Hiring Your First Employee: A Guide

Compliments on getting ready to hire your first employee! It’s a big step for your business — and an exciting and intimidating place to be. As a business owner, bringing on assistance translates to growth. But it also means taking on paperwork, expenses, and new legal responsibilities.

To get it right, we’re here to walk you through the new hire procedure. We want to help you avoid any problems as you go from individual businessperson to employer.

Before hiring your first employee

There are a few steps you will want to take before you hire your first employee. Some of these steps are quick, while others will take a bit more time. Prepare for the following:

Employer Identification Number:

Apply for an EIN (Employer Identification Number); this is a requirement for any business that has employees.

This can be done through the IRS website, however, EIN eligibility is based on a few things.

• Your business must be based in the United States of America or one of its territories.
• A valid Taxpayer Identification Number is required for those who apply.
• Each day, the responsible party can only apply for one EIN.

Use IRS form SS-4 to apply for apply online, and you likely had already done this when you started your business.

Obtain an EIN from the state that withholds taxes (if applicable – not always the same as FEIN)

To begin, you must register your company with your state’s secretary of state’s office. Many states include small business-specific website with links to registration applications.

If your company has employees, you must obtain a federal tax ID number, often known as an employer identification number. On the Internal Revenue Service’s website, you can apply online.

You must also register your company with the revenue department or other tax body in your state. You can do this on the agency’s website in several states. 

Register with the State Department of Labor:

All states require companies to provide employee unemployment insurance register with all appropriate agencies so they can pay state payroll taxes and unemployment taxes. For a list of specific State Requirements

State Unemployment Insurance (SUI) is a federally mandated program that mandates employers to contribute to unemployment insurance in every state where they employ workers. If you have employees in numerous places, you will need to apply for this on a state-by-state basis. For example, in the state of Utah, you’ll apply through the Department of Labor’s website. You will need your EIN in order to apply.

Get workers’ compensation insurance:

Most states require companies to provide employee workers’ compensation insurance, though some provide exemptions for small employers. The best thing to do is to connect with your local authorities to see if they need to pay workers at your company’s site.

Many work-related lawsuits, particularly those involving injuries and illnesses acquired as a result of an individual’s employment, can be avoided by having a strong worker’s compensation policy. This type of coverage is required by law to protect both you and your employees. The trade-off is straightforward: employees are covered regardless of who is to blame for their illness or accident, and employers are shielded from the majority of lawsuits.

The cost of worker’s compensation varies by state. According to the Bureau of Labor Statistics, the average cost of worker’s compensation per $100 in employee income was $1.36 in 2015.

Display the required DOL posters

Were you aware that you are obligated by law to post posters that inform your employees about critical labor laws? The Department of Labor provides details on each of the alternative posters you may use, as well as the consequences of failing to include the needed ones. 

You can opt to show the Fair Labor Standards Act poster, for example, but there is no punishment if you don’t. Certain OSHA posters, on the other hand, are mandatory for all commercial employers, and failure to display them can result in violations and penalties. Use this poster updating guide to figure out what you need to put up in your office.

Be sure to visit your state Department of Labor’s Web site to see if state posters are required. One way is to find out which ones you need is through the eLaws Poster Advisor.

Decide how you will run payroll.

There are several templates you can use, but make sure you have the payroll process under control. You can also identify an outsourced payroll company that fits your budget. Payroll involves much more than just writing checks, and the average small business owner spends nearly 20 hours a month on payroll, according to the Bureau of Labor Statistics.

Create an employee handbook.

You have three alternatives for building your employee handbook: start from scratch, utilize a pre-existing (paid or free) handbook template, or hire an expert to do it for you. Your guidebook performs a number of functions. It not only informs your staff about workplace policies but also protects you from legal action.

The following topics should be covered in your handbook:

• Anything your state requires you to include
• History of the company
• Policies on Family Medical Leave
• Policies for paid time off
• Policy on equal employment and non-discrimination
• Compensation policies for employees
• Expectations and regulations for employee behavior, as well as disciplinary procedures
• Pay and promotion information
• Information about the benefits
• A disclaimer stating that the policies in the handbook are subject to change.
• acknowledgment page for employees

Before distributing your handbook to any employees, we recommend having it reviewed by a legal practitioner.

The Hiring Process

Bringing in good people to shape your business starts with writing a well-written job description. This description will describe what it’s like to work with you and the job’s requirements. Then, share that posting with your network and get it where qualified applicants can be found. (like hiring sites, LinkedIn, a local newspaper, or the careers page of your site)

Performing a Background Check

Running a background check is a state or federal obligation in several sectors. Others simply think it’s a good concept. To avoid any unpleasant shocks down the road, we recommend that you conduct a background check on new personnel. Employers usually reimburse this expense. There are a variety of tools and websites that will conduct a background check on your behalf.

A few things to think about when designing your job description and beginning interviews:

• Be specific about whether the position is an employee or an independent contractor in the application process. The IRS has strict guidelines for classifying employees, so it’s best to be aware of them before recruiting anyone.
• When posting a work listing, add a deadline for applying; so you won’t continue to have resumes flooding your inbox long after filling out the role.
• Use your time to filter by resumes to find several interview applicants. You might want to schedule the interviews within the same week so that you can quickly complete the process. Make sure you evaluate applicants while they’re fresh in mind.
• When interviewing an applicant, note that there are specific questions that you can not ask, including those that are specifically related to age, race, ethnicity, gender, sex or sexual orientation, and country of origin.

