Your business is growing and you have decided that you need to hire an employee – congratulations! Now the hard part begins… Here is a step-by-step guide to hiring an employee, which flags some of the issues you should consider. Note, this “How To” deals with employees – contracting with someone as an independent contractor is a completely different process and will be described in another article.
There are a number of different spots to get your job posting out to your desired workers. It is worth doing a bit of research on where your particular industry tends to post. For example, many young professionals search for jobs on Indeed.com or Monster.ca. Further, your company might already have an online reputation on a site such as Glass Door.
The content of your job posting will include the particulars of the job requirement, and any formal education or accreditation required. While it is a great idea to add some “personality” to your job posting, it is important to avoid posting any worker preferences that could be deemed discriminatory. When in doubt, focus on what lawyers call “bona fide job requirements”. While a restaurant might be warranted in seeking a person who is “outgoing”, “looks good in a short skirt” wouldn’t be a great idea.
You have posted your job and have a list of people you want to interview…now what? We will leave a discussion of the right approach to interviews to the HR experts (“if you were an animal, which animal would you be?” or “how many sewer grates are on Elgin Street?”); however, we can give you some pointers on what NOT to ask in an interview:
- While you want to get a feel for the personality of your candidates, you also want to ensure that you don’t obtain information, which can lead to you making a potentially discriminatory hiring decision. This means that you need to stay away from questions that could lead to you finding out the age, religion, ancestry, race, sexual orientation, marital status and family status of the applicant, to name a few. For example, if you or your company is biased against hiring newly married women based on the assumption that such women will want to start a family soon and take maternity leave, then you need to make sure that you avoid questions that could lead to such assumptions.
- You can confirm that the candidate is legally allowed to work in Canada (e.g. a technology worker from the United States who has worked for your competitor might not have a work permit, which allows them to easily change positions or employers).
- If the candidate is working for a competitor, you can and should confirm whether the candidate has any restrictions in their current employment contract, which would limit their ability to work for you.
You’re down to the short list of candidates. Now you need to do your due diligence and verify each candidate’s information. Here are some guidelines:
- The rules with background checks are the same as those for interviews: solicit and confirm information, which has a genuine bearing on the person’s ability to perform the position, and avoid finding out information, which is not connected to the job and which could lead to the company making a discriminatory hiring decision.
- Confirm credentials, certificates and educational qualifications – especially those connected to the position.
- In Canada, an employer is NOT allowed to require pre-employment drug or alcohol tests.
- In Canada, pre-employment credit checks might be permissible, however, provincial Human Rights Commissions have begun to weigh in against them. It is difficult to establish a bona fide reason for a credit check, so approach this carefully.
- While social media reviews have become a standard component of reviewing candidates for jobs, they are best approached with caution. It is possible that you will find out information about a candidate that could influence your hiring decision in a discriminatory manner. Nevertheless, it is also possible that the position will require the employee to be a representative of the company in public, such that the employee’s judgment and behaviour outside of work could affect the company. Approach this sort of review with caution.
- Many employers conduct background checks after a conditional offer of employment has been made and accepted by the employee (offer letters are discussed below). This approach is fine, however, should the employment not be confirmed following the check, you might run into some issues. The employee will be aware that the check has been done and alerted to the fact that something in the background check affected their offer. Again, this might be perceived as discriminatory, depending on what the background check elicited. We suggest thinking your approach through before proceeding – it’s better to be safe than sorry.
Once you have selected a candidate, you might want to provide the key terms of the candidate’s employment to the candidate in the form of an “offer of employment”. This is what we refer to as a courtship document – it’s tempting to only include the favourable employment terms in this letter. However, it is equally important to include, in the offer letter, that the offer is conditional upon the employee entering into a formal employment agreement prior to starting work. The employment contract (discussed below) will include the balance of the terms and conditions of employment. An offer letter should include the following:
- Compensation: Salary or hourly wages, commission, bonus structure, and equity-based compensation (stock options, reserve stock units, etc.) should be addressed, where relevant. If compensation is conditional, then that should be referenced.
- Benefits: While it is important to highlight any benefit packages that you offer, it is also a good idea to keep the references reasonably vague and leave the details for the formal employment agreement. You should also include a note that the employer has the right to change the benefits packages from time to time.
- Hours: If the employee has set hours those hours should be referenced – if they are variable then this should also be clear.
- Vacation & Time Off: This is a key factor for most employees, so a reference to any Paid Time Off (“PTO”) should be included. If you have a PTO policy, which includes vacation, sick days, flex days etc., then it should be referenced.
- Work Expectations: This may seem obvious for some employers (e.g. a server at a restaurant will clearly anticipate working at the restaurant during its hours of service); however, if there is flexibility in terms of work location or time, it should be highlighted in the offer letter (e.g. the server might prefer weekend dinner shifts over weekday lunch ones).
- Restrictions: A reference should be made to any key restrictions that will be included in the employment contract, especially if they are unique to your business or industry. For example, a software sales professional might be restricted from selling a competing product to existing clients of the company for a specific period of time after the end of their employment.
