• Do you need to notify any local government about your hiring? These rules change frequently (and, if in the US, vary by state). Check local regulations in your area to learn what and when to report.  
• Will your payroll and tax structure change? (Ex: Will you pay in cash, if allowed in your state, by check, or direct deposit? How and when will you pay the payroll taxes?)
• How does this impact your worker’s comp insurance?
• Do you need to pay into your state’s unemployment benefits?

All of these considerations vary by location. Be sure to research the current rules for your area so you are operating legally. 

Payroll Service Providers or PSPs can be hired to assist small businesses in executing payments to employees and contractors and help ensure the appropriate taxes and contributions are considered. Visit MOBI’s Accounting and Cash Flow session to learn more about PSPs and other bookkeeping topics.

Before bringing a new worker into your business, it is a good idea to consider what this person will need to do the job for which they have been hired. For example, will they need a computer and specific technology? Will they need a place to work and a phone? Will you need to schedule or plan for training? Are there other tools or information this person will need? Be sure that you’ve thought through the new position from the perspective of daily activities as well as overall goals to determine what they will need to do the job.

Cost-Benefit Analysis 
The term “cost-benefit analysis” may sound complicated, but the idea is simple: it's a process of examining information to help you determine the likelihood that you’ll benefit from a business decision. You’ll also hear the term “Return on Investment” or ROI, which is a similar concept, but primarily only focuses on the financial impact of a decision. With a cost-benefit analysis, you can also take into account some of the wrap-around or intangible benefits of a decision. These are benefits that have an impact but can't be specifically measured. One example might be better work-life balance. Considering both tangible, financial implications as well as intangible, wrap-around factors through a cost-benefit analysis gives you a broader and more complete picture of the impact of your decision. You could use this technique for all different types of decisions like buying a new machine or moving into a new space. In this case, we’ll apply it to the process of hiring and adding a worker to your business. MOBI provides a Cost Benefit Analysis Template to help you get started. 

1. Determine how much it will cost to add an employee or contractor.
• You love working with your customers, but you need about five hours each week to step away from the direct work of the business so you can focus on the financials. You could hire a cashier at $15 an hour for five hours (cost: $75 per week) or you could hire a bookkeeper at $30 per hour ($150 per week).
• What other costs might be included? Consider things like benefits, insurance, supplies or technology, time spent on training, etc. (While there isn't a strict, universally applicable percentage you should add to your cost estimate when hiring someone, a general guideline for small business owners is to add 20% to 30% to an employee's hourly wage.)
  
  
2. Determine the value or financial benefit of adding that person.
• What’s the financial benefit? Can you estimate how much an employee will increase your revenue? For example, if you add a part-time employee at 20 hours per week, will that increase your sales? If so, by how much?
• What are the intangible benefits? Does it reduce your stress? Does it allow you to focus on what you enjoy? Does it provide a better customer experience?
  
  
3. Compare the two numbers and determine if it’s profitable and beneficial.
• It can be challenging to nail down the true costs and benefits associated with adding an employee. You don’t have to aim for perfection here - just get as accurate as you can. Ask other small business owners to see if they can identify other expenses or potential positive outcomes. Talk to friends and family and ask if they can think of additional considerations. Determine how you will weigh the bottom line, quality of life, and your other goals. 

Representing Your Community and Customers
There are numerous benefits associated with creating a diverse and welcoming workforce. Having a diverse group of voices helps you arrive at new and creative solutions. It’s also helpful to have your team reflect the community that you serve. As you look to grow your business, consider if and how you would include these ideas into your management and hiring practices. There are ample resources online that provide guides, templates, and training. In addition, it’s a good practice to create your own inclusion statement, which you can use in your hiring materials to help attract a wide range of qualified candidates. 

Job Descriptions 
Now that you know your job structure and general purpose, it’s time to prepare a job description. This document accomplishes several goals. First, it helps you clearly visualize how this worker will interact with your business and what you’ll need from them. Second, it shows prospective employees or contractors what the work would include, whether they’re eligible, and why they should want to work with your business. Third, it helps you build a more comprehensive list of tasks and responsibilities that you’ll use for training and employee evaluations. (To learn more about employee evaluations, see the Managing and Motivating Employees session.)

