As your independent consulting practice grows, you might start thinking about hiring your first employees.
Independent consultants typically follow a common path:
Stage 1: Starting out doing solo consulting projects
Stage 2: Bringing on contractors for projects
Stage 3: Hiring employees
The typical first hire falls into one of two categories:
- Client work: An associate or analyst to support delivery of client projects.
- Administrative assistant: An admin person to provide support tasks such as CRM, invoicing, inbox management, etc.
This resource focuses on consultants who are at stage two and moving towards stage three of hiring associates for client deliverables. For purposes of clarity, we will be using the term “associate” throughout this article to describe the employee hire discussed herein.
We have an additional resource that focuses on the second employee category: How to Hire an Assistant.
Please keep in mind that this guide does not constitute legal advice. We strongly recommend that you consult an employment attorney — visit our resource on Attorneys & Legal Services for more information.
Considerations for hiring
First, make sure you have clarity on your reasons for hiring an associate.
Initially your need for an extra person may be periodic, but as your workload grows with steady projects you may find you need to bring additional teammates into your practice.
The question then is whether to bring on a contractor or hire an associate.
Thinking about the needs of your practice and your reasons for bringing in new people, there are several factors to consider.
If your project pipeline fluctuates and you only need to bring in other people occasionally, using contractors is likely the most cost-effective approach.
As you have higher levels of utilization, your cost to use a contractor on a daily rate basis goes up — therefore, hiring an associate might make more sense.
It’s helpful to determine your breakeven point where the number of days per year that you utilize another team member makes it more cost-effective to hire an associate.
Estimate the daily rate you pay a contractor, as well as the all-in cost of an associate employee (including salary, bonuses, benefits, and employment costs such as insurance and taxes). Using these figures, you can determine the amount of days the person will be utilized to arrive at your breakeven point where an employee is more cost-effective than a contractor.
When using contractors, there are no guarantees that they will be available when you need them for projects.
On the other hand, if you hire an associate as an employee, you are assured they are always available as and when you need them.
Consistent service offering
This is much easier to attain with employees than contractors, who may change from project to project depending on availability.
With an employee you are able to train them in your methodology and processes, coach them, and make an investment in them. Associates who are employees understand your business at a deeper level than contractors are likely to.
This provides consistency in your firm’s work with clients. These associates can also help with business development efforts.
Some clients (though not the majority) will require that anyone on your team be an employee and may not allow contractors.
If this is the case with your firm or a client you obtain, this could be an important reason to hire an associate.
How to recruit an associate
There are a variety of recruiting approaches and methods.
Word of Mouth
Referrals and networking can be the most reliable way to identify potential associates to hire. Reach out to people you know, particularly colleagues in your industry. Current or previous employees can also be a potential source of referrals for associate positions.
While you can post a position on the LinkedIn job board for free, it won’t get many views unless you set a daily spending budget. LinkedIn will suggest a budget, and you can stop at any time. LinkedIn also offers tools such as customizable job description templates and screening questions.
Consulting firm alumni websites
Some large consulting firms have job boards that their alumni can access, and anyone can post a job there.
Business schools job boards
You can also post your openings on employment boards at business schools. These sites may require registration, but then you can post jobs targeted to current students, alumni, or both.
Recruiters and search firms
Utilizing a recruiting professional can allow you to find the right fit for higher, senior roles or those requiring very specific experience and expertise.
Extending the offer
Once you’ve identified a candidate you want to hire, you need to make sure you follow proper protocol and stay in compliance as an employer.
There are a number of considerations at this stage.
We strongly recommend that instead of using a standard offer letter or one you download, that you have an employment attorney draft it for you.
The offer letter should include:
- Terms and conditions of employment
- Basic economic terms
- Legal protections provided for both company and employee
- If the employment is an at will arrangement
- If the offer is contingent on a background check
Attorney Alexei Leonard, a Partner at Golenblock, Eisman, Assor Bell, and Pescoe, advises using care when conducting background checks and ensuring that you follow the guidelines from the federal, state, and local governments.
