SME Toolkit Logo
Partner Logo
Home  > Managing Employees
 Share  Print Version  Email

Managing Employees

Provided by My Own Business, Content Partner for the SME Toolkit

OBJECTIVE: It is not possible to include all the complexities and legal rules pertaining to employees. In this session you will learn how to prepare for employees from job descriptions through legal considerations. Your success in finding, hiring, training and motivating good employees will play a key role in building a successful business.

Back to Top

Step One: Before You Start


Your success in finding, hiring, training and motivating good employees will play a key role in building a successful business. Since payroll can be the single highest expense in operating a business, a mistake is especially costly when starting. A failure with your first employee will be harder to overcome than when you have many employees.

Employee or independent contractorEmployee or independent contractor?

You cannot assume that a hired person is an independent contractor rather than an employee. Unless a person falls clearly under the definition of independent contractor, you will be hiring an "employee" and will be responsible for withholding income tax, social security and other taxes. Or would it make more sense to retain a temporary employee through a temporary staffing company? If you do not have a stable operating budget, it is easier and less costly to end a temporary assignment than it is to lay off an employee.


Employee handbook. If your business plan includes building an organization, we recommend you consider development of an employee handbook. Your handbook should become the written summation of what your employees need to know regarding your company objectives, policies and current labor rules. It could include divider tabs for the following materials:

  • A document explaining company history and objectives
  • Employment policies
  • Pertinent labor laws and rules
  • Job descriptions and qualifications
  • Benefits package
  • Safety rules
  • Organizational chart and operating procedures
Employee handbook

Back to Top


Hiring Employees

Brent M. Giddens Carlton DiSante & Freudenberger LLP Brent M. Giddens
Carlton DiSante & Freudenberger LLP
Play Video
How should an employer determine whether an employee is to be paid hourly or a set salary?

Attracting employees
Attract the largest possible pool of applicants by making use of all the most appropriate job posting resources. Resources may include job fairs, school placement centers, newspaper advertising and online job boards. Also furnish the job description to your current employees and business contacts.

Require all applicants to furnish references, educational credentials and prior employment record. Always check the references and contact the prior employers of job finalists. Develop a list of specific questions you will ask references. Don't hesitate to ask hard questions. Consider running a credit and/or background check.

Interviewing practices
Remember that interviewing is a two way street. You are interviewing candidates and they are assessing you. Introduce yourself as you want to be addressed at work. Set a professional tone and treat the candidate as your top priority. Do not take phone calls or answer email. Do not discuss other candidates. Keep appointments promptly.

The interview process consists of four parts: preparation, writing questions, conducting the interview and selecting the employee. Avoid questions that have a yes or no answer; instead ask open-ended questions such as: "Tell me about a time when you had a difficult customer." Encourage candidates to tell about how they have solved problems. For example, "Could you give me an example of a business challenge you have faced and how you overcame it?"

Find a way to have the candidates demonstrate their knowledge of the skills required. If a specific skill such as software programming is required, prepare a test to assess their skills (or lack of skills). After each interview establish an overall rating on a one to ten scale. In this way you can compare candidates with each other. Finally, write down their strengths and weaknesses including:

  • How can this candidate help my business?
  • Is there anything that you are concerned about?
  • How much training will be required to get the candidate ready?

Pre-employment drug screening
Drug screening is an important safety issue in the workplace. 

Understanding Workplace Harassment
Harassment occurs when unwelcome comments or conduct based on sex, race or other legally protected characteristics unreasonably interferes with an employee's performance or creates an intimidating, hostile or offensive work environment.

Prevention of Workplace Violence
Workplace violence can be any act of physical violence or threat in the workplace. The best prevention comes from identifying problems early and dealing with them.

Brent M. Giddens Carlton DiSante & Freudenberger LLP Brent M. Giddens
Carlton DiSante & Freudenberger LLP
Play Video
Once an employee is hired then what?

Employment Eligibility Verification
Employers are responsible for verifying the employment eligibility of prospective employees.

Selecting outstanding employees
Warren Buffett, a great evaluator of outstanding employees, is not a big fan of resumes and instead focuses on brains, passion and integrity. Success in hiring outstanding employees will be directly proportional to the accuracy of your assessment of these three traits. Integrity is the most difficult and elusive to judge. Here are helpful guideposts:

  • Integrity is when what people think, promise, and do all coincide.
  • Integrity is about principle-centered living — doing what is right rather than what is expedient.

Legal considerations
Your labor lawyer and payroll service provider can keep you from making costly mistakes in interviewing, hiring and managing employees. For instance, laws protect applicants and employees against various forms of discrimination including race, color, religion, sex, national origin, pregnancy, age, citizenship status, disability, military status, union membership and in some areas, criminal record.

Sil Miller Director of Human Resources California Community Foundation Sil Miller
Director of Human Resources California Community Foundation
Play Video
What should I know before posting a job notice on the Internet?

Laws also require employers to provide employees with certain benefits:

  • Time off to vote, serve on a jury and perform military service
  • Comply with all workers' compensation requirements
  • Comply with Federal Family and Medical Leave laws (if you have more than 50 employees)

There are some employee benefits you are not required to pay for. However, most companies offer some of them to stay competitive:

  • Retirement plans
  • Dental or vision plans
  • Health plans
  • Paid vacations, holidays or sick leave.