- Conditions: The offer is likely conditional upon several factors, including the signing of a full employment contract (as noted above), as well as other ancillary documents (e.g. IP Assignment Agreement, Non-Solicitation Agreement, Employment Policies or others relevant to your industry). You may also be waiting to do background checks until the conditional offer is accepted by the employee. All offer letters should clearly state what they are conditional upon, to ensure that they are not binding.
Whether you have provided a conditional offer of employment or gone straight to providing an employment contract, this is the primary document for establishing the expectations of employment. A good employment contract will protect an employer upon termination of employment. What is CRITICAL is that the employment contract is signed BEFORE work is started – even if it is signed the first day before employment actually begins. Once an employee begins to work, the employer needs to provide new “consideration” to make the contract binding (see our Why Do I Need One? article) Also, the contract should be provided to employees well in advance of their start date to give them time to read it and ask any questions they have.
For a full discussion of what needs to be included in an employment contract, see our Blog’s Employment Contract Series:
The key terms to include are:
- Compensation: As discussed above.
- Benefits: Describe the benefits available to the employee in specific terms or include a reference to their location in the HR policies of the company, if they exist. In either case, it should be stated that the benefits can be changed at any time at the company’s discretion.
- Vacation & Time Off: Vacation and sick day provisions (and/or a reference to a PTO policy, if you have one) should be included in the employment contract. The contract should make clear what is PAID time off and what is UNPAID time off. If your company only provides the time off entitlements (paid and unpaid) contained in the Employment Standards Act (“ESA”), you can simply state that. If you provide time off beyond the ESA minimum, then the contract should also make clear how this time accumulates and what happens on termination of employment. For example, an employer who provides 3 weeks of paid vacation will usually frame that as accruing at a rate of 1.25 days per month, and 6 paid sick days per year as accruing at a rate of 0.5 days per month. Upon termination of employment, the employee is only entitled to be paid the ESA entitlement that has accumulated – this saves companies from paying a departing employee accumulated vacation pay and sick days that are intended for use by active employees.
- Work Expectations: Hours, duties, location of work and scheduling etc. should be identified in the employment contract.
- Confidentiality & Other Restrictive Covenants: It is best to identify that the company and its customers/clients have proprietary information that must be kept confidential and cannot be shared. Such information includes, but is not limited to, client lists, client orders, product pricing, IP, etc. If appropriate to your business, you might want to restrict your employees from soliciting clients or other employees of the company when their employment ends. Although most employment contracts include a “non-competition” clause, such clauses are rarely enforceable against an employee and we recommend against them in most circumstances.
- Termination: One of the most important clauses in an employment contract is the one that deals with what will happen when the employment relationship ends. In the contract, you should clearly identify probation periods, employee resignations, termination “without cause” by the employer and termination “with cause” by the employer. Look to our Terminations 101 article for more information on the termination process.
Other Items On Your “To Do” List
Your new employee has accepted your offer and signed the employment contract, but your work isn’t done yet!
- Payroll & Deductions: You need to set up payroll and deductions to submit to the government. In order to do so, you need a payroll account with the Canada Revenue Agency – this is easy to set up with a quick call to them. Once you have an account, you need to submit monthly reports, any deductions you have made, and your corresponding contributions to Employment Insurance and Canada Pension Plan. You will also be required to provide a T4 report to the government and each employee at the end of the year. When an employee leaves, you will need to file a Record of Employment, stating when and why the employee relationship ended.
In order to authorize the required deduction from the employee’s pay, you need to have the employee sign an authorization form called a TD1 Personal Tax Credits Return. If you only have a few employees, it is fairly easy to do all of this paperwork yourself; however, as with many things, outsourcing payroll to a provider can ensure accuracy and take a time-consuming task off of your hands.
Finally, if your payroll grows to more than $400,000 per year and your business operates in Ontario, then you need to register for and pay the Employer Health Tax.
- WSIB: In Ontario, the Workplace Safety and Insurance Bureau governs mandatory workplace injury insurance. The insurance is required for companies with a little as 1 employee, depending upon the industry you are in. If coverage is not mandatory, you can still opt in to WSIB coverage and you may do so to have a mechanism in place for dealing with potential workplace injuries. A call to the WSIB can help you assess whether your industry requires mandatory insurance coverage.
- Employment Policies: Even small businesses can benefit from having formal employment policies, which cover a number of important points. Businesses are also required, depending upon their size, to have policies to deal with things such as Violence and Harassment in the Workplace, and Health and Safety. Depending on your size, you may be required to have a Workplace Safety Committee. It may not be the first order of business in a new company, but having employee policies in place early on can help clarify workplace expectations and procedures.
How Momentum Can Help
Momentum can provide consultations and training on hiring processes and procedures to ensure that the hiring process is structured appropriately. We can draft offer letters and employment agreements for the company. We can also create employment policies and provide ongoing training for managers on how to apply the policies and how to deal with issues as they arise. Further, we can assist with employee discipline, employee performance improvement plan questions and employee termination.
If you are concerned that some, or many, of your HR legal documents are insufficient or outdated, contact us today to inquire about our fixed-fee HR Overhaul package.