So, you are ready to take on your first employee. But where do you stand, and what do you need to know? Before you even put out that requisition for enthusiastic individuals to join your company, you need to know your legal obligations as an employer so you know your responsibilities and what is expected of you once you have people on your payroll.
Read on for an employee checklist that will make sure everything is ticked off, and you’re ready to receive those applications.
You Need An EIN Number
Firstly, if you haven’t already, you need to register your business with the federal and local state departments to get your EIN (employee identification number). You cannot hire employees without this. Your EIN is essentially like your social security number for your business. The exact process of getting your EIN can vary from state to state, but before you go any further, if you haven’t already, get registered.
You need to make sure you have a system in place for tax withholding records. These records need to be kept for at least 6 years per employee. As an employer, you are responsible for filling out form W-2. This details the earnings and tax paid to and deducted from each employee over the previous year, and you must give the melee a copy by the 31st of January each year. On top of this, each employee also needs to fill out a W-4 form when commencing employment. This form indicates how much tax you should withhold from their wages to be paid each year. You need to submit this to the IRS. You also need to file state taxes, so you need the applicable information from your state.
In most states, you must purchase workers compensation insurance as soon as you hire your first employee. Workers comp protects employees should they have an accident or become disabled while at work and their earnings are affected.
However, before hiring anyone, you should find out how much is workers comp insurance. This will give you an idea of how much you can expect to pay per employee, and it’s based on their average earnings. Currently, the average national cost of workers comp per employee is $1.19 per $100 of payroll, but the price varies from state to state, so you need to check exactly how much you can expect to pay each month.
You should also know how to screen employees and determine if they have the correct eligibility to work in the US. Take your time to look at the different employment laws regarding the right to work in the US, what you need to be looking for, and the documentation you need. This can prevent you falling foul of labor laws and landing yourself in hot water and ensure that everything is above board and legal.
Hiring your first employee can be a complex process; however, by taking your time, doing the required checks, and getting your paperwork in order, you can give yourself an excellent base to start from before you even begin your search for someone to provide you with a helping hand.