Your job description should include:

• Title: This is usually one to four words.
• Business Description: The description may include your purpose, core values, vision, what makes you unique, etc.
• Job Overview: This summary is typically two to four sentences. Include time commitment and hours. Explain where the job takes place. 
• Tasks and Responsibilities: This is a list of core responsibilities with a high-level explanation of each. Usually, this is provided in bulleted form. Be concise and clear. Here is a template you can use to get started. 
• Qualifications: 
  • Include the knowledge, skills, and abilities you are seeking for this position. 
  • Organize expectations into tiers:
    • “Must have.” The bare minimum to be hired. Might be dictated by insurance policies, local regulations, business needs, etc. 
    • “Should have.” Refers to the core knowledge, skills, and abilities that all applicants should have. 
    • “Nice to have.” Often phrased as “Ideal candidate" or “is a plus,” nice to have traits are those that, while not required, would make a candidate stand out. 
  • Examples:
    • Must be at least 18 years old and be able to work evening shifts. 
    • Should have experience in customer service, working knowledge of Microsoft Office.
    • Ideal candidate would be bilingual in Spanish and English, with prior experience in (your business’s specialty).
• Benefits: Include pay, type of pay (hourly, salary, etc.), other benefits, perks, etc.
• Notable Details: List any other notable details (loud environment, heavy lifting, working outdoors, working at a desk, involves a lot of walking, credit check, background check, drug testing, etc.).
• How to Apply: Include information about the application process—in person, online, email resume—whether or not to include a cover letter, etc.
• Bonus Miscellaneous Information: Include an inclusion statement if appropriate, or other information. 

Important notes: 

• While you are selecting your employees, they are also selecting you. It’s tempting to create a long wish list for your candidate; however, listing too many qualifications or listing things that don’t directly affect their ability to do the job will reduce the number of applicants. The goal is to strike a balance and find a great candidate who has the necessary background and experience to do the job. 
• You should also avoid jargon (specific language familiar to a particular group, industry, or profession) because these unfamiliar terms may discourage a qualified candidate. For similar reasons, it’s best to avoid acronyms and other specialized language. 
• You can only hire based on what’s relevant to the job. It’s important to know there are several things you cannot use in the hiring process, and may result in a discrimination complaint or EEOC issue. United States federal laws prohibit hiring decisions based on: 
• Race
• Color
• Religion
• Sex (including pregnancy, sexual orientation, and gender identity)
• National origin
• Age (40 or older)
• Disability
• Genetic information

For more information, see the ABCs of EEOC.

How to Pay Employees
There are numerous scenarios for compensating employees. Mainly, you’ll want to consider how they are paid and when they are paid. The rules and implications will vary by country, state/province, and your local community. Once you have an overview, you’ll want to decide what’s best for your business and research the relevant regulations. Here are the areas to consider: 

• How worker compensation is determined. Workers might be compensated for being present, as in the case of a cashier or store manager. Alternatively, workers might be evaluated based on the number of units produced or services offered, such as number of haircuts or number of deliveries completed. Some employees might be paid hourly, while others are on salary. You should also consider other forms of payment, such as bonuses, commission, and tips. 
  
  
• The method of payment. How will you actually send or give the payment? This could be in the form of a check, direct deposit, cash, or a combination of these options. 
  
  
• The frequency of payment. There’s a range of options in this category. On one end of the spectrum, you might have “gig workers” or people who are paid daily for their service. More commonly, employees are compensated weekly or every other week. For contract workers, there may be other terms. For example, they might be paid only at the end of their contract or as they meet key deadlines during the project. 

Whichever approach you choose, it’s important to make sure that both you and the employee are on the same page about compensation. It’s best to clearly outline the arrangement in writing to avoid confusion and make sure everyone has the same expectations.

When recruiting a new worker, we can think of the expression “cast a wide net,” which in this case means creating a lot of interest in the job so you can increase your chances of finding the ideal candidate. This process of starting with a lot of people and trimming down to find your new employee is called the Hiring Funnel or the Recruitment Funnel. Let’s examine each step of this funnel. 

• Awareness: A lot of people are aware of the position post.
• Interest: Of those who are aware, some are interested.
• Apply: A smaller number of people apply for the job.
• Screen: You’ll screen applications and reduce the list.
• Interview: You’ll interview candidates and narrow further.
• Offer: You’ll select your top choice(s) and make an offer.
• Hire: You’ll hire your new team member.
  
  

Awareness and Interest
Consider how and where you want to let people know about the role. This could include social media, word-of-mouth, flyers, online job boards, etc. Be sure to provide a way for candidates to gather more information or apply.

