Taking your business from a solo venture to a small business complete with employees is an intimidating process with many different steps. You will have done most of these if you have incorporated and paid yourself as an employee, but some will need to be completed before you hire someone else.
Apply for an EIN
Before you can put someone on your payroll, you must apply for an Employer Identification Number, also called a tax ID; you get your EIN from the IRS. This allows you to communicate with the IRS as an employer and a business. You will also need to register with the state’s unemployment insurance office. This ensures you record and pay the proper state and federal unemployment insurance amount.
Set Up Payroll
Your next step is to set up payroll and tax withholding. One of the easiest ways to do this is with the help of workforce management software like Paypro, which will have built-in tools to make the various calculations effortless. The withholding you do from employee’s paychecks is paid with your quarterly tax filings and must be included on those forms.
Verify Employee’s Eligibility
Jumping through all the hoops to legally employ people will only be helpful if they are eligible to work in the US legally. Verifying someone’s eligibility means checking their identity by having each hire fill out an I-9 form and then getting copies of their identification. Confirming that those documents are legitimate and keeping the copies with the I-9 form for at least three years is a good idea. It is recommended that you also consider a background check.
Get Workers’ Compensation Insurance
Employers must carry amounts of workers’ compensation insurance determined by the state, so you should check with your state’s regulations and add this coverage to your policy before hiring employees. You must also comply with the federal Occupational Safety and Health Administration regulations concerning your industry. The good news is that the more you comply with OSHA regulations, the easier it is to find discounts on your business-related insurance.
Report New Hires With Your State
New employees need to be reported to the state so that their information can be added to the National Directory of New Hires. The various government agencies can ensure proper payroll withholdings are accounted for. Your employees must also fill out a W-4 to determine how much is withheld for individual income tax.
Write Notices and Handbooks
You may know how you want each employee to behave and how each task should be done, but your new hires will not. By writing out these things in employee handbooks and notices, you will outline what is expected of each party in this employment contract. You can ensure employees receive and read them by having each one sign a paper verifying that they have received, read and understood the documents. Keeping this page on file can help cover your company if a dispute happens in the future.
Hiring your first employee is a daunting task with as much to do with setting up the legal paperwork behind the scenes as posting the job opening. There are a lot of steps you must take and forms that you and your employee need to fill out and file with the government.
