After starting a small business, it may seem like a good idea to hire an employee. Another person to help out could bring in more customers and pay for itself, all the while growing your business. One has to consider what the legal process of hiring an employee entails.
Before hiring an employee, it’s important to obtain an employer identification number (EIN) from the U.S. Internal Revenue Service. Then, it’s important to find or set up a record keeping system as employers are required to keep federal tax records on employees for up to 4 years. There is a software for this which calculates the taxes that need to be withheld for each pay period. Employers must report monies paid and taxes withheld for each employee by the last day in February, every year, to the Social Security Administration, for the previous calendar year. Businesses are also required to send W-2’s to each employee by the 31st of January of the year, following the reporting period. As for state taxes, each state has its own laws regarding the taxes and will depend on the state where the employee lives. Each state has its own New Hire Reporting Program in which you need to register within 20 days of the employee hire date.
Upon hiring an employee, you’ll need to make sure they are eligible to work in the United States. This means checking, to be sure that the person is a citizen of the United States or is allowed to work here, by examining and verifying certain documents. Only the documents specified on form I-9 are allowed to be requested. Register with E-Verify to electronically verify the documents. You can also visit http://www.ice.gov/factsheets/i9-inspection to find out more detailed information on what the law requires.
Next, you’ll need to acquire worker’s compensation insurance which is mandatory for all businesses with employees. This is carried by commercial carriers but is also accessible through your state’s Workers Compensation Insurance Program. You can find out more about this program by visiting the Department of Labor’s website at http://www.dol.gov/owcp/dfec/regs/compliance/wc.htm.
There are posters that employers are obligated to put on display that inform employees of their rights and employer responsibilities under the labor laws. Some of these contain information on the Family and Medical Leave Act (FMLA), minimum wage laws, health and safety laws, etc. Not every business is required to post every poster, depending on the type of business.. You can visit http://www.dol.gov/elaws/posters.htmto determine, based on your business, what posters you’ll need.