Hiring the first employee can be an exciting time for a business, but it can also be terrifying. Numerous steps need to be carried out before this process even begins. The reason for this is no business wants to run afoul of the law. Doing so could lead to an abundance of legal bills and the business going bankrupt. Following are only some of the many steps that should be completed.
- An employer ID number or EIN is needed before any employees are hired. This number is required on all IRS documents, and the SS-4 form may be found online. Complete this form before advertising for workers.
- Contact the state labor department to register. This department typically handles unemployment compensation taxes, which go into a specific fund to help workers in the short term when they lose their job.
- Obtain the necessary insurance. At a bare minimum, this will be workers’ compensation insurance, although other coverage may be required by law. There are exceptions, however, based on the size of the business, thus the owner needs to understand the requirements in their state thoroughly.
- Put a payroll system into place. This system collects any taxes withheld from the employee’s paycheck. This system needs to include local, state and federal taxes.
- Learn about the Employment Eligibility Verification requirements for employees. Overseen by the U.S. Citizenship and Immigration Services (USCIS), this program ensures the person is allowed to work in the United States. Although this form doesn’t have to be filed with the USCIS, the employer needs to keep it on file for three years and present it when asked by officials of this department.
- When the employee is hired, report this to the new hire reporting agency. Have the employee fill out the necessary paperwork, including the IRS Withholding Allowance Certificate and the Employment Eligibility Verification form. Create a file for each employee with these documents or copies when the original must be submitted to a government agency.
Don’t overlook a single step. To learn more about what should be done before hiring an employee, visit founders guide. This site helps individuals start up the business of their dreams and provides information any business owner will benefit from.