Application
Set up a process for applications. It could be setting up an online form, asking candidates to email a resume or drop off a paper application, or you could host open interview hours where candidates could come in person. 

Screen
Ideally, you will have a pool of applicants that you can evaluate. The next step is usually to look at their application to determine if they’re eligible and meet the different requirements you outlined in your job description. You should eliminate anyone who doesn’t meet your minimum qualifications. For those who do meet the requirements, you’ll want to pick several candidates to interview. Beyond the qualifications, you may also want to consider the application itself and look for things like whether the candidate used good grammar, followed instructions, applied on time, etc. If someone’s application has numerous errors and issues, that’s something to consider as well. If you’re in the fortunate position that you have more qualified candidates than you intend to interview, rank your candidates in order from most qualified to least qualified and select those who most closely meet your criteria. Aim for three to seven people to interview. 

Interview
There are a few key steps in the interview stage of the Hiring Funnel including defining job success, deciding how to evaluate, providing information and time for questions, and selecting your top candidate(s). We’ll describe each stage in more detail.

Stage 1: Define Job Success. Now that you’ve narrowed your group of applicants, it’s time to evaluate them further. This is your opportunity to learn more about them beyond what you can see in the resume. Using the job description, consider the things that are crucial to success in the job and make a list of these “key indicators.” Some examples include attention to detail, experience in customer service, knowledge of your computer software, reliability, management experience, etc. This could be a wide range of things, so it’s important to pick the ones that are unique to your business and to this specific role. 

Stage 2: Decide How to Evaluate. Next, you’ll design a process to measure your key indicators. List out each indicator and consider how you can determine if a candidate meets the criteria. Most often, this is done by asking interview questions. There’s what you want to know, and how you will learn it. 

• What you want to know: 
  • Personality, core values, and soft skills. Soft skills could be things like willingness to help, staying calm under pressure, good time management, active listening, etc.
  • Prior experience.
  • Knowledge, skills, and abilities.
  • How they would perform in your job specifically.
    
    
• How you want to learn it:
  • Questions. There are numerous types of questions and ways to ask them. We’ll list a few here, but encourage you to do some online research to find extensive suggestions. Here are a few examples:
    • Behavioral questions. These explore past behavior in relevant job tasks.
      • Ex: Tell me about a time you interacted with an upset customer.
    • Situational/hypothetical questions. Depending on the situations you choose, these questions could explore how a candidate thinks, their judgment, problem-solving capabilities, their knowledge of the industry or position, and their skills and experience. 
      • Ex: Imagine you’re in this role while the phone is ringing and a customer is waiting at the counter. How would you handle it?
  • Tasks. In addition to asking questions, you could design a short task that’s directly related to the job duties and then ask the applicant to complete it. For example, if they’re managing communications, ask them to write a social media post. If they need to manage your books, ask them to generate a sample report. 

It’s generally a good practice to use the same questions and approach for each candidate to ensure there’s fairness and consistency in your hiring process. In addition, remember to adhere to EEOC guidelines (as mentioned above) and avoid any topics related to protected classes. 

Stage 3: Include Information and Time for Questions. During the interview process, you’ll also usually want to include:

• Overview of your business and the role. This is your opportunity to explain why your business is unique and share more about the work environment. This topic is usually covered at the beginning of the interview.
  
  
• Time for candidate questions. Save some time at the end for the interviewee to ask questions. Be prepared to speak to specifics about the job roles, questions about your management style, and details about compensation and employment structure. 

Stage 4: Select Your Top Candidate(s). Next, rank order your candidates based on their interview performance. For your top choice(s), you may want to call references, do a background check, or confirm their qualifications. Do your due diligence so there are no surprises later. For some, it may make sense to wait until after the offer has been accepted to do these steps. 

Offer
Once you have identified someone you want to hire, it’s best to reach out by phone or email and notify them that you’re intending to make an offer. If they express interest and want to continue in the process, you will move forward. 

Often in this conversation, you will offer the candidate the job verbally, including the compensation rate, start date, and any requirements needed before the candidate begins the job. This is known as the “verbal offer.” 

