The Basics of Making An Offer To Your First Hire

Recruiting and interviewing your startup’s first employee is a thrilling and trying time. For startup founders who often lack HR experience—and are already deep in the activity of launching a business—the process is downright daunting.

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Once you’ve found a candidate that checks all the boxes, it’s time to bring them on board. This process can be broken into four steps: covering the legal requirements, negotiating, making an offer, and planning for their first day.

In this article, I explain how to navigate each step of making a job offer with suggestions to make your life easier along the way.

The Legal Requirements of Hiring

This is arguably the least exciting aspect of hiring a new employee, but it must be done.

First, you should read this full article from the United States Small Business Administration (USSBA), as well as anything that’s unique to your city or state. Again, it’s not thrilling, but all of this must be completed before the new hire can log a single hour of work.

Additionally, you’ll need to have your new employee complete a W4 and an I-9 if you’re based in the US. As with the tasks listed above, these forms must be complete and on file before an employee begins work.

If these acronyms have you dazed, opt for online services that make this process smoother. WorkBright, Agile HR, and Zenefits are a few to consider. These services cost money to use but will be a lot cheaper than an in-house HR professional.

You should also make sure payroll is lined up before the new hire comes on board. For example, do you have a finance person in-house or will you use an outside service? Often times an accountant will run payroll for a small business or startup.

Navigating Negotiations

Now that the legal boxes are checked, turn your attention back to the would-be employee.

Before making an offer, request and check references. Make sure you get two professional references and one personal reference, then pick up the phone and call them. Ask the professional reference if they’d hire the person for the target position, and ask the personal references how long they’ve known the candidate and their thoughts on their personality and work ethic.

If that goes well, it’s time to negotiate with the candidate. Remember, a formal job offer is a give-and-take for all involved. That said, it isn’t about “winning.” Your goal shouldn’t be to walk away the victor, but to come to a result that makes everyone happy.

Salary is a logical place to start. First, define what your limits are. As a young startup, money is likely tight. Identify a number that represents your absolute limit for salary *and* benefits. Make your first offer a little below that figure so you have room to negotiate.

Next, be aware of what your competitors are paying those in a similar position, as well as what your candidate was earning at his or her previous job. To fill in any gaps between your ideal number and what competitors are offering, consider things like bonuses and benefits. Flexible schedules or equity might go a long way.

At this stage, be willing to walk away. That’s not easy to say and even harder to do. If your would-be hire becomes inflexible or unreasonably demanding during the negotiation process, it’s best to let him or her go, as disappointing as that might be.

Making the Formal Offer

Once you and the preferred candidate negotiate a plan forward, contact them by phone or video call if you haven’t already. A face-to-face discussion is more effective at conveying your enthusiasm than an email would be.

Next, draft, sign and send an employee offer letter. It should include:

  1. A job description, including job title, duties and responsibilities
  2. Required hours or schedule
  3. Starting date
  4. Salary/wages and benefits

Of course, all of these items should have been discussed in the negotiation phase. Put a deadline on when the letter should be signed and returned to you by the employee. Giving candidates 24 to 48 hours is standard practice.

As a young startup company, you’ll also want to have a Confidentiality and Intellectual Property Assignment Agreement signed by the employee (here’s an example). Without this agreement, they may be free to discuss your intellectual property or take work they created for the company with them upon termination. It’s best to protect yourself from day one.

Put the signed documents in a new employee file to be built over time with performance (records of promotions/demotions, performance reviews, disciplinary actions/warnings, awards or commendations) and separation records (termination paperwork, letters of resignation and exit interview notes). This will help you stay organized in the event of termination.

Preparing for the Start Date

It’s nearly time to celebrate and thank everyone who helped you get here. Hiring is a major milestone and one who should be proud of.

But first, consider that a new job is an exciting and difficult time for both employee and employer. Take these last steps to ease the pain for everyone.

Make a list of routine expectations. Years ago I was given a list of “Ongoing Tasks” I’d complete routinely, week after week. These did not change. Next, a list of general “To Dos” which changed from week to week and finally a list of “Open” tasks that I could address when I had time. I loved these lists, as I knew exactly what was expected of me as the new guy, and I plugged all of them into a daily routine that worked.

It’s also a good idea to plan the new person’s first week for them. This will be the time they’ll learn the product inside and out, read up on policies and procedures, and attend any planned orientation sessions you have. This ensures that they’re informed and reduces stress on their part. By week two, they can move on to “real” work.

Four Steps to Startup Hiring

Congratulations on bringing someone on board. It’s an involved process but one that’s certainly manageable for those who plan ahead. Be diligent and careful, purposeful and smart.

Follow the steps outlined in this series and use it as a checklist. May your employee roster and your business grow to great heights.

Expanding your team? Use Authentic Jobs to find your next hire.