7 Steps To Hire An Employee
Congratulations, you’re ready to hire! Now that you’ve determined your new hire is an employee (and not an Independent Contractor), you must satisfy several administrative steps in order to get off on the right foot. Even though these administrative obligations may seem daunting, you can look on the bright side—you’re the boss now!
Being the boss means you make the rules, but it also means you must know when and how to comply with the law. To ensure that your business and role as an employer goes smoothly, make sure you take the correct measures when you hire a new employee.
1. Obtain An Employer Identification Number (EIN)
Before you even hire your first employee, you should have an employer identification number (EIN). The EIN is used on tax returns and other documents that you submit to the IRS. To get an EIN, you have to file an IRS form SS-4, which can be found here.
2. Verify Employee Eligibility
We are aware that being an all-inclusive employer means not turning anyone away who is right for the job, but Federal Law does require employers to verify an employee’s eligibility to work in the United States. U.S. Citizenship and Immigration Services (USCIS) requires that within three days of hire, the employer must complete Form I-9, found here.
Employers do not have to submit the I-9 form with USCIS, but you must keep it in your files for three years, or one year after the date of employee’s termination (whichever is later) and make it available for inspection by officials of Immigration and Customs Enforcement (ICE).
3. Fill out IRS Form W-4
Employees must fill out an IRS Form W-4 to give to their employer. This form tells the employer the allowances the employee claims for tax purposes, and thus enables the employer to withhold the correct amount of tax from their paychecks. The form can be found here.
4. Carry Workers’ Compensation Insurance
Workers’ compensation insurance protects your employees who might suffer on-the-job injuries. The coverage is not only for employee safety but also for the company’s peace of mind, knowing that your employees are covered if an accident were to occur (which we hope doesn’t happen).
5. Report to State Hiring Agency
It’s important to keep your business up-to-date with all of the relevant governmental agencies. This includes updating your state directory about any newly hired or re-hired employees. Each state has its own reporting agency. Visit the New Hires Reporting Requirements page to find your state’s New Hire Reporting System.
6. Set Up Payroll
You’ll need to withhold a portion of your employee’s income and deposit it with the IRS, and also make Social Security and Medicare tax payments to the IRS. You may also need to withhold taxes for your state.
In California, payroll tax requirements are obtained from the California Employment Development Department (EDD) and from California Department of Industrial Relations (DIR). The EDD requires you to withhold personal income tax and state disability insurance from employees’ paychecks. The DIR enforces a range of labor laws including state minimum wage and overtime pay requirements, which are updated on an annual basis. See 2017 Labor and Employment Law Updates for more deets.
* PRO TIP: Some payroll companies offer assistance in handling all of the above filings and requirements for you.
7. Onboard New Hires
Now that you have fulfilled your federal and state duties, you are ready to onboard! We recommend using employee job descriptions and an employee handbook to help stay compliant. For more more information on these important onboarding tools, check out the following resources: Why Every Employer Should Use Employee Job Descriptions and Why an Employee Handbook is Really an Employer Handbook.
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Disclaimer: Although this article may be considered advertising under applicable law and ethical rules, the information in this article is presented for informational purposes only. Nothing herein should be taken as legal advice and this content does not form an attorney-client relationship. If you would like further information, Wilkinson Mazzeo would love to hear from you, so please feel free to reach out with any questions!
Photo Credit: Jackie Wonders