Hiring Staff

Chapter 1: The hiring process: how to hire staff

Are you ready to hire your first employee? Or maybe you have a few employees but want to improve the hiring process and find more good ones? Congrats, hiring staff is a huge milestone for your growing business.

But before you get started, you need to understand each step in the recruitment process. It’s so much more than just job descriptions, interviews, contracts, and pay. Hiring is also about finding good employees, getting the best out of your team, and understanding your responsibilities as an employer.

The hiring process in a nutshell    

Hiring is an exciting process, but it can get overwhelming with quite a few steps along the way. This guide will take you through it step by step so you can find employees who fit perfectly with your business.

First, create a hiring strategy.    

A carefully crafted hiring strategy can set your business up for success as you hire your first employee now and continue growing your team in the future. Your hiring strategy gives you a clear idea of your employment needs and how to achieve them. It’s a plan of action that helps you get through each stage of the recruitment process.

Here are three essential questions to ask when creating your hiring strategy:

  1. Who do you need?
    Choose the type of person you need for your business. It can be one, some, or all of these: someone to fill in the gaps in your expertise, someone to do the things you could if only you had time or someone to do the things you don’t enjoy doing. This helps you get a good sense of the skills, experience, and other qualifications to look for in an employee.
    Once you’ve decided on the type of person you need, work out a balance between attitude and skills. It might be easier to train a hard worker on the skills you require, rather than hire someone with all the right skills but without the go-getter attitude, you’re looking for.
  2. What type of employee do I need to hire?
    Figure out what kind of employee is right for you. Whether it’s an independent contractor or an employee, a part-time or full-time worker, each type has its own pros and cons. Do your homework to find the best fit for your business.
  3. What can you afford?
    Do some budgeting before jumping into the job market. Find out what the market rates are in your industry so you can offer a competitive salary that’s within your budget. Other costs to consider include employer super contributions, any benefits or incentives you want to offer employees, advertising fees for job postings, and more. Use these costs to plan your budget and see what you can afford.Use the Fair Work Ombudsman pay calculator to get an estimate of what hiring a new employee might cost.

Payroll is a big financial commitment.    

Finding the money to pay employees often involves personal sacrifice.

50% of employers have denied themselves a pay rise or bonus in order to give one to their staff*

40% of employers have paid employees out of their own pocket at some stage*

Chapter 2: Make it official – register as an employer

Once you’ve got a hiring strategy in place, it’s time to register yourself as an employer. This may take time, so start the process as early as possible.

Here’s what you need to do:

  • You’ll need an ABN number to register for pay as you go (PAYG) withholding tax.
  • You’ll also need to register as an employer of working holiday makers if you plan to employ workers who hold either a working holiday visa or a work and holiday visa.
  • You can register online, by phone, or through your registered tax agent.For more information, visit the ATO pages on PAYG withholding and employer registration for working holiday makers.

Understand employment law    

Certain laws govern the entire employment process, so understand them before you begin hiring. Speak with an employment lawyer for specific advice or check a government site to learn more about employment laws and how to comply with them.

The Fair Work Ombudsman website has some helpful fact sheets and best practice guides on workplace laws.

Chapter 3: Write a job description and promote it    

Anatomy Job Description

                                       (Credit: Xero.com)

Need to write a job description? We’ll show you how to attract the best candidates for the job and give you ideas on advertising your job opening.

Hiring is a lot like matchmaking. You’re searching for the ideal employee, but job seekers are also looking for the right employer, job, and workplace for them. To find the perfect fit, you need to write a job description that stands out from the crowd.

Anatomy of a job description    

Let’s say there’s a cake shop, Custom Delights, which bakes made-to-order cakes for any occasion. The business is growing and they’ve decided to hire a cake decorator to help out with designing their cakes.

Consider setting up a separate email account for job applications, so they don’t get mixed up with important business emails. It also makes it easier for you to sort through applications later on.

Make your job description inclusive   

When you write a job description, be inclusive. Use thoughtful language, so you don’t run the risk of discrimination or breach diversity and equality laws. Think about accessibility for people with disabilities or other health conditions. Consider ways to accommodate those who are caring for a child, a sick or elderly member of their family, or people in similar circumstances.

For more information, visit the business.gov.au page on equal opportunity and diversity and the Australian Human Rights Commission page on preventing discrimination in recruitment.

