What every business owner need to know before hiring their first employee

For most businesses, some kind of growth is usually the goal.

The problem becomes that when you grow your business, it can become harder to step away from that business for your own personal life, vacations or other ventures. If you’re business is growing and you want to maintain your sanity, you’ll need help with day-to-day operations, and that means taking on one or more employees.  If you’ve never hired someone before, or if it’s been a long time since you have, don’t worry. Here is some important information to get you started.

 Federal & State Regulations

Hiring a new employee means complying with federal and state regulations.  Although the following list may seem long, it is much less daunting with an attorney by your side you who specializes in employment and business law.

Here’s an overview of what’s generally required. You are invited to check out the U.S. Small Business Association (SBA) or call our office for assistance. We commonly walk businesses like yours through the hiring process.

  • Obtain an Employer Identification Number (EIN). Often referred to as an Employer Tax ID or Form SS-4, this nine digit number is issued by the S. Internal Revenue Service (IRS) and used when paying taxes or reporting information to state agencies.
  • Keep Records. The IRS requires employers to keep the following employment tax records for at least four years:  1) federal income tax withholding, 2) federal wage and tax statements, and 3) state wage and tax statements.  Additional records may be required.

See the IRS Employer Tax Guide and the IRS State Government Website links for specifics.

  • Verify Employee Eligibility. All employers must verify an employee’s eligibility to work in the United States.  This is done via the I-9 form that can be obtained and filed online or completed using the paper form.  Verification must be completed within three days of employment and kept on file for three years.
  • Register with Your State's New Hire Reporting Program. All employers must report new and re-hire employees to their state’s New Report Hiring System.  The U.S. Department of Health & Human Services (DHHS) publishes a list of state new hire reporting websites.
  • Obtain Workers' Compensation Insurance. All employers must carry workers’ compensation insurance when they have employees.  The insurance can be obtained through a commercial carrier, through their state’s workers’ compensation program, or on a self-insured basis (where the employer assumes the financial risk for providing benefits to employees).
  • Post Required Notices.  Employers must display posters in their workplace that inform employees of their employer’s responsibilities and employees’ rights.  For example, you must use posters identifying federal and state minimum wage (Fair Labor Standards Act, “FLSA”), equal employment opportunity (“EEO”), and safety (Occupational Safety & Health Administration, “OSHA”).
  • File Your Taxes. Employers who pay wages are generally subject to taxes and income tax withholding, Social Security, and Medicare taxes.  The specific form(s) needed depends upon the facts and circumstances of your situation.

Failing to comply with these laws and regulations can result in unnecessary fines, fees or even litigation. This is why we recommend going through the process with a qualified attorney who has your best interests, as well as a knowledge of the law, in mind. If you need help on-boarding new employees or other aspects of growing your business, we would love to talk to you about how we can help you reach your goals.

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