Are you ready to hire? If your growing business needs more support, there are legally required steps you must follow before bringing on a new employee. There are also systems and process you can set up to make managing and paying employees easier. Here’s a list of tips to help you get started.
1. Set Up Legal Requirements
When you hire employees, you must get an employer identification number (EIN). You’ll use this number on tax returns and other tax documents you submit to the IRS. Note: Applying for an EIN is a free service offered by the IRS. Beware of companies that charge to set up an EIN. Apply for one online through the IRS website here.
2. Register with Your State's Labor Department
Paying state unemployment compensation taxes is required once you bring on an employee. Go to the Department of Labor's website for a list of state unemployment insurance tax agencies.
3. Get Set Up to Pay Withholding Taxes
There are three types of forms you’ll need to fill out to properly pay withholding taxes.
- Federal income tax withholding. Employees complete Form W-4 which you submit to the IRS. Find the form here.
- Federal wage and tax statement. Every business owner with employees must file a Form W-2 for each employee (even if the employee is related to the employer). Download W-2s from the IRS website here.
- State taxes. Many states also have a state withholding form — find your state here to access the required form.
You’ll need to report payroll taxes as needed on quarterly and annual basis.
4. Set Up Payroll System
You can DIY your payroll. However, dealing with tax withholdings can be complex and take valuable time away from your business. Most payroll services can do it all including calculating pay and taxes and sending filings when required. If you’re looking for a software program to help, visit Capterra to compare product features and ratings.
5. Obtain Workers’ Compensation Insurance
Most states require employers to have this coverage if they have even one employee, but the laws vary from state to state and depend on your industry. This coverage helps your business pay for employees’ medical and recovery expenses, replacement wages, dependent support payments, and liability expenses if your business is sued over work injuries or illnesses.
6. Display Required Workplace Posters
The U.S. Department of Labor requires that certain notices are provided to employees in the workplace via displayed signage. Note that posting requirements vary. Not every company is covered by every statute, meaning that your business may not be required to display a specific poster. Free electronic copies of required posters and additional information is available here.
7. Define the Role
What will your new employee be doing to help grow and strengthen your business? Start with a list of the most important tasks then flesh out the full job responsibilities. You’ll also want to have a solid idea about what success will look like for this role.
8. Find Candidates
Once you’ve defined the role, write a job description and decide where to place your help-wanted ad. There’s no shortage of online job boards and some may even be tailored for your specific area or industry. One effective way for a small business owner to find a new employee is by networking. Ask for suggestions from friends, family, vendors, industry colleagues and other professionals like your accountant or attorney.
9. Conduct Interviews
Craft questions that will help you determine if the candidate has the experience, skills, and attitude needed for the job. The type of interview questions you ask will vary depending on the position but there are some questions you should ask each candidate. Visit the SmartBiz Blog for a list of 7 questions every small business owner should ask.
10. Run a Background Check
Running a background check helps protect your business, other employees, and your clients. You’ll discover if the candidate has anything in their background to disqualify them and could help identify if they’ve provided misleading or false information. Check out the Best Background Check Service for Small Business 2019.
11. Make Sure Employee is Eligible to Work in the U.S.
You must verify that the person you want to hire in the United States is authorized to accept employment in the United States. For more information about the employment authorization verification process, see the “I-9 Central” page on the U.S. Citizenship and Immigration Services website.
12. Get Paperwork in Order
To keep organized and stay compliant, set up an employee file for each new hire that includes important information like the employment contract and their emergency contact information.
13. Discuss Required and Optional Employee Benefits
If your business has established employee benefit programs such as health insurance or a 401(k) plan, you'll need a sign-up procedure so employees can enroll, name their dependents, and select options. Some employee benefits are required by law, but others are optional. For information about legally required and optional benefits, visit the SBA website.
14. Discuss Incentive Programs
Employee incentive programs can boost morale and help attract quality job candidates. According to the SBA, common incentives can include stock options, flex time, wellness programs, corporate memberships and company events. Benefits administration software can make accounting easier and more efficient if your budget allows.
Once you’ve brought on your new employee, check out the resources available on the SmartBiz Small Business Blog. We write about all aspects of employee management and cover the hot topics you need to know. Examples of our coverage include: