5 Legal Steps for Hiring Employees (US)
So, your business has expanded and you’re ready to hire your first employee. You’ve found the perfect person for the job, they’re excited about being a part of your venture, and you’ve worked out details like expected hours and pay. Now all that remains are your legal obligations. Here are five steps for American companies to take when hiring:
1. Get your Employer Identification Number (EIN)
Apply for this important code online through the IRS website. The EIN (also called the Employer Tax ID or as Form SS-4) is necessary for reporting information to the IRS and state. Once you’ve done this, you never need to do it again.
2. Do the paperwork for withholding taxes
The IRS requires you to keep records of all of your employment taxes for four years or more. There are three types: Federal Income (Form W-4, filled out on or before your employee’s first day of work and submitted thereafter), Federal Wage and Tax Statement (Form W-2, submitted every February), and State Taxes (depending on which state your business operates in, check local information).
3. Make sure your employees are eligible to work in the US
This requires completing the Form I-9, which involves checking an approved form of documentation to ensure that you are not employing an illegal alien or other individual who cannot be lawfully employed in the US. You don’t need to submit it, but you do need to keep it on file for at three years after you hire them or one year after they stop working for you, whichever is later.
4. The New Hire Reporting Program
Each state has their own directory of newly hired and re-hired employees. You must report employees on your state’s website within 20 days of the date that you hire them.
5. Get worker’s compensation insurance
Workman’s Comp, that fearful thing. You are required to carry worker’s compensation insurance of some sort, be it through the state program, a commercial insurance company, or by self-insuring. This is often a delicate thing between employers and employees, and obviously something to monitor closely as you develop relationships with those who work with you. Document any workplace injuries carefully, and if there is ever any issue of trust take not of any injuries your employees may suffer outside of the workplace so that you don’t become liable for them.
There are additional steps required in the process, so I recommend further research. You are now well on your way to growing larger and more successful. The satisfaction your employees have with you as a boss is an integral part to the functioning of your business, but don’t neglect the paperwork aspect as well.