As an accountant for small businesses, you play a number of roles for your clients throughout their growth: part financial expert, part trusted business advisor and part superhero.

Your clients may have started as a one-person operation formed around an idea, a website and the gritty will to succeed. When they grow and hire their first employee, however, things get more complicated. As an HR consultant serving small businesses for more than 23 years, I’ve been asked many questions outside of my core expertise. I know how helpful it can be when I am able to offer information and provide even basic answers to these questions. It’s a great feeling to be able to reinforce my relationship with my clients as an informed, go-to, business resource.

You may already have a good handle on what your clients should be thinking about, but brushing up on the basics is always a good idea. In that vein, here are five things your clients should know when they’re ready to hire their first employee.

1. Those little things called laws. When a client hires their first employee, federal, state and even local labor laws come into play. Your clients should familiarize themselves with all of them and be ready to comply. The list can be long, so here are just a handful of things to consider: new hire documents, labor law postings, employee notices, employee records, exempt versus non-exempt status and, well, you get the idea. Compliance is often dictated by employee count, but many employment requirements apply even when there is a single employee. Among these requirements – in every state except Texas, anyway – is that businesses with at least one employee have to buy workers’ compensation coverage. Non-compliance can result in stiff fines and other punishments. Despite this requirement, paying for workers’ comp premiums can put pressure on cash flow. One remedy to suggest is pay-as-you-go workers’ comp. This offering enables companies to tie premium payments to their payroll runs, smoothing out the expense throughout the year. Bottom line? Advise your clients to get informed. There are resources available on the federal and state Department of Labor websites that are free to download (free is good, right? Everyone likes free) and even articles like this one on the QuickBooks® Resource Center. Referring them to a HR professional for further guidance is good advice too.
2. Speaking of payroll. For small businesses, paying themselves as sole proprietors is easy and familiar. Paying others is an entirely different thing – compliance with aforementioned labor requirements, complex tax withholding calculations, benefits payments and other employee-related items conspire to make paying employees an onerous and, at times, frightening. Employees must also be paid regularly and on time. All of this builds to the “OMG, that’s a lot of work and takes a lot of time which I don’t have” epiphany so commonly experienced by new employers. My advice is don’t try this at home (or work). Outsource! By partnering with a professional payroll service provider your clients will be timely, accurate and fully compliant when paying employees, not to mention staying focused on their customers, ensuring employees are satisfied and remaining confident business owners. Look for a payroll provider that delivers great customer service, enables seamless purchasing and payment of workers’ comp coverage, and makes smart use of technology to avoid complicating the entire payroll process. It’s a lot less stressful that way.
3. An employee handbook? Really? Yes, really. Hiring an employee is transformational and your clients need to start considering a few things that were not part of their prior mindset. One, which I highly recommend, is an employee handbook. It seems quaint perhaps but putting together an employee handbook is critical as it outlines very clearly and concisely what your client is offering their employees and what is expected in return. It should include your client’s mission, vision and values, as well as information related to policies around time off, performance and compensation. It’s an important communications tool that should be provided to new employees upon hire. This way, everyone can focus on the job at hand and your clients can feel good about what should be a fulfilling transition from sole practitioner to a team environment.
4. Forms, forms and more forms. Did I mention there’d be forms? Forms and documents abound for employers. It’s just the way it is. So, a good suggestion for your client is to build an HR “toolkit.” The toolkit is essentially a repository of documents and forms that could significantly lower their risk while saving time. The toolkit should include legally required new-hire documents, such as W-4s and I-9s, and good-to-haves like employment applications, job descriptions and performance evaluations. Your client should consider including documents that support the entire employment lifecycle. They will be on a sharp learning curve once they start employing people, so reviewing the HR toolkit a couple of times a year to ensure it reflects the current state-of-the-business is good advice. If your clients prefer to work in the Cloud, a human resource information system can turbocharge the entire toolkit, making it super easy to update and share documents, collaborate with vendors and contractors, and track all HR activities.
5. Think total compensation. Another consideration for new employers is the optimal package of both pay and benefits – total compensation – that will be offered. There’s a fine balance between being competitive in a tight labor market, and a client’s budget. New employers will also need to consider how they can offer options for health coverage and paid time off, two of the most important benefits for employees. Even small perks can be appreciated by employees, such as supporting a gym membership. Flexible work schedules can be highly valued as well. Advise your clients to consider what would be important to an employee in their specific line of work and at their particular company, then design the total compensation around it.

Bravo to your clients when they’ve grown to the point where hiring an employee makes good business sense. The process is energizing and exciting. It can be frightening, too. My hope is that you’re their first call. With this information in your consulting arsenal, you can feel confident that you’ll have answers when your clients ask you about the first steps on the path to being a boss. You’ll have served them well.

Editor’s note: To be compliant, employers must post current federal and state labor law posters. To automatically receive new posters when mandatory laws change, subscribe to the QuickBooks Poster Compliance Service. Automate your workers’ comp payments and pay as you go, each time you run payroll. Learn more about the Intuit Workers’ Comp Payment Service.