Ten ideas to promote your job description    

Now you’ve written an outstanding job description, it’s time to let the world know. Get the word out using any of these options:

  1. Your website
    Post the full job description on your website in a place that’s logical and easy to find.
  2. Referrals from existing employees, business partners, or clients
    Ask your existing employees, business partners, or clients if they know any candidates that might fit the job description. It would be even better if they’ve worked with them – they can provide insights based on those experiences – and candidates may come highly recommended.
  3. Your company’s social media accounts
    Post a short and engaging version of your job description with a link to the full version on all of your company’s social media accounts.
  4. Your personal social media accounts
    You may have a family member or a friend of a friend within your social network who suits the position you’re looking for. Post an ad similar to what you’ve posted on your company’s social media accounts but include a personal touch to it. Consider this option only if you’re comfortable hiring family or friends and letting them go if things turn out badly. You’ll need to separate your personal relationship from your professional one and treat them like you would any other employee.
  5. Trade and industry associations
    Post jobs in industry journals, trade magazines, or association websites if the job you’re hiring for is specific to an industry or requires certain trades or skills.
  6. Local community groups or business organisations
    Posting jobs in local community group boards or business organisation websites can be a great way to attract top local talent.
  7. Local government agencies
    Work with a local government agency that helps people who are unemployed find jobs. You can inform them of your vacancies, and they can assist you with finding a suitable candidate.
  8. Universities
    If you’re looking for specific degrees or qualifications, posting on university and alumni association job boards is the way to go.
  9. Job boards
    Job boards usually charge fees, but it might be worth looking into them if you’re having trouble finding good candidates through any of the options mentioned above.  And ume of applications, and it takes time to sort through all of them.
  10. Recruitment agencies
    Recruitment agencies are an even costlier option than job boards. But if you have the budget, it might be more efficient to outsource the recruitment process to recruiters or agencies.

Chapter 4: The selection process – from interview to job offer    

Formal Offer

                                                                  (Credit: Xero.com)

Choosing the top candidate is hard work. We take you through the selection process and do interviews to create a job offer letter.

With a fair amount of applications coming in, it looks like you’ve been able to attract several job seekers. But how do you sort through them all and select only the best of the best?

Create a cream-of-the-crop shortlist    

Going through applications and creating a shortlist of candidates can often be the most challenging and time-consuming part of the recruitment process. Here’s what you need to do:

  1. Settle on a number for your shortlist
    Find a number you’re comfortable with and keep a few in your ‘maybe’ pile in case things don’t work out with your initial shortlist.
  2. Create a set of criteria based on your job description
    List the must-have attributes of the job. Make a second list of nice-to-haves, which can be a tiebreaker when choosing between candidates with similar skills or experience.
  3. Filter candidates
    Choose those who tick (almost) all the boxes when it comes to the essentials and check for any nice-to-haves that give candidates an edge over others.
  4. Deliver the news
    Deliver the good news to those who were shortlisted and inform them of the next steps in the recruitment process. Send a thank-you note to those who didn’t make the cut and wish them all the best in their job search.

Interviews: the getting-to-know-you stage    

Now that you’ve got a promising shortlist, it’s time to narrow it down through the most exciting part of the hiring process – the interview. This is where you learn more about your potential employees and where potential employees learn more about you.

Before the interview    

Decide on these items before doing the interview:

  • how many interviews you’ll have
  • how much time you need for each interview
  • the types of interviews you’ll be doing
  • the questions you’ll ask for each interview

You can’t ask, do, or say certain things during the interview. If in doubt, contact an employment lawyer for advice and read the guidelines on how to avoid discrimination and any privacy laws you need to keep in mind. Visit the Fair Work Ombudsman page on workplace privacy.

