From Solopreneur to Your First Hire: 5 Things to Consider (2024)

When you can’t keep up with demand, are working without breaks or need to bring different skills or expertise in your business, it may be time to hire your first employee. Here are things to consider as you prepare to build a staff.

1. Identify the costs and opportunities that come with hiring

A guideline to consider when hiring your first employee is to hire someone who can help you make money versus someone who will cost you money. As Shelagh Cummins, founder and CEO of The Road to Seven says in a recent webinar, “Hire someone who is going to help you make money. Hire what I would call a revenue centre in your company.”

After all, with an employee to pay, you will no longer take home 100% of your profit. This is why, if your bottom line is tight, hiring a revenue-generating employee is a smart move – instead of an employee who might simply reduce your working hours like a virtual assistant.

Hiring someone who can fill a crucial gap is a great place to start. For instance, if your strength lies in developing the product or performing the service you’re providing, bringing in an employee who can sell your business could help you grow. Or if you’re not strong in processes, an operations expert could help streamline your business and boost profits.

It’s a smart move at this stage to calculate how your new hire will impact your personal and business finances – in both the short-term and long-term – and how long it might take for your growing team to translate into growing revenue (See #3 for calculating the cost of a new employee).

2. Understandthe legal side of hiring

There are several steps to take to hire an employee in Canada. Here are some of the main tasks you’ll need to complete to onboard your first employee:

Draft an employment agreement

An employee agreement sets clear expectations for an employee around their role and responsibilities, work hours, compensation, vacation benefits and workplace policies. It should also have an explicit termination clause that indicates the amount of severance pay they’re entitled to should they lose their job. If you’re hiring an independent contractor for a specified time these dates should be included in the agreement.

Provide and collect the appropriate tax forms

From a compliance standpoint, your employee should complete the federal TD1 form and the provincial equivalent (i.e., the TD1ON in Ontario, TD1AB in Alberta, TD1BC in British Columbia, TP-1015.3-V in Quebec) for the current year. These forms will provide you with the details you need to process your employee’s payroll, such as their Social Insurance Number, date of birth, address and tax deduction information.

Open a payroll account with the CRA

When you hire an employee and pay a salary, you need to register for a payroll account. If you already have a business number (BN), you just need to add a payroll program to your existing BN. TheGovernment of Canada websitehas complete information on what you need to open and manage a payroll account, including what is required around remitting timelines and payroll deductions.

Understand Employment Standards Act, health and safety policies

Each Canadian province and territory has an Employment Standards Act (ESA), which outlines the rights and obligations of employers and employees. It sets the standard for payment, compensation and working conditions in most workplaces. Hours of work, breaks, minimum wage, vacation time, holidays and leaves (i.e., parental, sick, bereavement) are covered in the ESA.

There are also certain workplace health and safety practices required by law in Canada, such as controlling workplace hazards, providing necessary employment training, supplying protective equipment and more.

Understand insurance requirements

Depending on the type of business you run, you may need to register with a workers’ compensation board. These organizations provide workplace insurance to employees in construction, hospitality, agriculture, transportation and domestic services – if your business is any of these sectors, workplace insurance is mandatory. It’s a good idea to check with your provincial or territorial compensation board to understand what’s required as an employer.

3. Figure out how much to pay your new employee

The cost of an employee is more than their salary. Besides their wage, there are benefits, taxes and insurance premiums to consider. It will be important to balance what you can afford with what the industry and the role demands. Indeed has ahelpful formulato determine the overall cost of an employee.

As you establish your employee’s wage, here are a few things to consider:

• Make sure you’re compliant with minimum wage and hour laws

• Find out what others are paying for the same type of work. This may take some networking and reviewing similar job postings

• Determine how you’re paying, such as an hourly wage, commission or annual salary, and whether the compensation will include any bonus for performance

Keep in mind that you’ll want to hire someone who fits your needs while also exhibiting qualities that align with your values and those of your business. Given the cost to hire and train, finding someone who you can retain for the long term (if that’s your goal) is an important consideration.

5 min read: Tips to Attract, Retain and Engage Staff: HR Best Practices in Turbulent Times [webinar re-cap]

4. Recognize how your role might change

With the addition of a new hire, do your responsibilities change? Are you moving away from “doing” and towards “managing”?

As you consider hiring your first employee – and start establishing the roles and responsibilities they will take on – think about whether their presence might take away from what you love most about running your business. For instance, if baking bread is your passion, will you be moving away from baking and towards supervising?

While expanding your business will often require owners to work “on” their business more than “in” their business, it’s smart to think hard about the direction your business is about to take, and what your role will be in the business going forward.

5. Engage them from the beginning

After running your business on your own, hiring your first employee might feel fairly personal – and that’s not a bad thing. Studies show that employees who are properly onboarded (i.e., when expectations are clearly set, appropriate training and resources are provided and a strong sense of belonging is conveyed), employees are more likely to feel loyal and invested in the company.

Following this up with an ongoing culture of recognition and support is just as vital to ensuring your employee is engaged and committed to the success of the business. Beyond hiring your first employee, understanding how to retain your first employee will be important as you grow your business.

5 min. read: How to Become an Employer of Choice

Bringing someone else into your business is a big move, and it’s worth carefully considering the impacts to your finances and your role. And to stay compliant with federal and provincial/ territorial governments, it’s crucial to be up to speed on the laws and regulations that govern employee standards. With payroll and HR experts available and plenty of online resources, you can get the information you need to hire with confidence.

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