As your business begins to grow, you soon realize that you need to bring in an extra hand to help with the increasing work demands. Unfortunately, adding that first employee can be overwhelming, particularly because of all the legal requirements you have to fulfill.
But you don’t have to worry about that; this post offers a guide on some of the things you need to know when hiring your first employee.
Step by step guide on hiring your first employee
1. Understand the employment law
When hiring your first employee, the very first thing you need to understand is your legal obligations and responsibilities as an employer. These requirements usually vary from state to state, so it is important to consult with your lawyer about the employment labor law in your state. If you are on a tight budget and can’t afford an attorney, you may consider accessing free employment legal advice online.
2. Obtain an employer identification number (EIN)
If your business is registered as a corporation or a partnership, you probably have an EIN. That means you may have to skip this step.
If not, however, you need to apply for one. Your employees will need to use your EIN when filing their income taxes, and you will need it too when reporting and filing payroll-related taxes. Obtaining an EIN is easy and can be done online.
3. Register with your state’s revenue department
Besides having the federal EIN, you will be required to comply with your state’s requirements too. After all, your new hire will also need to pay state income taxes as well. The laws around employer registration with their respective states may vary from state to state. Therefore, it would be good to consult the revenue or tax department in your state for specifics about its legal requirements.
4. Get your taxes in order
Every employer is responsible for withholding applicable taxes from the employee’s income and depositing it with the IRS. Before an employer can make deductions, employees must fill out a W-4 form, which advises the employer on the correct amounts of taxes to withhold from the employee’s income.
Besides the withholding tax, employers are also tasked with forwarding social security and Medicare deductions to the IRS. On top of that, you may be required by your state’s tax agencies to withhold state taxes from your employees’ earnings and forward them to the relevant state tax agents.
5. Set up a workers’ compensation cover
A workers’ compensation coverage is a form of a government-mandated compensatory scheme that seeks to ensure that employees receive compensation for damages incurred in their workplaces. The laws surrounding workers’ compensation insurance may vary from state to state.
In some states, every employer must carry a workers’ compensation insurance policy. However, other states make exemptions for small businesses with just a few employees. Therefore, research your states’ laws or have a workers’ comp lawyer guide you to ensure your business is compliant.
6. Verify your candidate’s eligibility for employment by having them fill Form 1-9
The United States and Immigration Services (USCIS) require employers to fill out Form 1-9, which helps employers verify if their potential employees are eligible for working in America. This form must be kept in your records for not less than three years and must be made available for inspection by Immigration and Customs Enforcement (ICE) officials upon request.
When hiring your first employee, following the right steps can help you get the right talent and make the most out of the available time and resources. While the steps discussed in this post are key when hiring an employee, there is still so much that you can do to ensure that you find the right person that pays you back in employee productivity.