Types of interviews    

Choose the type of interview that best suits the requirements of your job. It can be one or a combination of the following:

  • Phone interviews or video calls
    These types of interviews to work best for remote workers or those who can’t come in person because of long travel times, childcare, or other circumstances. Quick phone interviews are typically used for initial screening of candidates to get a feel of how they’ll fit into the role.
  • In-person interviews
    These interviews can be one-on-one or include a number of interviewers. Bring in anyone else the candidate will be working with – such as a manager or a teammate – to get a second or third opinion. They can help confirm your observations, spot anything you’ve missed, or even prove you wrong. But make sure not to bring in too many people to avoid overwhelming your candidate – the sweet spot is usually two interviewers for each interview.Typical in-person interviews are held in a meeting room, but why not try something different? You can show candidates around your workplace, introduce them to your team, and see how they interact with people or show interest in your business. You can also put candidates in a more casual and relaxed environment – take them out for coffee to know more about their personality.
  • Skills-based assessments
    If your job requires certain skills, you can test those skills through skills-based assessments. This can be an interview where candidates answer a set of technical questions, a written exam, a test project, or a series of short tasks in a work environment. Make sure assessments don’t take too much time and only evaluate a candidate’s ability to do the necessary tasks for the job.

Whichever type of interview you choose, be consistent and fair. Make sure you ask the same questions and use the same approach for all candidates. Try to keep interviews conversational and don’t let them go on for too long – an hour or so will do.

Questions to ask during the interview    

Interviews help you choose the best person for the job, so ask a range of questions that will determine if a candidate is the right fit. Get them to open up by asking open-ended questions instead of yes-no questions.

Some questions will be specific to the job or a person’s career or work experiences, while others will be general questions you can ask all interviewees. Here are examples of what to ask candidates during interviews:

At the end of the interview, thank interviewees for their time. Let them know when they can expect to hear back from you and the next steps.

Make an offer they can’t refuse    

The fun part is over – it’s time to get down to business. Use all the information you’ve gathered – cover letters, CVs or résumés, interview notes – to inform your decision. If other members of your team are interviewers, meet with them right after an interview to discuss their thoughts on a candidate.

Top tips for selecting a candidate    


Here are three tips to help you decide which candidate to pick:

  1. Try to be as fair and objective as possible in your decisions.
  2. Challenge any implicit or unconscious bias you have by pushing for diversity. Different perspectives encourage creativity and innovation and help you find the best solution to a problem.
  3. If you get stuck in the decision-making process, trust your instincts and do what feels right for you.

Before making an offer    

It’s a must to do a reference check before making an offer. Referees give you feedback about a candidate’s past performance that can help you finalise your decision. Ask your chosen candidate to provide at least two referees and for permission to contact them.

A written reference is good, but speaking with referees over the phone is even better. Ask them questions that can verify a candidate’s skills or character.

Perform reference checks on your second or third picks so you can make them an offer in case feedback from your top candidate’s referees isn’t good or your chosen candidate doesn’t accept your offemployment terms and conditionsoes well with your reference checks, it’s time to draw up an employment agreement. An employment agreement is a written agreement between employer and employee that clearly outlines the terms and conditions of employment.

What to include in an employment agreement

Employment agreements must include the following information:

  • employer name
  • employee name
  • job description
  • hours and place of work
  • pay
  • whether employment is casual, fixed-term, full-time, part-time, or permanent
  • start date (and end date for fixed-term employment)
  • entitlements such as leave and holidays, holiday work pay, and more

Other terms of employment included in the agreement are benefits the employee is entitled to receive, how employment relationship problems will be resolved, notice periods when terminating employment, trial or probation periods, what happens if you restructure or sell your business, and confidentiality clauses, among others.

When in doubt, seek legal advice to make sure that your employment agreement has no unlawful terms and follows all relevant employment and labour laws.

The Fair Work Ombudsman website has templates you can use to draft a letter of engagement.

Make a formal offer    

Once you’ve drawn up the agreement, it’s time to offer your chosen candidate the position. Give them enough time to consider your offer and to seek independent advice about the agreement, and let them know when you’ll need their decision.

Your chosen candidate might not accept your offer outright, so be open to any questions they have or items they want to negotiate. Once you’ve both agreed on the changes, you and your potential employee need to sign the employment agreement. Keep a copy of the signed agreement for your records and provide a copy to your employee..

Chapter 5: Check your employer responsibilities    

With great employees come great responsibilities. Learn more about your employer responsibilities and how to meet them.

Check your employer responsibilities    

Congrats on hiring your new employee – a significant turning point for your business. It’s exciting to bring in that first team member or add someone to your growing team. You might have time before your new employee starts, so use it as an opportunity to check your employer responsibilities and make sure you’re well prepared.

Always act in good faith and treat employees fairly.    

