If you are a small business owner who does not have an HR department set up quite yet, the task of onboarding new employees may fall to you. While outsourcing onboarding to an outside HR advisor or adopting an integrated HR system are both options, it would be more cost effective to handle the process yourself, unless you are hiring in droves.
Such an experience could also provide valuable insight into understanding the role an HR department plays. Growing your knowledge can grow your business.
Keep in mind that there hiring regulations and tax requirements at the local, state, and federal levels. You must be compliant in all of these things, or your business could be hurt. In order to protect your company, there are eight steps you should take before hiring a new employee.
Obtain an Employer ID Number
An EIN identifies businesses for tax purposes. It functions similarly to a Social Security Number. Any company with employees must have an IRS issued Employer ID Number. Apply for this EIN by filling out an SS-4 online, by fax or phone. If you are confused by any sections, speak with your business attorney.
Register with State as an Employer
You are required to register as an employer with your state’s version of the Department of Revenue. If you are in a state that has an income tax, ask about W-4s and how the state would like you to report and pay state income taxes that you take on your employees’ behalf.
Research Your New Hire’s Past Work
One of the fatal mistakes a business owner makes is not hiring the right people. It is essential that you look into applicants’ history before hiring. Performing an employment background check is an easy and smart way to verify that your new employee was truthful about his or her past. Character matters to a company’s long-term growth and success, so it is wise to use a company like ShareAble to confirm that you are making the right choice.
Confirm New Employee’s Work Eligibility
The United States Citizenship and Immigration Services mandates that all employers complete an IRS issued 1-9 Form to confirm a worker’s eligibility. The final page of that form will denote the documents new hires must show to verify work eligibility.
Comply with State and Federal Tax Reporting Regulations
To comply with state and federal tax laws, you must list your employees as full-time employees or independent contractors. If you choose to diversify your business by hiring freelance workers, your registration and tax requirements will be different than if you have full-time employees. Be sure to thoroughly review the IRS’ tax guide so that you know the different tax requirements.
Enter New Hires into New Hire Registration System
Employers are required by law to report new-hire info to their state’s directory within a three week period of the hire. One of the primary reasons this universal system was created was to keep tabs on people who have debts that need to pay or still owe child support. People derelict in their payments may have their wages automatically garnished by the state.
Attain Workers’ Comp and Unemployment Insurance
In most states, employers are required by law to get worker’s comp and unemployment insurance. Worker’s comp is for employees who get injured on the job and unemployment insurance is for employees who work a certain period of time and then are involuntarily laid off. Since these laws vary by state, make sure to research what is required for your specific location.
Post Worker’s Rights Notices or Posters
Nearly every state requires that employers display a current poster that alerts them of their state and federal workers’ rights. This must be shown in a visible area and updated regularly as the laws tend to change throughout the year. If keeping track of these changes sounds like a pain, QuickBooks offers a service that automates this poster compliance and sends you new posters as changes occur. The Department of Labor has a Poster Advisory page to help clarify what you need post.
There are local, state, and federal employment laws you must comply with in order to run a business. These steps serve as a general guideline, but because these laws can vary according to the state, be sure to thoroughly peruse and familiarize yourself with the Equal Employment Opportunity and Fair Labor Standards Act so that you protect your business and your new hires.