Many jurisdictions are curtailing the use of background checks, and most have disclosure laws and require that you get authorization from the employee or potential employee to conduct a background check, as well as provide notice as to what factors will be considered.
If you do conduct background checks, Leonard recommends doing so after the offer letter is extended, and to go through an agency rather than doing them on your own.
- For more details on employment law, listen to Episode 468 of Unleashed with Alexei Leonard.
Setting up payroll and meeting compliance requirements
Contracts & employment attorneys
Working with an attorney for your hiring and employment process is wise, and can help protect your firm. The laws surrounding employment are constantly changing, and an attorney can help you navigate this.
For example, an attorney can draft the right employment contract for your needs, rather than using a boilerplate document. This can save a lot of time and confusion when bringing on new hires.
Non-disclosure agreements are very useful tools that ensure confidentiality, as well as protect against the solicitation of your employees by other firms. Check out our resource on Attorneys & Legal Services for Independent Consultants.
There are a number of documents that need to be filled out by the employee on their first day. These might include:
- W9 form in the United States (or similar tax ID forms in other countries)
- I9 form if you need to establish the individual’s ability to work in the U.S.
- Payroll direct deposit forms
- Non-disclosure agreement
When you have employees, it’s advisable to use an HR/payroll provider. These services make sure that the proper withholding for payroll taxes and other items are properly administered. Some bookkeeping firms or accountants offer this, as well as popular payroll processing companies such as Gusto.
When you bring on employees you’ll need to think about what benefits you are able to offer them. These can include:
- Paid time off
- Health insurance (or HSA, etc.)
- Life and/or disability insurance
- Parental leave
- Sick leave
Be clear about your policies surrounding sick leave and paid vacation, whether it accrues, and the details of when it can be used.
This insurance is required in the U.S. and can be obtained through an insurance company or broker. Other countries have similar requirements. Many consulting firms, especially larger or growing firms with employees, utilize the services of an insurance broker to assist with employment insurance needs.
Check out our Insurance Resource sections on:
This is required in most states in the U.S. (and many other countries as well) to provide payments to people who have lost their jobs or been terminated through no fault of their own.
You should research the unemployment requirements for your country and state, province, or territory. Your payroll provider or accountant can help with this.
Employment Practices Liability Insurance (EPLI)
This policy is separate from your general business or professional liability insurance, and protects you from defense costs and damages related to various employment-related claims including allegations of wrongful termination, discrimination, workplace harassment, and retaliation.
We recommend you consider obtaining a EPLI policy — refer to our Business Insurance Resource for more information.
Alexei Leonard. the attorney from Golenblock, suggests considering the creation of an employee handbook, especially if you bring on several hires.
This document can include all of the policies that will be helpful to you and your employee, such as vacation policy. The handbook should state if these days accrue and what happens to paid vacation once an employee leaves the company.
Your payroll firm may be able to provide you with a sample employee handbook you can edit. Gusto, for example, offers a guide and template for creating an employee handbook.
Onboarding and training
When you do bring new employees into your firm, you will need to have an onboarding and training procedure in place.
The onboarding process should provide a thorough introduction to all your systems. It’s helpful to create a new employee checklist — this might be part of your Employee Handbook
Some typical things to include are:
- Setting up email
- Ordering business cards
- Setting up a company credit card
- Updating the associate’s LinkedIn profile
- Providing access to CRM and other business files and systems
Most consulting firms primarily provide on-the-job training and coaching, though many find relevant online courses helpful, particularly those specific to your industry.
Providing a career path
It’s also important to think about how you will design career paths so that new associates can start at junior levels, then advance to more senior roles.
Consider the most common role levels at a consulting firm:
Good associates want to know that they have advancement opportunities, as well as the opportunity to learn and grow. Providing a path for advancement and growth is beneficial for your consulting practice and helps you be more competitive as an employer when you recruit new associates.
- Episode 468 of Unleashed with Alexei Leonard
- Video of the workshop event: Hiring your first associate
- Attorneys & Legal Services for Independent Consultants
- Accountants & Bookkeeping Services for Consultants
- Health Insurance Considerations, Companies & Brokers
- Business Insurance for Independent Consulting Firms