When interacting with employees, every action must be done in good faith. Follow a fair process and be honest at all times.

Allow employees to raise concerns and respond to them immediately. If you have an issue with an employee, discuss it with them as soon as possible and clarify any uncertainties.

Pay employees on time    

Part of your employer responsibilities is paying employees at the rate specified in the employment agreement. Pay them on the day and frequency stated in the agreement and use the method of payment you agreed on. Make sure you provide your employees with statements of their pay showing any deductions or contributions made.

Besides your legal responsibilities, payroll is also personal. Employees often have a lot riding on it.

63% have financial difficulties before payday*

33% have less than $100 left by payday*


* Xero Australian workforce survey, 2019


Deduct the correct amounts    


Income tax is one of the deductions made on an employee’s salary or wages. Be sure to deduct the right amount for each pay period based on your employee’s earnings.

Other payments such as allowances or bonuses may be taxable, so make sure you deduct the correct amount for these payments. Also, check if you need to make any other deductions for each pay period.

Online payroll software can automatically do these calculations, so invest in a tool that makes it simple for you.

Know the finer details of leave entitlements and public holidays    

Time off is essential for your employee’s health and wellbeing. When they’ve had a break from work, they come back more focused and productive. Understanding the different types of leave and holidays and the rules around them can help you better manage leave for your staff and keep them happy.

Annual leave    

Employees take annual leave for rest, recreation, or other personal reasons. Certain conditions apply on when employees become entitled to annual leave, and employment law sets the minimum number of annual leave days that an employee is entitled to. As an employer, you can give your employees extra annual leave days on top of the minimum as an added benefit.

Payment for annual leave is usually at the rate of daily pay, but it may also depend on other rules prescribed by employment law.

Sick leave    

Employees can take sick leave if they’re injured or unwell or to care for a dependant who’s injured or sick. Employment law states the minimum number of sick leave days that an employee is entitled to, but you can give them more as an added benefit. Payment for sick leave is at the rate of daily pay.

Public holidays    

Public holidays are considered paid leave, and employees are entitled to take the day off during those days. If employees have to work on public holidays, you must pay them at the rate required by law (which may be different from their daily pay).

Other types of leave    

Employees may be entitled to other types of leave, such as bereavement leave, parental leave, jury duty, and more. They may also ask to take unpaid leave, and it’s up to you as an employer to allow this or not. Consider your employee’s reasons and discuss the best approach with them.

Keep an accurate and up-to-date record of your employees’ leave. Good payroll software can do that for you.

Health and safety responsibilities of employers    

Keeping your employees healthy and safe while they’re at work is a key part of your employer responsibilities. Creating a safe work environment lowers the risk of illness and injury at work, improves your employees’ productivity, and helps you follow workplace health and safety laws.

Workplace health and safety practices    

Have reasonable practices in place for your employees’ health and safety, and carry them out as best as you possibly can. Workplace health and safety practices include:

  • providing and maintaining a suitable work environment and facilities
  • providing safe systems of work
  • handling, storing, and using materials at work safely
  • informing and training employees on workplace health and safety
  • monitoring your employees’ health and safety at work

Five questions to ask about the health and safety of your workplace 

To fulfil your duty of care and meet your responsibilities as an employer, you need to understand the risks your workplace could present to employees. Here are five questions to ask yourself about your work environment:

  1. What are the health and safety risks in my workplace, particularly those that might cause injury or illness to my employees?
  2. What’s the extent of harm that could result from these risks?
  3. How likely is it that these risks will happen?
  4. How do I eliminate these risks?
  5. If I can’t eliminate them, how do I minimise them?

Workplace health and safety in action    

Once you’ve answered the questions about workplace health and safety, it’s time to put measures in place that will reduce the risks into action. Some examples of workplace measures for health and safety are:

  • a health and safety briefing on your employee’s first day at work
  • a way for employees to raise any work-related health and safety concerns and suggest improvements
  • a regular assessment of the work environment
  • safety equipment and training for your employees on how to use it
  • a workplace evacuation plan and clear guidance on what to do in case of an emergency
  • employee assistance programs to provide counselling and support for your employees
  • workplace insurance for your employees (if this is within your budget)

It’s also a good idea to contact a health and safety specialist. They can help with workplace plans, setting up accident registers, and hazard identification.

