Making the first hires for your small business is exciting. It signals growth, opportunity, and success. If you have never gone through the hiring process before, here are 5 things you need to be sure you take care of when you hire your first employees.
Verify That Each Employee is Eligible to Work in the US
This seems like a no-brainer first step. But, it is one of those things that can be easily overlooked when you are in the middle of the exciting and busy the hiring process. For an individual to be eligible to work in the US, they have to prove both identity and employment eligibility, which can be done several ways:
- By presenting US passport or an Unexpired Foreign Passport with a temporary I-551 stamp or MRIV with qualifying language and paperwork (click here for full list)
- By presenting one proof of identity (Driver’s license, ID card, School ID with Photo, Miltary ID card, Voter’s registration card, etc) and one proof of employment eligibility (Social Security Card, US Citizen ID card, US Birth Certificate, etc).
Once they have done this, just make sure to fill out an I-9 Form to keep handy for each employee. If the government ever wants proof from your business that you did your due-diligence on employment eligibility, you can show your I-9 form and you are in the clear.
More information on the I-9 Employment Eligibility form can be found at I-9employmenteligibility.com.
Get Employee Tax Forms Filled Out
There are a variety of tax forms you will need to fill out before your first employee starts receiving paychecks. First, there are federal tax forms, typically the W-4, which you need to have employees fill out so you can deduct federal taxes, including income, social security, and medicare, from their paycheck throughout the year.
There are also specific forms for state income tax that they need to fill out as well. In most cases, you just need to fill out the section that asks for your Federal Employee Identification Number. The rest should be filled out by the employee. Once completed, the form should be returned to you so that you can keep it on-hand for tax time or in case of government review.
Research and Purchase Worker’s Compensation
Most states require small businesses to have some form of worker’s compensation in place. But it can be tricky, because each state differs as to which businesses must have worker’s compensation and in what situations. Some states, like NY and KY, require worker’s compensation for pretty much every employer in any situation. Others, like TN and FL, only require it for specific industries or businesses with a minimum number of employees. The point, is you need to do your research, figure out your state regulations regarding insurance, and then find and purchase insurance to cover your workers. The NFIB offers a handy chart detailing worker’s compensation requirements for each state.
In most cases, you can purchase worker’s compensation insurance through the same provider that you get your business insurance from, although you may want to shop around a bit to see if you can get a better deal.
Create Files for Each Employee
The U.S. Department of Labor requires that you have some specific information on-hand for each employee. The easiest way to keep track of this information is to create a specific file for each employee. That way you’ll be able to easily access your employees’ information whenever necessary.
The Department of Labor requires a written record of the following for each employee:
- Personal Information – Full name, Gender, Mailing Address, Social Security Number, Date of Birth, and Occupation
- Compensation – Weekly Salary or Hourly Wage as well as how frequently you compensate them (weekly, bi-weekly, etc)
- Payroll Deductions – How much is being deducted from their paycheck?
- Record of Hours Worked – How many hours have been worked? How much overtime have they worked? What is the employee’s work schedule?
- Compensation Records – Dates of paychecks, amounts, periods covered, etc.
- Forms – I-9 form, W-4, State income tax forms, etc
Report New Hires to the State
The last step in your hiring process, is to report new hires to the state. Most states require that you inform them of new hires within 20 days or so to your state’s Department of Labor. Nothing fancy: just the basic info such as employee’s name, SSN, address, and hiring date. If you actually have a local place of business where employees regularly work, then you might also want to ask state labor officials about what posters or notices are required to be posted at your workplace. Many states require specific posters or banners be clearly shown on workplace walls.
To Sum It All Up
Hiring your first batch of employees is a big step for your business. It can be difficult, though, and even once you’ve been through a lengthy hiring search and interview process, you still have a mound of paperwork and legal concerns to take care of. Hopefully this guide will help you navigate the tricky and unexciting parts of the hiring process, so you can focus on training and getting new employees excited about your business!