Questions to should not ask:

1. Are you a U.S. citizen,
2. do you have or plan to have children,
3. do you have children,
4. have you been sick lately?
5. Have you ever filed for bankruptcy,
6. own or rent out or own a home,

You can ask applicant questions that pertain to their eligibility:

1. Are you legally able to work in the U.S?
2. Are you able to fulfill the list of tasks you have set?
3. Have you ever been convicted of a felony,
4. and if so, what kind of crime did you commit, and how did it lead to your arrest?
5. Why are looking for a new job,

Be sure to check references for all applicants you wanted to hire; you need to be sure that the person you want to hire is the right choice, especially if you are doing your first job. But also make sure that you appear more legitimate to candidates who may be considering multiple positions. Even though the interview went very well, many employers are missing this step due to a lack of background checks. In some states, this is legally binding, so make sure you understand which staffing rules work for you and which don’t.

Onboarding new employee: The first day and beyond

When the right applicant has accepted your proposal, developing a thorough onboard plan for any employee is the best way to help the first employee settle in quickly.

Help them understand the critical tasks they are responsible for, this will help them feel comfortable and in a stronger place to hit the ground running.

You’re going to hand in a ton to your first recruit, and you’re probably buried deep in your brain with many of the things they need to learn, so take the time to log them and prepare to be less successful in the first week.

When you have a training program and set up their workspace, all the formalities and regulations need to be taken care of. You will need to have a clear understanding of the company’s policies and procedures, as well as first day legal standards.

Required onboarding paperwork:

• An I-9 Job Registration Form is a requirement for each employee on the first day of the job; this form helps you review the required documents like an employee’s Social Security Card. It must be held in an individual file for a minimum of three years after the date of employment or at least one year after termination of employment.
• W-4s must be held for at least four years for each employee, and you must fill out a questionnaire for each worker if your state collects Federal income tax.
• If the new employee is an independent contractor, the law requires that you fill out the W-9 form.

Additional onboarding paperwork:

• Collect an information sheet for staff, including the emergency contact details.
• Include a copy of the company handbook (if you have one) for the new employee. Spend some time reviewing your companies policies and procedures, especially things such as holiday and sick time, holidays, and any other policies you wish to bring to their attention, such as a social media policy. Do not forget to get a signature from the new employee that they agree to abide by the policies that you set.
• If your company is providing a direct deposit, please ensure that new hires fill out the correct forms.
• Is there a requirement in your industry for non-disclosure or non-compete agreements? You’ll want to add those to the paperwork on the first day too.

New employee hiring requirements:

New hire reporting data is commonly used by states for the following purposes:

• Increase the speed with which child support income withholding orders are processed.
• Collect child support from parents who change employment frequently.
• Find out who the non-custodial parents are.
• Detect bogus unemployment insurance claimants.
  Prevent and end illegitimate welfare support.
• Put an end to bogus workers’ compensation claims.

Payroll Outsourcing vs. Do-It-Yourself

Some employers choose for the “Do-It-Yourself” approach to payroll management, which entails being in charge of payroll accounting, pay disbursement, and all payroll taxes and fees. This can be accomplished using a variety of software applications, the most prominent of which is QuickBooks. We usually prefer an electronic payment system over paper checks because enrolling your employees in direct deposit will save you both time and money.

There are several liability considerations to consider when doing payroll on your own, particularly in a small business where there are fewer employees overseeing the process and identifying possible errors. Here are some of the issues we’ve seen employers face when it comes to payroll administration on their own:

• Payments and withholdings are miscalculated. This can include inadvertently withholding too much or too little, inaccurate reporting of pay rates, wrong bill verification, and so on.
• Errors and omissions in recordkeeping are common.
• Intentional blunders, Unfortunately, there will be situations when companies accidentally hire dishonest employees. Payroll is one of the areas where monies might go missing as a result of dishonesty on the part of problem employees.
• Missing deadlines, miscalculating pay rates, or making mistakes in numerous legal forms and papers might result in penalties.
• Employee and employer information is subject to being accessed inappropriately by anyone both inside and outside the firm due to security holes.
• Outsourcing this element of your organization to the pros is one of the best methods to minimize these penalties, hazards, and general payroll-related problems. Professional payroll services can handle everything from tax forms to direct deposit and post-pay record-keeping for your company.

Employer payroll tax forms

The IRS, State, and local tax agencies demand a lot of paperwork from business owners, and when you become an employer, you add a few pages to the list of exhausting work. Stay on track because penalties can quickly pile up if you fall behind.

Here you will find the best times for processing and submitting your tax forms as well as tips and tricks for tax returns.

• Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return. Usually, FUTA payroll contributions are made monthly or annually, with Form 940 used for reporting federal unemployment taxes on each employee. A percentage of the wages of each employee is charged before the employee exceeds $7,000 in taxable compensation for the year. Additionally, you would have to pay an unemployment tax on certain forms collected directly from the state department.
• Form 941 – Employer’s Quarterly Federal Tax Return. 941s are filed annually, semi-weekly, or monthly when tax deposits are made. Form 941 records deferred federal income tax and Social Security and Medicare.
• Form W-2 – Wage and Tax Statement The previous years W-2 are filed with the Social Security Administration by January 31. The filed W-2 forms, followed by Form W-3 (see below) Each employee is also issued a W-2 form, which must also obtain the form by January 31.
• Form W-3 – Transmittal of Wage and Tax statements the form used by Social Security Administration to file W-2s.
• Form 1099-MISC Is a document used by companies hiring contractors. Annually, applicants must submit their Form 1099-MISC before January 31. Business owners will also need to file Form 1099-MISC with the IRS and must have Form 1096 if paper filing is required.

Building your team is an exciting achievement — and it’s the perfect time to put in motion a recruiting plan for all of your future workers. It might sound like a lot of work, but taking the time to get the first employee on board the right way will minimize administrative errors and make recruiting down the road easier. When in doubt, don’t be afraid to enquire with a lawyer, accountant, or AccuServe Payroll for assistance.