Protect the privacy of your employees    

Another part of your employer responsibilities is keeping your employee’s personal data safe and secure. You’ll need your employee’s permission to keep any sensitive data about them, so if it isn’t relevant, avoid storing information, you don’t need, about your employee.

If an employee asks for a copy of the information you hold about them, make sure you provide it as soon as possible. Avoid disclosing employee details to unauthorised people, and use employee information for work purposes only.

Chapter 6: Get started with employee forms and onboarding    

Now that you’ve hired your employee, it’s time to get them on board. We’ve got some handy checklists to make employee onboarding a breeze.

Making a good first impression when you onboard any new employee is vital. You only have one chance to get it right, so make it count.

A good employee onboarding process is key to engaging your new hire and getting their commitment from the start. It helps a new employee feel welcome and valued as part of your team. Employee onboarding is more than just inductions and orientations. It’s setting expectations, building relationships, and providing support for employees to perform at their best.

Employee onboarding made easy with these checklists    

Getting an employee on board can mean working through lots of to-do items. We’ve made a few handy checklists to make the process easier for you.

Top tips for a great employee onboarding experience    

A great employee onboarding experience makes all the difference. Here are five tips to set your employee up for success from day one:

  1. Start early: Make sure everything’s ready before your employee’s first day.
  2. Clarity is key: Give them a clear roadmap of how they can succeed at their job.
  3. Constant communication: Let them know you’re always available to answer any questions, lend a helping hand, or even just for a casual chat.
  4. Make it personal: Adding a personal touch to the employee onboarding experience can make your new employee feel valued.
  5. The little things count: From where the lunch area is to how to use the printer, providing your new employee with all the information they need – no matter how small – will help them succeed.

Chapter 7: Run payroll for your employees    

Feeling lost on how to run payroll for your employees? We take you through the ins and outs of the payroll process so you can get it right.

Run payroll for your employees    

Getting payroll right is essential. Paying your employees on time and at the agreed rate is important to maintaining a productive relationship. It’s also a legal requirement. Let’s take a look at the payroll process.

First, what is payroll?    

Payroll is a list of your employees and the total amount of money you pay them. It includes salaries or wages, bonuses, allowances, and benefits. Deductions such as tax are also part of payroll.

Four ways to run payroll for employees    

Running payroll for employees can take on different forms, with each having its pros and cons. Here are four ways to run payroll for employees:

  1. Spreadsheets or pen and paper: Many small businesses with less than five employees run payroll on a simple spreadsheet or pen and paper. It’s free, but it will start to cost a lot of your time as you hire more people. You’ll also have to stay on top of tax laws to avoid making mistakes or getting in trouble with the tax office. It can also be inconvenient when it comes to filing payroll reports with tax offices that require electronic filing.Under Single Touch Payroll (STP), you’ll report to the ATO every payday how much your employees were paid, how much tax was withheld and what contributions were made to superannuation. This report needs to be lodged through accounting or payroll software, or through a registered agent or payroll service provider. If you use spreadsheets or pen and paper, you need to find a service to convert the data into a compliant digital report format and submit it on your behalf.
  2. Outsource to a specialist
    You can get a payroll expert to do the work. They know the ins and outs of tax and will help you stay compliant. Using a consultant will cost you money, and you’ll need to communicate regularly about staff changes, but a lot of employers are happy to pay for peace of mind.
  3. DIY software
    Many software packages can do the maths and some of the admin work for you. For example, they’ll work out the pay you owe, and the deductions needed, create payslips, and fill out tax forms automatically. But it’s up to you to make the actual payments.
  4. Full-service software
    You can sign up to systems that do everything DIY software does – plus make payments and file reports. You’ll still have to set up employees in the system and update their details if circumstances change, but most of the rest is taken care of.

A good payroll system simplifies the complexities, helps you avoid mistakes that may lead to costly penalties, and does all the heavy lifting for you so you can focus on other parts of your business. Choose a payroll method that’s best for you and suits your business needs.

When to run payroll    

There are a lot of conventions around the timing of payday. In Australia, it most commonly falls on a Wednesday or Thursday. And employees are generally paid weekly, fortnightly, or monthly.

