Hiring your first employee is an exciting step, but it also comes with legal and financial responsibilities. As a new business owner, it’s easy to overlook important steps in the hiring process—especially when you’re focused on growing your company and managing day-to-day operations. Our Troy, Mi business lawyer can attest that hiring hiccups can lead to diminished productivity, nasty disputes, and even lawsuits down the road.
Five Common Hiring Mistakes And How To Avoid Them
Misclassifying Workers
One of the most common mistakes new employers make is misclassifying workers as independent contractors instead of employees. While using contractors may seem like a simpler or cheaper option, getting the classification wrong can result in penalties for unpaid taxes, wage violations, and more.
Before deciding how to classify someone, review how much control you have over their work. If you’re setting their schedule, providing tools or equipment, or closely managing their tasks, they are likely an employee. Michigan law—and IRS guidelines—look at several factors, so it’s worth reviewing your working relationship before making a final decision.
Not Having A Written Offer Or Agreement
Some new employers rely on verbal conversations when bringing on their first few employees. But failing to document the terms of employment can cause confusion later. A written offer letter or employment agreement helps clarify key details like job duties, pay, work hours, and any probationary period.
Even if you’re hiring someone you know or trust, it’s important to be clear about expectations from the start. Putting the terms in writing shows professionalism and gives both sides something to refer back to if questions come up later.
Skipping The Employee Handbook
Many small businesses delay creating an employee handbook until they grow larger, but having one in place from the beginning can help you avoid misunderstandings and set the tone for your workplace. A handbook outlines your company’s policies, including time off, conduct, workplace safety, and complaint procedures.
It doesn’t have to be long or complicated. A basic, legally sound handbook helps communicate what you expect from employees—and what they can expect from you.
Hiring Without Verifying Eligibility
Federal law requires employers to verify that every employee is legally authorized to work in the U.S. If you skip this step, even by accident, you could face fines or audits. Within three days of the employee’s start date, you need to complete Form I-9 and collect the proper identification documents.
It’s not enough to just ask for a Social Security number or copy a driver’s license. The I-9 form must be filled out properly and kept on file for a certain period. Taking care of this early helps you stay compliant and avoid penalties.
Not Thinking About Long-Term Fit
When you’re under pressure to fill a role, it’s tempting to focus only on technical skills or availability. But hiring someone who doesn’t fit your business culture or long-term goals can create more problems than it solves.
Take the time to interview thoughtfully, check references, and consider how the person will work with you and any future team members. A good hire can support your business as it grows, while a rushed decision might lead to turnover or legal conflict.
Build A Strong Foundation From The Jump
Hiring doesn’t have to be complicated, but it does require careful planning. From proper classification to clear communication and documentation, the right steps now can save you from disputes and legal costs later. At Gudeman & Associates, P.C., we work with Michigan business owners who want to get things right from the start. We’re here to help you build a strong and sustainable business. Whether you’re getting ready to hire your first employee, or reviewing your current practices, contact us for seasoned and reliable guidance.
