So, you’re preparing to hire your first employee? Congratulations! This is a critical initial step to growing your business. But the work’s only just begun. There are several things you need to check off the list in order to ensure that your affairs are in order and that you’re protected from liability. If you like smooth sailing, then your business must be compliant with hiring regulations and tax requirements.
Don’t know where to start? Follow this to-do list to find everything you need to know.
Prior to the Hire
There are a few tasks you need to finish before you hire your first employee:
- Get an EIN – An Employer ID Number is your business’ form of identification for tax returns and other documents that will eventually be sent to the IRS. It’s similar to a Social Security Number. To obtain an EIN, you must:
- Principally operate in the
U.S. or U.S. Territories
- Have a valid Taxpayer Identification Number
- Be the responsible party
- Complete an IRS Form SS-4
- Set up Tax Withholding Records – As you go about the hiring process, you’ll have to keep taxes in mind. When you do hire, you have to list your employee as either full-time, part-time, or independent contractor. Also, there are 3 types of withholding taxes you’ll need to fill out paperwork for:
- State taxes – Depending on your state, you may be obligated to file a state withholding form.
- Federal income tax withholding – New employees will have to fill out a W-4, which is an employee’s withholding certificate. This will then have to be sent to the IRS.
- Federal Wage and Tax Statement – You’ll also need to complete a W-2 Form for every employee. This will include their earnings and taxes withheld. A copy must be sent to your employee and the Social Security Administration.
The Hiring Process
This is the fun part. It’s your chance to bring in a new valuable member to begin building your team. Your first hire sets the tone for your business, so make sure you deliberate carefully:
- Define the role – You should have a clear idea as to what role this new employee will have within the company. Will they be supporting you or working independently? Do they need to have some type of industry expertise? Are they there to help with marketing or sales? Having a comprehensive overview of what you’re looking for will make the interview and hiring process that much easier.
- Start interviewing – Once you’ve listed the job on career boards like LinkedIn, sit back and let the applications come in. When a qualified candidate puts their name in the hat, bring them in and see if they’re a good fit. Ideally, you’re looking for a candidate who’s not only qualified and professional, but someone you’ll want to be around every single day.
- Pre-Employment Screening – After you’ve landed on a candidate, it’s crucial you perform an online background check. This is a necessary step to protect yourself from liability and ensures that the person you hire is who they say they are. A background check also protects customers or other future employees.
- Confirm they’re eligible to work within the U.S. – It’s your duty to verify that your employees are legally allowed to work in the country. Failure to do so could result in fines or penalties. In order to prove this, ask the new employee to do the following:
- Fill out section 1 of an I-9 Form, which includes SS, contact info, and employment eligibility.
- Bring in their ID, driver’s license, or passport to confirm their identity.
There are just a few finishing touches to complete the hiring process:
- Register with Department of Labor – After you hire your first employee, you’ll need to report them to the state’s labor agency and pay state unemployment compensation taxes to your state’s Department of Labor. These payments are added to the state’s unemployment fund, which is intended to give temporary assistance to workers that are momentarily out of a job.
- Setup Workers’ Comp – Although it varies from state to state, most require that you get a workers’ insurance policy to protect employees who get injured on the job or fall ill because of exposure in the workplace. Business insurance is critical, it protects you from an injury claim that would for you to pay out of pocket.
The Finish Line
Congrats, you’re done! You’re all set to hire your first employee. Now you can start investing in them. Pop some champagne and celebrate. Your business just got 100% bigger!