Hiring your first employees can be an exciting yet intimidating feat. You need to adhere to multiple steps, such as verifying a potential candidate’s identity and obtaining the proper insurance, among others. Here are the legal requirements associated with hiring an employee for your business.
[Read: What Is Fractional Hiring?]
Apply for an EIN
Before you can add an employee to your business’s payroll, you must obtain a tax ID for your business, also known as a federal Employee Identification Number (EIN). Businesses can apply for an EIN on the IRS website. As the applicant, you will need a form of your personal taxpayer ID, such as a social security number and the basic information regarding the company, including corporation status.
Register with your state’s unemployment insurance office
The U.S. Department of Labor states that, generally, businesses must pay both federal and state unemployment taxes if they employ at least one person for 20 weeks in a calendar year, or if their employees’ wages account for over $1,500 per quarter. Your business will first register with the state office in charge of unemployment insurance, then record the quarterly wages of your employees and pay quarterly unemployment taxes online.
Verify your candidates' eligibility to work
Before you officially onboard a new employee, you must verify their identity using the U.S. Citizenship and Immigration Services’ I-9 form. Your prospective hire will fill in their identifying information, such as social security number and citizenship status, and they must provide copies of acceptable documents that prove their identity. It’s up to you or your HR team to ensure these documents are authentic. Keep each of these I-9 forms for at least three years after the employee is hired.
Consider running background checks
A background check is an optional part of the hiring process that can provide you with additional information on your candidates; however, any information found through a background check, such as an arrest record, cannot be used as proof of guilt. Employers should also take care to understand the effects that turning away those with previous records can have on otherwise solid candidates.
Every time your business hires a new employee, you’ll have to report their information to your state’s registry. This information is then given to the National Directory of New Hires where the state will be able to find and withhold income from those who are behind on child support payments.
Obtain workers’ compensation insurance
Most states require employers to hold workers’ compensation insurance in case an employee is injured while at work. This insurance will assist the injured worker with medical costs and lost wages. It’s crucial to research your state’s requirements to obtain the correct amount of coverage.
[Read: Talent Recruiters' Insider Tips for Finding Talent in a Tough Hiring Market]
Report new employees to your state’s registry
Every time your business hires a new employee, you’ll have to report their information — such as full name and social security number — to your state’s registry. This information is then given to the National Directory of New Hires where the state will be able to find and withhold income from those who are behind on child support payments.
Set up a payroll and tax withholding system
You will have to withhold a portion of each employee’s paycheck as a contribution to federal and state taxes, including Medicare and Social Security. Third-party payroll systems can help you determine just how much comes out of each paycheck and how these funds can be distributed to taxes and employee benefits.
Have all employees fill out W-4 forms
A W-4 form is filled out by the employee to determine how many allowances the employee has to determine for the amount of money that is withheld from taxes. An employee may take on extra allowances, which will cause less money to be taken out of their paycheck for taxes.
Write and share employee notices/handbook
An employee handbook is useful no matter how many employees you have on your payroll. It gives your employees a centralized location to answer questions, explain benefits and employee expectations. If you have an office location, you’ll most likely need to place employee notices informing employees of their rights including a poster on the Fair Labor Standards Act.
Comply with OSHA rules
When you begin employing workers, your business will have to comply with the rules of the federal Occupational Safety and Health Administration (OSHA) enacted in the Occupational Safety and Health Act of 1970. OSHA has a number of safety rules, such as having safe tools and equipment and handling of hazardous chemicals.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
Follow us on Instagram for more expert tips & business owners’ stories.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
Next Event: Tax Filing Tips!
Join us on Thursday, February 22, at 12 pm ET for the first episode of our expert series, Ready. Set. Scale.: Smart Tax Tips for a Stress-Free Filing. We will have seasoned leaders offering actionable tips to help minimize the stressors of tax time for small businesses.