For some businesses, this may be all you need to do before the candidate starts. These could include smaller, family-run, or local services businesses where roles are filled more casually. Some examples might include:

• Small restaurants, food trucks, food carts, and cafes
• Landscaping or handyman services
• Cleaning services
• Local retail shops or boutiques
• Seasonal pop-ups or farmers’ market stalls
• Sole proprietor hair salon or spa
• Family-owned auto repair shop

In other cases, you will need to prepare an offer letter. This is appropriate for businesses that are more regulated, structured, or professional, where documentation is important for compliance with rules and regulations, protection for both the employer and employee or contractor, and overall clarity. Some examples of these businesses might include:

• Accounting or financial services business
• Healthcare clinic or private practice
• Care services, such as child care or adult care
• Educational programs
• Retail chains or franchises
• Construction business with office staff
• Law firm
• Software business or technology startup

Your offer letter should include:

• The candidate’s name
• Position title 
• Company name
• Start date
• Location of work
• Compensation details
• The type of position (Ex: full-time or part-time, at-will, contract work, etc)
• Any conditions of employment (Ex: must maintain a valid driver's license, pass drug tests, etc.)
• The date by which they need to accept or decline the written offer (usually between 48 hours to seven days)
• How they should accept (Ex: by signing and returning the offer)
• Signature line and date
• Your name and title
• Any other pertinent details

Hire
Hopefully, your ideal candidate will accept your offer and join your team. If not, you would determine whether your second choice should receive an offer. You will work through your list of qualified applicants. If you determine that no one in your applicant pool is qualified, you should evaluate the posting and restart the search process. 

After your applicant has officially accepted the offer to join your team, you should notify other applicants that they were not selected for the position. While this is never a pleasant task, most job seekers appreciate the update and the closure so they can turn their attention to other opportunities. Depending on your relationship, it could be an email, phone call, or text.

Before your candidate starts, be sure to check the rules and regulations where they will be working to ensure you are in compliance with requirements. For example, typically, new employees in the US need to complete a Form I-9 (Employment Eligibility Verification) within three days of the start date, and a Form W-4 (Employee’s Withholding Certificate) before starting their job. Additional forms may be required depending on the state. The Form I-9 and Form W-4 on the USCIS (.gov) and IRS (.gov) websites, respectively. 

Unexpected Situations
Situations may arise during a hiring process that are unexpected. Sudden changes in the market or economy could prevent you from bringing a new worker into your business, even late in the process. Or you may receive new information about the position or applicant that would prevent you from moving forward.

If you change your mind about a candidate or are unable to continue your hiring process during the final stages of the hiring funnel, it’s important to act quickly and professionally. If you have not yet made a formal offer, you can simply inform the candidate that you have decided to move forward with another applicant or that you cannot continue the hiring process. If an offer has already been extended but not yet accepted, you should promptly contact the candidate to withdraw the offer, providing a brief but professional explanation. 

In cases where the offer has been accepted, you may need to consult legal or human resources (HR) professionals to ensure compliance with any contractual obligations before rescinding or withdrawing the offer. Regardless of the stage, always communicate with respect and clarity to maintain professionalism and protect your business’s reputation.

The goal with your new hire is to get them up to speed and ready for success. This process of transitioning from a new employee to a successful employee is called “onboarding.” It typically includes a plan for training, expectations, pay structure, an employee handbook, and other key information. (MOBI provides an Employee Handbook Template (PDF) to help you get started.) To learn more about this process and how to manage employees, visit MOBI’s Managing and Motivating Employees session. 

Just as there’s a process to add employees, there are steps and procedures to follow when it’s time for an employee to leave your business. If and when this time arrives, there are practical, legal, and personal considerations that will guide your approach. This section covers the process for several scenarios and how to prepare for each situation. 

There are quite a few terms that mean firing an employee, such as terminating, downsizing, right-sizing, eliminating, removing, dismissing, laying off, severing ties, and ending the relationship. While some of these can be used interchangeably, others vary by situation. In this section, we’ll cover how different scenarios change the language you use. 

As with the rest of this session, it’s important to know all the legal considerations and guidelines that apply to your business. These will change over time and based on your country, state/province, and local laws. In addition, some rules only apply to businesses of a certain size. Be sure to do your research so you’re in compliance. 

How Employee Departures Impact Your Business
While firing an employee can be a difficult experience for everyone involved, there are also benefits to consider. If you have a particularly problematic employee, they are likely having a negative impact on other parts of your business. They may be rude to customers, which may hurt profits. They might be causing friction with other employees, which reduces trust and morale. You want to wait until you’re sure it’s the right decision, but you don’t want to let the situation linger or get worse. On the other hand, you may have an employee who’s a great person but is just the wrong fit. Similarly, new business constraints or changing market conditions might necessitate that you downsize (reduce your staff) to save money and your business. In all cases, you’ll want to be efficient, clear, and fair so that the employee can move on to a new opportunity. 