How often employers pay:

  • 28% weekly
  • 52% fortnightly
  • 15% monthly
  • 5% other

A quarter of employees say the pay cycle makes it hard for them to budget or save. It’s an area where small businesses can stand out by helping employees achieve their financial goals.

How often workers want to be paid:

  • 46% weekly
  • 39% fortnightly
  • 9% monthly
  • 5% other


* Xero Australian workforce survey, 2019

How to run payroll – from start to finish    


With quite a few steps along the way, the payroll process can get complicated. We’ll take you through it step by step so you can process payroll properly.

1. Prepare for payroll    

You may want to set up a payroll bank account to keep your business transactions separate from your payroll transactions. Your payroll bank account will be used to pay your employees and hold funds for taxes, deductions, and other payroll-related items. You might need to set up a direct deposit with your bank for paying employees into their bank accounts (if this is the method of payment you agreed on).

You’ll also need to lodge some paperwork before paying a new employee. See the chapter on employee onboarding for more information on this.

2. Calculate employee pay    

You’ll need to calculate the gross pay for each of your employees. Gross pay is the total amount you owe an employee for the pay period based on the terms of their contract. It also includes overtime pay and pay for work done during public holidays. Employees don’t take home their gross pay – you’ll make deductions before they’re paid. Good payroll software can do this automatically. It will even handle leave requests and timesheets if you have wage workers.

3. Calculate pre-tax deductions        

Payroll deductions are amounts taken from an employee’s pay. Some are legally required, while others are voluntary. If you make a deduction, you’re responsible for sending that money to the right place – be it a government agency or a retirement fund. Some deductions are made before tax is taken out of your employee’s pay, while others come after.

Pre-tax deductions include:

Superannuation (super)

Paying super for employees is an important responsibility. It’s compulsory and provides for their retirement. Your contributions will come out of your business expense account and not from your employee’s salary or wages.

  • You have to start contributing super when an employee’s pay passes a certain amount.
  • The contribution rate is around 9.5% of employee earnings.
  • If your employee doesn’t nominate a super fund, you’ll pay into a default fund.

4. Calculate employee-related taxes    

Each payday, you need to deduct taxes from your employees’ earnings and work out what payroll taxes you owe as an employer. You may need to hold on to these withheld taxes for a while before passing them on to the government. It’s a good idea to set up a special bank account for them.

PAYG (pay-as-you-go income tax)

This is what your employee is taxed on earnings. This includes a Medicare levy and takes into account the tax-free limit, tax offsets, and student loan repayments. Check out the ATO page on PAYG withholding. The ATO also has an online tax withholding calculator and some tax tables you can use to work out how much PAYG tax to deduct.

Taxes on benefits

Your employees are expected to pay tax on allowances, bonuses, and fringe benefits such as housing or private use of a company car. Check out the ATO pages on allowances, withholding for allowances, and fringe benefits tax, as well as the ATO tax table for back payments, commissions, bonuses, and similar payments.

Payroll taxes

Your business may face extra state or territory taxes if you pay a lot in salary and wages. Check out the ATO page on paying payroll tax and the Payroll Tax Australia website.

5. Calculate post-tax deductions    

Your employee may have extra deductions to come out after tax. Child support is one of the most common. Check out this Department of Human Services page on child support information for employers.

6. Make payments to employees    


Take out all taxes and deductions from your employees’ gross pay to get their net pay. Once you’ve calculated net pay, it’s time to pay them. Make payments based on the method of payment you’ve agreed on. Make sure to issue payslips to your employees. Their payslip will show their gross pay, along with all the deductions taken from it and the net pay they receive.

Good payroll software automatically looks after all the calculations for you, processes payments on time, and makes it easy for employees to view their payslips. If you don’t use payroll software, a payslip template can be useful.

7. File and pay taxes, deductions, and contributions    

Now that you’ve calculated all taxes, deductions, and contributions, it’s time to file and pay them. You need to do it on time to avoid paying any penalties or interest.

Most businesses will need to submit a report to the ATO each payday reporting what employees were paid, how much tax was withheld, and what super was contributed. 

8. Keep payroll records    

You’ve finally reached the last step of the payroll process: record-keeping. You need to keep payroll records in case any questions come up. You’ll need to keep records in paper or electronic form for:

  • salary or wages and time worked
  • holidays and leave
  • taxes and other deductions
  • employer contributions
  • when money was paid and where to for employee pay

You must keep these records for at least seven years, even if your employee has left.

