by| Featured Contributor
The United States economy is currently enjoying “a hiring spree,” according to a recent report from The Washington Post. 223,000 jobs were added in May 2018, allowing the unemployment rate to fall to 3.8 percent which is the lowest it has been since 2000.
As more jobs continue to be added and businesses make the decision to bring on full-time employees, entrepreneurs that have never hired before may be curious about the legal requirements necessary for hiring new team members. If you’re planning to hire your first employee, here’s a look at the documents and records you’ll need to ensure a smooth — and compliant — process.
1. File for an Employer Identification Number.
An Employer Identification Number, or EIN, is a federal tax ID issued by the IRS to uniquely identify employer tax accounts. If your business wants to hire employees, you’ll need to file for an EIN first. Outside of hiring employees, you’ll also need to file for an EIN if you plan to open a business bank account, change your organization type, or establish a credit profile.
2. File Form I-9.
According to the U.S. Citizenship and Immigration Services, Form I-9 is used to verify the identity and employment authorization of your employee’s eligibility to work in the United States. U.S. employers are required to complete this form, along with employees (including citizens and noncitizens), for each hired individual. Once the form has been completed, employers must keep it on file for each person on their payroll who was required to complete it. It is not to be filed with the U.S. Citizenship and Immigration Services (USCIS).
3. Begin withholding taxes.
Once you, the employer, have decided to hire an employee with the intention of paying them, you are required by the IRS to withhold their income, Social Security, and Medicare taxes. New employees must complete and return to their employer Form W-4 Employee’s Withholding Allowance Certificate in order to have federal income taxes withheld. Form W-2 withholds federal Social Security and Medicare taxes and is completed by the employer. There may be additional state forms to complete as well, which may differ depending on your state’s tax regulations. During this time, you may consider whether you will administer payroll in-house or by using an external service.
4. Report new hires to the state.
Once an employer has hired a new employee, they must report that information to the state. Each state will vary in their reporting requirements, but don’t worry — it’s not meant to be an intimidating process.
Let’s use the state of California where my business is an employer, for example. If I hired any new employees who work in California, I would need to report that information to the New Employee Registry within 20 days of their start-of-work date. I can send the report electronically or through the mail. The only situation where I would not need to submit a report is if I did not hire any new employees.
5. Create compensation plans and obtain workers’ compensation insurance.
There are several compensation plans every business will need to create for its team. Let’s take a moment to explore the required ones.
- Workers’ compensation insurance is required in the event that an employee suffers an injury or unforeseen circumstance on the job. Employers can obtain this insurance through their state’s workers’ compensation program or through a third party provider.
- Disability insurance, which is required in California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico.
- You may register for unemployment insurance with your state workforce agency.
- Leave benefits, outside of the Family and Medical Leave Act (FMLA), may be optional, but are worth discussing additional options with your employees.
For brick and mortar storefronts or offices, remember that you will be required to post OSHA workplace posters in a conspicuous place where all workers are able to see it. If you don’t already have one, you may order a print copy online or on the phone or download it from the OSHA website.
Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA
As CEO of MyCorporation Business Services, Inc. (MyCorporation.com), Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With her experience in the fields of corporate and intellectual property law, Deborah has evolved from lawyer to business owner. She has extensive experience in the start-up and entrepreneurial industry as she has been involved in the formation of hundreds of thousands of businesses for MyCorporation.com’s customers.
Ms. Sweeney received her JD & MBA degrees from Pepperdine University. She is active in the community and loves working with students and aspiring entrepreneurs. She serves on the Board of Regents at California Lutheran University and is a founding member of Partners of Pepperdine. Deborah has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in the areas of corporate and intellectual property law. Ms. Sweeney is also well-recognized for her written work online as a contributing writer with top business and entrepreneurial blogging sites. She is a regular contributor on Forbes, American Express, Social Media Today, and BlogHer among many others.
In her ‘free’ time, Deborah enjoys spending time with her husband and two sons, Benjamin (8) and Christopher (6). Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Follow her on Twitter @deborahsweeney and @mycorporation.