Offboarding
Just as onboarding refers to the process of bringing an employee into your business, the term “offboarding” applies to employees leaving your business. The offboarding process should cover any and all steps that need to happen when an employee leaves. 

It’s important to have your offboarding details in place before removing an employee so that you’re not caught off guard, and you’re not rushing or scrambling to make decisions in the moment. There are several topics and tasks that should be addressed:

• Explain remaining pay. What’s the amount? How and when will it be distributed?
  
  
• Collect physical materials. This could include keys, electronics, safety equipment, or any other company-owned property that an employee received. 
  
  
• Secure or change digital access. A former employee should no longer have access to any systems, assets or infrastructure for your company. You should deactivate email, change passcodes, update key pads, remove them from accounts, and eliminate any other digital access. 
  
  
• Transition knowledge and accounts. Make sure you get all necessary information to continue running your business. Depending on the circumstances of the departure, you may ask them to hand off accounts, share processes and directions, or locate physical or digital assets. 
  
  
• Update internal information. When an employee leaves, the other employees notice and may be impacted so it’s best to make sure they’re notified of a departure. They don’t need to know the details but they do need to know if a colleague is no longer on the team. Be open and direct about the change(s) to your business and what other team members can expect. It reduces gossip and builds trust and transparency among your other team members.  
  
  
• Update external-facing information if applicable. Once an employee leaves, it’s important that they’re no longer associated with your company. This might mean removing them from the website, newsletters, or social media mentions. 
  
  
• Establish a way to communicate. You may need to reach a former employee for a variety of reasons such as follow up questions or sending tax documents. Make sure you have a way to reach them through several methods including phone, email, and mailing address.
   
• Conduct an exit interview if appropriate. Employees are a wealth of knowledge when it comes to your business effectiveness and operations. They may have feedback to share about their work experience. If possible, it’s best to schedule this discussion separately from the termination conversation. It’s also helpful, but not required, to have a neutral third party or objective person conduct the interview so you get the most candid responses. Exit interviews are most common when the employee has decided to leave the business.

Types of Departures
There are two main ways this could happen: 1) Employee Initiated, where the employee decides it’s time to move on, and 2) Employer Initiated, where the employer decides to end the relationship. 

In addition, some employees in some states are considered “at-will” which means the employer or employee can end the relationship at any time while others may have more protections or even be “contract” workers which includes specific terms of the employment. Make sure you know which type of employment structure applies to your situation. 

Employee Initiated (also called voluntary termination). Even the very best employees often move on to a new or different opportunity. Your employee handbook should outline the process for submitting a resignation (a notice that the employee intends to quit or leave their job). In this scenario, express your appreciation for their service and follow the offboarding process you’ve built. While it may be difficult to lose a good employee, maintaining a positive relationship during this transition is always a good idea, and may even provide future benefits. Perhaps this employee will recommend your next employee or refer a new customer to your business.

Employer Initiated. With employer-initiated terminations, the first consideration is whether the situation is “with cause” or “without cause.” 

• With cause. These terminations mean that the employee’s behavior is the cause of their termination. It could be failure to meet goals, abandoning the job, or a variety of other reasons. You may also hear this called "dismissing," "firing," or "ending the relationship" with an employee. Breaking that down further, there are two additional scenarios:
• Due to misconduct.
• Some egregious actions (theft, assault, job abandonment) may warrant immediate dismissal.  
• Due to performance.
• Employee should be given clear feedback ahead of the decision, and they should know that termination is possible if they do not improve.
• You may consider putting the employee on probation or a performance improvement plan (known as a "PIP") as an intermediary step. In some cases, a documented process, with warnings and opportunities for improvement, may be required depending on the position, your business, and your location. (It can be a good idea to include this process in your employee handbook.)
• See MOBI's session on Managing and Motivating Employees for more information.
  
  
• Without cause. These terminations may be related to larger-scale changes within the business, for example, in the case of layoffs, business closures, moving locations, etc. You’ll also see and hear terms such as "downsizing," "rightsizing," and "restructuring." 

Preparing for the Termination Conversation
Whether the reason for termination is with or without cause, you will need to notify your employee that they are being let go. It is always best to communicate this in person through a direct conversation. Since this may be a difficult and/or emotional conversation, it’s a good idea to prepare, and even practice, your key points, anticipate questions, and make a list of the information you might need.