Back to Top

Step Three: Create Training Disciplines

One of the main reasons new employees quit is lack of information about the job or an unpleasant work environment. Starting with the first day of employment, establish a customized training program designed to:

  • Review the job description and probationary and evaluation periods.
  • Outline benefits, training requirements, policies, job expectations, dress code, information on the company, payroll and work breaks.
  • Introduce to coworkers and tour facilities.
  • Set goals.
  • Review and answer any questions.
  • Have new hire work with an existing employee.
  • Develop teamwork skills.
  • Learn problem solving and conflict resolution.
  • Check periodically to make sure employee is doing well.

United business team
Growing employee skills
Training should be ongoing for every employee and can come in many forms:

  • When you see an employee mishandling something, use the moment to teach them what to do. But don't correct in front of customers or co-workers.
  • Have regularly scheduled training meetings.
  • Send employees to helpful workshops.
  • Use online training programs to expand employee skills.
  • Have regular, periodic reviews on achieving advancement goals.
  • As you grow you will need to begin delegating authority. 

Back to Top


Keeping Good Employees

Keeping Good EmployeesImportance of retention
Employee turnover is very costly. Not only the cost of rehiring and retraining but in disruption of production, customer service and the damage to company morale.

How to retain good employees
If offering promotions isn't an option for your small business, here are ways to help you keep valued employees:

  • Tune into whether employees are happy with their roles and with you. Ask their opinion on changes that might enhance their loyalty.
  • Reward extra effort.
  • Give praise. It should be frequent and personalized. A simple thank you note can be effective.
  • Avoid burnout: Bring in temporary help during crunch times.
  • Have a little fun: Boring, no-fun jobs and businesses are...boring!

Ways to motivate employees
Key managers can be motivated by sharing in the earnings they individually produce. In many cases, profit centers can be set up on individual profit centers.

Back to Top


Discharging an Employee

Brent M. Giddens Carlton DiSante & Freudenberger LLP Brent M. Giddens
Carlton DiSante & Freudenberger LLP
Play Video
When does a company need to hire a lawyer for employee related issues?

Firing a problem employee is unpleasant. But when called for, you should be ready and quick to act as the occasion demands, and proceed very carefully. You should consult with your labor lawyer to avoid the risk of a discrimination or wrongful termination lawsuit. Although this course does not provide legal advice, here are some helpful steps:

  • Under most circumstances (excluding misconduct such as theft) an underperforming employee should be given early warnings and realistic written performance reviews pinpointing specific shortcomings.
  • Make the termination meeting short and to the point. The reasons for firing should be cited as being for cause but without going into details that would result in an argument. Maintain a positive and professional attitude and remember to treat the person with courtesy and respect.
  • Explain termination benefits including severance pay (if any) and any other benefits.
  • Collect all company equipment, keys, tools, etc. being held by the employee. Accompany the employee to their desk or work area, and wait while they collect personal belongings. If they have used any company computers, change the passwords at that time.
  • Present the final payroll check, which was prepared in advance of the meeting. The check should include pay for the full day of termination regardless of the time of day the person leaves and any accrued vacation pay. The discharged employee should then be asked to leave the premises. Accompany the employee to ensure no mischief occurs but allow them to maintain their dignity. Do not permit a return to the workstation to avoid the risk of any damaging behavior such as erasing computer files.
  • If appropriate, have the locks on doors changed.
  • If you receive a reference check request on a discharged employee, ask your lawyer to assist in how you respond. Fear of lawsuits keep many employers from replying at all.

Back to Top


Top Ten Do's and Don'ts


  • Be slow and diligent in hiring.
  • Verify all references and prior employments.
  • Maintain an employee job description and handbook.
  • Maintain a competitive employee benefits package.
  • Use a payroll service provider.
  • Retain a labor lawyer to avoid expensive claims and penalties.
  • Evaluate potential employees by brains, passion and integrity.
  • Maintain ongoing training programs.
  • Keep all employment records at least four years.


  • Delay in discharging unsatisfactory employees.
  • Rely on a candidate's claims regarding skills. (Evaluate by testing.)
  • Assume your employees are independent contractors.
  • Think that benefits packages are for big companies.
  • Proceed with hires without evaluating numerous candidates.
  • Hesitate to ask candidates hard questions.
  • Deny employees their legal rights: serving on juries, voting, approved leaves.
  • Overlook classifying employees correctly.
  • Overlook praise, recognition and reward of good employees.
  • Overlook the power of incentive compensation.

Back to Top


Business Plan: Managing Employees

We heartily recommend that you download the individual business plan template for this session and complete it now:

Managing Employees

Instructions on filling in the business plan template:

  1. Each box has a permanent title in CAPITAL LETTERS.
  2. Below each title is a sentence starting with an "Insert here" sentence. This will suggest information to insert. The boxes will expand as you take up more room so use all the space you need.
  3. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information you have inserted.
We suggest that you fill in each section of the business plan
as you proceed through the course.

The full template for all sessions 1-15 can also be downloaded into your computer as a single document:

Section 1-15: (Full Business Plan Template)

Include sufficient research findings and background materials. Make it interesting by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 15 sections.

Many other business plan formats are available in libraries, bookstores and online.

Back to Top


Session Feedback and Quiz

Copyright © 1993, 1997-2016, My Own Business, Inc. All Rights Reserved.
 Share  Print Version  Email
Ratings (0)
If you are a human, do not fill in this field.
Click stars to rate.