For more information, visit the Fair Work Ombudsman page on record-keeping.

Chapter 8: Manage employee evaluations

Employee Review Form

                                              (Credit: Xero.com)    


Employees help you grow your business, but they need your support too. Here’s how to do employee evaluations so you can get the best out of your team.

As a small business owner, it feels good to have an employee or two or an entire team behind you. You can rely on them to get things running smoothly and support you in growing your business.

But your employees need your support too. They need to know if they’re on the right track to achieving the goals you set out for them when they started. They also need to know what they’re doing well and the areas they can improve on. Employee evaluations help with that.


What is an employee evaluation?    

An employee evaluation, also known as an employee performance review or employee appraisal, is a way to assess your employee’s performance. Employee evaluations help you get the best out of your employees by giving them feedback on what they did well and how they can perform better. A good employee evaluation process can make your employees feel happier and more secure in their job, leading them to stay longer with your business.

Why do employee evaluations matter?    


Your employees are your most valuable investment. Supporting them in their work journey will benefit your business and help you achieve your objectives.

Here’s why employee evaluations are important:

  • to set clear, achievable goals for your employees
  • to check if goals are being met or exceeded
  • to find out what employees need to improve on
  • to document employee performance and progress
  • to use as a factor in pay increases or promotions
  • to gauge employee job satisfaction and understand their career goals

When to do employee evaluations    

Employee evaluations are usually done once a year, either at the end of the year or during an employee’s work anniversary. But it’s good practice to do it more often, such as once every two months or quarterly. It’s better to give employees ongoing feedback on their performance rather than meeting with them only once or twice a year.

Catch up with your employees weekly, fortnightly, or monthly. Talk about what they’re currently working on and address any issues or challenges they’re facing. These regular discussions also give your employees a chance to provide feedback about your business.

Employee evaluation in action    

So how does employee evaluation work? It’s an ongoing process that takes a lot of reflection and careful judgement. It’s about listening and providing constructive feedback. It’s also about giving employees the opportunity to grow in their job rather than dwelling on past mistakes.

Here’s what you need to do when evaluating employees.

Be prepared    

Schedule each employee evaluation in advance, so you and your employee have enough time to prepare for it. Book a private area within your workplace or do it in a more relaxed environment such as a coffee shop to make your employee feel comfortable.

To prepare for the evaluation, look at your employee’s job description and the notes you’ve taken during your regular check-ins. Get feedback about your employee from their manager, teammates, or even customers they’ve interacted with.

Use this sample employee review form to help you organise your thoughts:

Ask your employee to complete the same employee review form beforehand to assess their own performance.

When completing the form, be as specific as possible. Include concrete examples and exact details if you can. So instead of listing something generic such as ‘Delivers on time or even earlier’ as an achievement, put in ‘For project X, Jess submitted the design document three days earlier than the due date. Because of this, the production team worked on the designs immediately and delivered the project a day before the deadline.’

Encourage a two-way conversation    

Use the employee review form as a starting point. Discussing employee performance is a two-way conversation, so encourage your employee to share their point of view. Ask for their ideas and input around:

  • Successes: What parts of their job are they doing well? What are their greatest achievements so far?
  • Improvements: What areas can they improve on? What do their priorities need to be? What do they need to focus on? What needs to change so they can do better?
  • Challenges: What do they find difficult about their job? What other issues are they facing? How can you help them address these difficulties or issues (like providing training or other equipment)?
  • Job satisfaction: Are they happy with their job? Do they want to take on new challenges or additional responsibilities? Are they struggling with work-life balance?

This is also the time to have an honest and open discussion about pay and promotion. Talk to your employees about any pay increases or bonuses and how they can move to another role or position.

Outline future goals    

Set achievable goals for your employee and give them a say on what their goals need to be. Work with them to discover the best ways to reach those goals. Go back and update their goals during each employee evaluation, and on your regular catch-ups, check in with your employee to make sure they’re on track to achieving those goals.

Document the discussion    

Take notes during your discussion and write down everything you’ve agreed on. Share these notes and other documents with your employee to remind them about their goals and remind you about what you need to do to help them. You’ll also use them as a starting point for the next employee evaluation.