What you should do:

• Write an outline in advance for what you plan to say. If the termination is with cause, it is a good idea to write down the key issues that led to your decision so that you can refer to them if needed.
• Begin your conversation by getting right to the point. You could begin by saying something like, “We need to have a difficult conversation,” or “I have some bad news I need to share with you.”
• Stay calm, respectful, and firm. Be empathetic in answering questions the employee might have, but emphasize that the decision is final. If you don’t know the answer to a question, it’s ok to respond with, “I will get back to you on that.”
• Consider having another person present if possible, ideally an objective third party like HR or your business partner (not one of their peers).
• Thank the employee for their contribution to your business if appropriate.
• Offer to be a reference if appropriate. For example, if you had to let someone go due to market conditions and they are an excellent employee, you could offer to be a reference.

What you should not do:

• Do not get pulled into an argument.
• Don’t make it personal. Focus on the key issues, and not the employee’s personal characteristics.

Parting on Good Terms
Whenever possible, try to part ways on a positive and respectful note (on good terms). While this may not always be achievable, handling difficult situations with respect and compassion can lessen feelings of anger or resentment. Employees may leave for various reasons, such as pursuing new opportunities, family commitments, or furthering their education, and they could potentially return in the future. It may be easier to part on good terms when there are circumstances beyond the business’s control, such as economic factors or a natural disaster. However, even workers you’ve had to let go for performance reasons may still have connections within your community that could impact your business. By fostering a positive or at least neutral interaction during the separation, you leave the door open for all former employees and contractors to become customers or advocates for your business.

Hiring employees is a crucial step for small business owners as they transition from working alone to building a team. This session guides business owners through assessing whether to hire, the types of help they may need, and the financial and legal considerations involved. It details the hiring process, from writing job descriptions to managing the recruitment funnel, interviewing candidates, and making an offer. Additionally, it provides guidance on handling employee departures, whether through voluntary resignation or termination, and outlines best practices for offboarding while ensuring compliance with legal requirements. These topics provide information on the beginning and ending processes of employment for your business. To learn more about onboarding, managing, and motivating employees for long-term success, please visit MOBI’s session entitled, Managing and Motivating Employees.

THE TOP 10 DO'S

1. Check all of the employment rules and regulations for your country, state/province, and local community to make sure you are in compliance.
2. Decide the type of help you need and how much help you need.
3. Consider whether an employee or contractor would be better for your business. 
4. Complete a Cost-Benefit Analysis to determine if it will be beneficial to hire.
5. Consider how representing your community and customers in your hiring practices could enhance your business.
6. Create a thorough and accurate job description so that both you and the job applicant fully understand the role.
7. "Cast a wide net” when hiring so that you have a sizable group of applicants to consider for the job.
8. Create a hiring and interview process that will help you find the ideal person to join your team.
9. Ceate an offboarding process before you need it. Have this process ready to go so you’re not scrambling to create it when an employee leaves your company.
10. Create an outline for any termination conversation. Be brief, calm, decisive, and to the point.

THE TOP 10 DON'TS

1. Avoid or ignore relevant regulations, rules, or processes.
2. Hire a new worker before conducting a Cost-Benefit Analysis.
3. Set the bar too high for applicant qualifications. Make sure you’re asking for knowledge, skills, and experience that are relevant and realistic to be successful in this job.
4. Wait until you’ve hired a new employee before planning how they will be paid.  
5. Make hiring decisions based on an applicant’s race, color, religion, sex, national origin, age, disability, or genetic information.
6. Ask different questions for each candidate you interview, it’s best to be consistent to ensure a fair evaluation.
7. Forget that Payroll Service Providers can help you do payroll and ensure you are correctly following tax laws and other requirements.  
8. Keep a bad employee longer than necessary. They can do damage to your business and your team.
9. When firing an employee, don't get pulled into an argument and do not make it personal.
10. If possible, don’t part on bad terms with employees who are departing from your business.

If you are currently writing or have developed a business plan, consider taking a moment now to include any information about your business related to this session. As a reminder, MOBI’s free Business Plan Template and any worksheets, checklists, and templates from this course are available for you to download. Just visit the list of MOBI Resource Documents on the Resources & Tools page of our website.

Here are some key terms and definitions used in this session or related to this session: