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Posted: 17 Jan 2021 09:00 AM PST Hiring the right employees is critical to the success of any business, particularly startup companies. Good employees can present new ideas and motivate other employees to work hard. They are dedicated, conscientious, trustworthy, and do not need to be micromanaged. Conversely, hiring the wrong employees can slow down or impede the progress of your business and cause you to lose money through wasted training time, improperly performed tasks, or even internal theft. Furthermore, any incompetence or improper activities by your employees can reflect poorly upon you and your business and potentially result in legal liability. Before hiring anyone, you should familiarize yourself with the laws and regulations imposed regarding interviewing and hiring employees. Protecting employee rights, ensuring physical safety, and maintaining fair treatment are at the heart of most laws created to safeguard the hiring process. Laws protect against discrimination on the grounds of race, religion, national origin, age, sex, or disability. They also protect against sexual harassment and unfair treatment of employees. You not only need to be aware of such employment laws, but you can protect your business by establishing appropriate hiring policies. This guide offers business owners important guidelines for interviewing, hiring, and onboarding new employees. Labor laws impacting employeesThe U.S. Department of Labor (DOL) administers and enforces hundreds of federal laws covering workplace activities. The laws fall under various Congressional acts and are enforced by various divisions of the DOL. Included are laws pertaining to:
The DOL also enforces other laws pertaining to drug testing, polygraph use, garnishing wages, and family and medical leave. Finding the right pool of candidates to interviewWhen hiring employees, popular methods for finding job candidates include using LinkedIn ads, employment agencies, executive placement services, job postings on employment websites, job postings on your own company website, and word of mouth. Keep in mind that the wider you extend your search, the more time you will need to go through resumes and narrow down candidates. In some cases, the cover letter accompanying the resume will tell you more about the individual than the resume itself. Here are top tips on finding the right employee:
Once you have decided which applicants you would like to interview, you need to prepare for the interview in advance. Pre-interview to-do list
Different ways to approach employment interviewsBusiness owners who are hiring employees should know that there are several different philosophies when it comes to the job interview process. Depending on the position being filled, some employers will look more closely at specific technical skills when hiring employees, others will be concerned primarily with how this individual will fit in with the team, and some will focus on an applicant's enthusiasm and desire for the position. The need to handle specific tasks, supervise others, meet with clients, and/or work independently should all factor into how you approach the interview process and make your assessment of the candidates. Although you can get the answers to many questions from looking at a resume, it is important to hear each prospective employee respond so that he or she can provide greater insight into his or her previous employment, experience, and education. Top job interview questions to ask when hiring employeesIt is helpful to prepare a list of questions you would like to ask candidates, which you should review with your legal counsel. Keep in mind that you don't need to always stick to the script; you can and should follow up on the interviewee's comments with additional questions. Here are some of the most frequently asked job interview questions: Introductory questionsThe job interview often starts off with some general introductory questions, such as;
Questions about work historyTo learn more about the candidate's work experience and how that experience might translate for the open position, ask these types of questions:
Questions about the job positionQuestions about the specific job position that candidate is applying for can include:
Questions on interpersonal skillsQuestions about work relationships and interpersonal skills can include:
Questions about the companyConsider asking a variety of questions about the company to see if the applicant has done their due diligence. Consider these types of questions:
Questions on strengths and weaknesses of the job applicantYou should also consider asking potentially challenging questions to gain insight into the applicant's strengths and weaknesses, including:
Questions on job compensationYou may want to ask salary/compensation questions, such as:
Concluding questionsSome questions to ask at the end of the interview can include:
Along with assessing the candidate's answers, you should try to get a general feeling for the comfort and character of the person sitting across from you. However, try not to read too much into body language, since most people are typically nervous during a job interview. It is more important when hiring employees that you get a feeling for what this person could bring to the position from his or her past experience and his or her manner of presentation. Candidates should be dressed appropriately for an interview, depending on the formality of the position and company. RELATED: Tips for Interviewing Potential Employees Job interview red flagsYou may find certain red flags during the interview process that will indicate that this is not the ideal person for the job. These might include:
Know what job interview questions you may not ask when hiring employeesFederal and state laws prohibit employers from making hiring decisions based on protected categories: gender, race, age, color, religion, disability, and others. Asking the wrong questions could lead to a discrimination claim against the company, even if decisions are not made on that basis. When hiring employees, here are examples of the types of questions to stay away from:
Some of these may be obvious. But these questions may also be prohibited:
Have each job applicant fill out an Employment ApplicationHaving prospective employees fill out Employment Applications will typically save you time gathering background information. While a resume will include some of their work history, you can obtain more information from presenting your own application. Applications should provide spaces for basic information such as name, address, phone number, and Social Security number. While you cannot ask a person's age, you can ask if he or she is over the age of 18. You may also want to ask where the applicant heard about the position or who referred them to your business. Past job history, including job title, key responsibilities, salary history, and reasons for leaving the previous positions should be included for the applicant's last three jobs. Education should include high school, college, and post-graduate work as well as any special schooling the applicant may have had that would be applicable to the position. Finally, you need to have a paragraph (review this with your attorney) proclaiming that all statements made by the individual are true and that this application does not signify that any hiring agreement has been entered into. Also, have the applicant answer whether or not it is okay to contact his or her current or previous employer. The Employment Application should then be signed by the applicant and dated. As is the case with the interview, you cannot ask a variety of personal questions on the Employment Application. Once you have hired someone for the position, you should hold on to the application and the employee's resume. This is the information on which you based your hiring decision should it ever be questioned in the future. Perform a comprehensive reference check before hiring employeesMany employers conduct a limited and incomplete reference check as part of the hiring process, often leading to issues with the candidate's inability to perform their required duties or to get along with others. A comprehensive reference check includes:
The purpose of these checks is to make sure that the applicant will fit into the company's culture and to ensure that the applicant has been truthful in their resume and employment application. However, the process is carefully regulated by the federal government (through the Fair Credit Reporting Act) and the laws of many states; failure to follow the highly technical process can lead to class action lawsuits. Consider consulting legal counsel and, for general information, see the EEOC's Background Check: What Employers Need to Know. Use a good form of job offer letter or employment agreementOral agreements often lead to misunderstandings. If you plan to hire a prospective employee, use a carefully drafted job offer letter, which the employee is encouraged to review carefully before signing. For senior executives, a more detailed employment agreement often makes sense. A good offer letter or employment agreement will address the following key items:
Companies should ensure that the employee and the Company sign the letter, the Confidentiality and Invention Assignment Agreement, any Stock Option Agreement, and any first day paperwork (such as the IRS W-4 Form for withholding and the I-9 form mandated by law). Here is an example of a form of employee job Offer Letter. Employment agreements for executivesFor executives and other high-level employees such as CEOs and CFOs, you might want to compose a more formal Employment Agreement. A well-drafted Employment Agreement for an executive addresses the following key issues:
Confidentiality and Invention Assignment Agreements with employeesCompanies pay employees to come up with ideas, work product, and inventions that are useful to the business. Employees have access to a great deal of their company's confidential information, which can be highly valuable, especially in technology companies. One basic way to protect proprietary company information is through a Confidentiality and Invention Assignment Agreement. This agreement deals with the confidentiality issues, but it can also provide that the ideas, work product, and inventions that the employee creates which are related to company business belong to the company—not the employee. A good Employee Confidentiality and Invention Assignment Agreement will cover the following key points:
Venture capitalists and other investors in startups expect to see that all employees of the company have signed such agreements. In an M&A transaction in which the company is sold, the buyer's due diligence team will also be looking for these agreements signed by all employees. A sample form of Employee Confidentiality and Invention Assignment Agreement can be found at the Forms & Agreements section of AllBusiness.com. Similarly, it will be appropriate that all consultants of the company also sign a Confidentiality and Invention Assignment Agreement. See Key Issues with Confidentiality and Invention Assignment Agreements with Consultants. Properly classify workers as employees or independent contractorsBoth emerging and established companies face the issue of properly classifying workers as employees or independent contractors. When hiring employees for your company, it’s critical to get this right. Lawsuits are often filed attacking the classification of workers as contractors, and the potential damages and penalties can be enormous. Employees and contractors are paid differently. Generally, the company must withhold income taxes, withhold and pay Social Security and Medicare taxes, observe wage and hour laws, and pay unemployment tax on the wages of employees. On the other hand, employers generally are not required to withhold or pay taxes on payments to independent contractors, pay overtime compensation, or comply with other payroll and related issues applicable to employees. The general idea behind the difference is that the contractor will often have his or her own business, work for other companies, have expertise that is not subject to detailed control and supervision of the company, and may want the flexibility of setting hours and working arrangements. The savings to a company by properly designating a worker as an independent contractor could be 20-40% of the labor costs. However, that savings will be quickly eaten up by challenges and claims from the government (which wants the tax payments) and lawyers for the workers. The IRS takes the position that in determining whether a person is an employee or independent contractor, the key factor is the degree of control the company exerts over the process. Here are some of the factors that might indicate the worker should be classified as an employee:
These factors may indicate the worker may properly be classified as an independent contractor:
This is an evolving area of the law and some states are adopting specific legislation dealing with gig workers and independent contractors. California legislation in particular has been hotly contested by Uber, Lyft, and other companies. New employee paperworkPrior to welcoming new employees into the business and before you show them around the office, plant, or sales floor, you should be prepared with all of the proper paperwork. Consider the following paperwork for the employee to sign on the first day:
An employee handbook should include all practical information on:
Short of such a handbook for each employee, there should be a central location such as an Intranet site or a handbook in the office of the person who handles human resources for your company with all of this information spelled out in writing. It's to your advantage to take the time to carefully think through and list all matters pertaining to employees prior to the hiring process. This can prevent future lawsuits. Maintain proper documentation concerning employees and HRCompanies are often sloppy in maintaining the proper employee/HR-related documentation. This can become problematic if the company is pursuing financing, is involved in an M&A activity, or is involved in litigation with an employee or regulatory agency. Here is a compendium of the types of documentation the company should consider maintaining:
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