Five tips for more effective employee evaluations    

Effective evaluations help your employees perform at their best. Here are five tips to get the most out of employee performance reviews:

  1. Give constructive feedback
    Recognise your employee’s efforts and focus on how they can do better. Give them feedback they can act on and steer them to the right information.
  2. Be objective
    Try to remove any bias when evaluating employees. Focus on the complete picture of their performance instead of one past mistake or a recent achievement.
  3. Explain why employee evaluation matters
    Take some time to let your employees know why you’re doing performance reviews. Explain to them why it matters to you that they perform well and what the impact is on your business if they don’t.
  4. Don’t catch them off guard
    Don’t wait until the employee evaluation to raise any issues. Bring them up at the time they happen so you and your employee can resolve them immediately.
  5. Show your appreciation
    Thank your employee for anything they’ve done that goes above and beyond what you would expect. Reward them for their success, even if it’s something small such as a thank you note, buying them a cup of tea, or mentioning them in your next team meeting. A little positive reinforcement goes a long way.

Chapter 9: How to grow your team after the first few hires    

Taking your team from zero to hero is a challenge. We’ll help you get there with some tips and tricks on how to successfully grow your team.

Becoming an employer involves more than just hiring, onboarding, running payroll, and evaluating your employees. It’s also about leading and building an effective team. But building a team can be challenging. Every team member is different and they bring their own experiences, personalities, strengths, and weaknesses to the job.

Eight ways to build a winning team    


To build a successful team, you’ll need to encourage a strong sense of camaraderie, respect, and trust among your employees. You’ll also need to set up a working environment that promotes communication, cooperation, and innovation.

So how do you do that? Here are eight ways to build a winning team.

  1. Share your vision
    Share the long-term goals you have for your business with your team. Let them know what your vision is and what your plans are to turn this vision into reality. Explain to them where your business is headed in the coming months and where you see it going in the next few years. Once you’ve shown your team the big picture, it’s time to zero in on the details. Help your employees understand how their roles contribute to your vision and how they fit into your plans.
  2. Set team goals
    Create shared objectives as a team that tie in to your business goals. This helps your team know what they’re working toward, what their priorities are, and how to make decisions that align with the team’s shared objectives. These objectives also give your team a shared purpose, one that strengthens a sense of ‘us’ instead of ‘them and me.’
  3. Define clear roles and responsibilities
    Make sure your team understands how their roles work together. Each team member’s responsibilities are connected, and these dependencies are crucial to the team’s success. For example, a person delivering late or failing to do something that’s part of their job can cause conflicts and misunderstandings. To prevent this, discuss with your team how their roles are related and how each team member relies on the others for the entire team to do well.
  4. Build relationships with your employees
    Spend some time learning more about each member of your team – their skills, their strengths and weaknesses, their likes and dislikes. Once you understand them better, you’ll know how to motivate them. You can match their skills to certain tasks and know which problems they can solve best. Get to know your employees outside of the workplace too. Ask them about their hobbies and interests. It’s a personal touch that shows your employees that you care.
  5. Show your employees that you value them, Recognise your team’s efforts and reward them. Celebrate their successes – go out for a team lunch, give them a gift card or voucher for their favourite takeaway place, or feature them on your business website and social media accounts. Whatever it is, be genuine in showing your appreciation. Another way to motivate your team and keep them happy is to offer perks. This can be bonuses for excellent performance, new equipment or a cool new uniform, or even shouldering the cost of training to improve their skills.
  6. Embrace diversity
    Each team member is different and that can be a strength. Contrasting points of view help you find the best solution, so be open to different ideas and ways of approaching things. By embracing your team’s differences, you’re fostering creativity and innovation.
  7. Be a good leader
    An effective team needs an effective leader. Be firm yet approachable, fair and true to your word, and treat each of your team members with respect. Leading a team may be new to you, so invest in yourself by taking training courses on leading and managing. It’s a constant learning experience, and you’ll discover techniques that will work for you along the way.
  8. Do fun team-building activities
    Doing activities together can help create common experiences as a team and form good working relationships. These activities build trust, improve communication, and help your team work more effectively. Check your budget and see what you can afford. Team-building activities can be as simple as going out for drinks after work on a Friday night or even monthly game nights, movie nights, or quiz nights. Put some effort into it and don’t forget to relax, unwind, and enjoy.


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