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ou’ve successfully started your own business and it’s booming; sales are high, customer retention is solid, and demand is growing. While you may be a pro at wearing multiple hats you may notice signs that you’ve outgrown your one-person operation. It may be time to hire some help.

At this stage, you may be weighing the costs and benefits of hiring your first employee. For example, companies spend an average of $4,000 per hire just for recruiting and hiring costs. 

To help us evaluate the benefits of hiring an employee, we tapped CPA Zach Carnes with Founder's CPA. His first tip was to think long-term. He says, “Hiring employees may come with some increased short-term costs such as recruiting costs and time spent training. This is why employees would ideally fill longer-term roles to eventually realize benefits on those short-term costs.”

With Zach as our guide we will explain the difference between an employee and a contractor, and then we will dive deeper into the benefits of hiring including:

  • Scalability and business growth
  • Increased productivity and efficiency
  • Enhanced customer service and satisfaction
  • Time saved and work-life balance
  • Tax benefits

This article may also give you some ideas of what skills to seek in a new employee. And when you make that first hire, consider using a payroll processor like Novo, to help you manage the payroll process.

Employee versus Contractor

We start by taking a closer look at the definition of an employee versus contractor.

The IRS provides guidelines that can help you determine the classification of your workers. But generally speaking, a worker is considered an employee when you have control over how, when, and where they perform their work.

In contrast, a contractor has more control over how and where they perform their work. Typically a contractor works on their own schedule, can work for multiple companies, and is responsible for paying for their own taxes and health coverage.

So which is right for your business? Zach says, “Employees will generally be for longer-term roles that fill a specific need to the core functions of the business. Contractors may often be used to fill needs for specialized tasks where they have increased expertise or experience.” 

It’s possible to hire both, depending on the work you need done, so don’t be afraid to diversify your hiring strategy. Zach says, “For example, it will not make sense for all companies to hire an accounting department on payroll (employees), but contracting out that necessary work to an outside firm would be efficient, as current employees do not have the expertise or time to spend on those accounting-related tasks.”

If you are still torn between hiring a contractor versus an employee, Sean offers this reminder.

“Contractors have the ability to fill roles, but they will not be as intertwined in your company's operations or culture.”

5 Benefits of Hiring Your First Employee

1. Scalability and Business Growth

“The biggest benefit of hiring employees is the potential for long-term growth,” says Zach.

With an employee to take over some of your day-to-day tasks, you have more time to focus on the bigger picture, where you see your business going, and how you can get there. Zach says, “If the sole owner of a business is spending a certain percentage of time on administrative tasks, this may be taking valuable hours away from tasks that are core to the business's operations or growth (e.g., sales, research and development, maintaining customer relationships, marketing).” Those administrative and ancillary tasks may be the first tasks you hand over to your first employee.

Alternatively, you can utilize your new hire to seek out growth opportunities for you. For example, if you’re looking to expand your market reach, you can look for an employee who has experience selling in other regions, so their network can help your business grow.

2.   Increased Productivity and Efficiency

You can’t be everywhere or everyone at once, and bringing on an employee can help you get more accomplished during the same amount of hours. 

Further, “Employees can develop skills over time, specific to your business, which can aid in growth, efficiency, and process improvements,” says Zach. For example, let’s say you want to build out the content on your website and social media pages. You have the writing skills, but you need an employee who can help run the campaigns. You can recruit a new hire who has experience using the tech stack needed to seamlessly cross-promote your posts, interact with customers on social media, and track the data analytics to better optimize future campaigns.

Your new hire can also introduce new perspectives on how current processes can be improved. Maybe you’ve been doing it your way up until now, but a new hire can help you find an even better social media scheduler or project management tool that can make your social media run more efficiently. 

3.   Enhanced Customer Service and Satisfaction

As your business expands, you’ll need to ensure customer satisfaction stays a top priority. According to a PWC study, nearly one out of every 3 consumers said they would walk away from a brand they love after just one bad experience. 

Having an employee to handle customer interactions means there’s more attention and care given to every client; something that may not be possible as your customer base outgrows your team.

Plus, having a dedicated employee means they can handle any incoming inquiries or issues faster, making customer satisfaction even higher—especially since 46% of customers expect a response in less than 4 hours.

4.   Time Saved and Work-Life Balance

It goes without saying that hiring an extra pair of hands means getting a little more time back in your day. While the initial onboarding and training process may take up a bit of your time, don’t skip this step. 

A robust onboarding plan can help you set up your new employee for success from the start. In fact, studies have shown that 69% of employees are likely to stay at a company for at least three years if they have a good onboarding experience. This saves you time in the long run from having to repeat the recruitment process due to turnover. 

Hiring your first employee can also give you more personal breathing room, reducing burnout and encouraging a stronger work-life balance. This can mean more time with your family or having the space in your schedule to actually make that yoga class. When you aren’t the only one doing all the work around the clock, you can take better care of yourself, which ultimately helps your business overall. 

5.   Tax Benefits

Depending on your state, you could be eligible for hiring incentives, economic development relief programs, and tax credits. 

For example, employers in New York State can receive a federal tax credit of up to $9,600 when hiring from specific target groups who have regularly faced barriers to employment. Check your local state government websites to see if you qualify for any applicable employment tax benefits. 

And don’t forget about the tax-deductible business expenses related to your employees, like health insurance, wages, and pension plans. These can also help ease the expenses of hiring a new employee.

Novo Note: Through the SECURE 2.0 Act, a number of credits are available to offset the employer's cost for implementing, maintaining, and funding employee's 401k plans.


“At some point in a company's growth cycle, hiring employees will be necessary for scaling and growth,” says Zach.  

Consider all the benefits that a new hire can bring to your company, in both the short and the long term. And if the legal and tax implications feel daunting, remember a payroll processor like Novo can make it easier to manage the payroll process.

Novo is a fintech, not a bank. Banking services provided by Middlesex Federal Savings, F.A.: Member FDIC.

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