Are you in the process of hiring your first employee? Congratulations! Reaching the point where you are ready to start growing your team is an exciting time in any company’s journey.
When you bring on people, however, you also have more responsibilities and requirements to fulfill. Not to worry—we’re sharing 11 steps you should take to prepare for your new hire below.
1. Get an Employer Identification Number.
One of the first things you should do when hiring your first employee is obtain an employer identification number (EIN). Your EIN is required on tax returns and other IRS forms.
Getting an EIN number is a fairly simple process, thanks to the IRS’s easy online application. You don’t even have to file a Form SS-4 anymore!
2. Have your new employee complete and return all necessary forms.
Every new employee should fill out two essential forms, a W-4 and an I-9.
W-4, Withholding Allowance Certificate
Employees use the W-4 form to tell you how many allowances they are claiming for tax purposes. You will then withhold the correct amount of tax from their paychecks.
You don’t need to file this form with the IRS, but you should have employees fill out a new W-4 annually in case they want to change their withholdings.
I-9, Employment Eligibility Verification
Employers must verify that every employee they hire is eligible to work in the United States by having them complete a Form I-9, as required by the U.S. Citizenship and Immigration Services (USCIS).
You don’t have to submit the I-9 form to the USCIS, but you must keep it on file for three years and make it available for inspection by officials of Immigration and Customs Enforcement (ICE).
Note: Completed I-9 forms should be kept in a separate folder for all employees, rather than their individual personnel files.
3. Report each new employee to your state’s new hire reporting agency.
Employers must report information on all new employees to their local new hire reporting agency. This program is meant to locate parents who owe child support.
To find your state’s agency, visit the Office of Child Support Enforcment’s New Hire Reporting page.
4. Post required notices.
When you hire your first employee, you must also post notices with information on worker rights. Several federal agencies and state departments of labor (DOL) have specific requirements, so be sure to check both to find out which posters you need to display.
- Check out the Department of Labor’s Poster Advisor for federal requirements.
- Find your state DOL for state requirements.
5. Set up a payroll system.
Now that you’ll be paying an employee, you need to find a system to properly manage income and withhold a portion of employee’s income. Your payroll program will withhold state income (if applicable), Social Security, and Medicare taxes and deposit them with the IRS.
- Learn more about deductions in the IRS’s Employer’s Tax Guide.
- Check your state’s tax requirements by visiting the Federation of Tax Administrators.
Additionally, make sure you:
- Decide who will administer your payroll system: Will you handle it internally, or hire an external service provider?
- Create a compensation plan for holiday, vacation, and leave.
- Report payroll taxes as needed on a quarterly and annual basis.
6. Prepare for required benefits and taxes.
When you hire your first employee, you will need to provide several required benefits and taxes.
Unemployment Taxes
Register with your state DOL to pay state unemployment insurance and file Form 940 annually to report your annual federal tax. You must file a 940 for:
- Any year in which you paid $1,500 or more in any quarter, or
- Any year in which an employee worked for you in any 20 or more different weeks of the year.
These unemployment compensation funds provide short-term relief to people who lose their jobs.
Social Security Taxes
Pay Social Security taxes at the same rate as your employees.
Workers’ Compensation Insurance
Obtain required coverage through a commercial carrier, self-insured basis, or state Workers’ Compensation Program.
Family and Medical Leave Act (FMLA)
Provide eligible employees with unpaid, job-protected leave for specified family and medical reasons with continuation of health insurance according to the FMLA.
Disability Insurance
Required in CA, HI, NJ, NY, RI and Puerto Rico.
7. Put optional benefits in place.
While certain benefits are not required for all employers, they are an important part of recruiting and retaining high-quality employees. Good health, dental, and vision insurance play a significant role in top candidates’ job decisions.
If you do offer certain benefits, you may need to comply with certain laws. Group health plans must comply with federal laws and businesses must offer optional COBRA benefits to employees who are terminated or laid off.
Whether or not your company has to provide group health insurance depends on your full-time equivalent, which measures the number of full-time hours being completed at your company. Check out our five-step guide to calculating your full-time equivalent.
Retirement plans are another important benefit to many candidates. You might choose to offer a 401k or pension plan. If you do provide a retirement plan, you will need to show its compliance with government regulations through IRS Form 5500.
8. Establish workplace safety measures.
Of course, hiring your first employee means considering their health and safety. Be sure to comply with OSHA requirements by:
- Maintaining a hazard-free workplace.
- Training employees to do their jobs safely.
- Notifying applicable government agencies about serious workplace accidents.
- Keeping detailed safety records.
Workplace safety means different things for different types of businesses and work environments. Develop a safety program to keep your team safe.
If your growing team will be partly or entirely virtual, you have a whole new set of concerns to address. Follow these workplace safety tips for remote employees.
9. Create an employee handbook.
While it may not be mandatory, developing an employee handbook from the minute you start hiring people ensures you’ll be on the right track.
Your handbook should communicate your business’s employee policies and make it clear that employment is at will unless a worker has signed a written employment contract. You should also have each employee sign a handbook acknowledgement, then store it in their personnel file.
10. Develop a personnel filing system.
For each employee you hire, create a file to keep job-related documents, including:
- Job applications
- Employment offers
- W-4 forms
- Performance evaluations
- Employee benefit forms
Create a separate medical records cabinet, which should be confidential and locked, and another for I-9 forms.
11. Create employee incentive programs.
Many talented candidates are searching for a work culture and perks that improve their lifestyle and finances. Extras like flexible schedules, unlimited PTO, wellness programs, corporate memberships, and company events can help your company establish high morale and performance and retention from Day 1.
Consider these 13 low-cost employee perks as you develop your company’s incentive programs.
Be Prepared When Hiring Your First Employee
If you’re hiring your first employee, it’s likely both an exciting and slightly scary time. You want to ensure everything goes smoothly and you’ve got all your ducks in a row for both your new team member and your business.
Doing these 11 things is a great way to start, but if you’re feeling a bit overwhelmed, we can help! BlueLion will help your processes and procedures are compliant and you set up your new employee for success. Contact us today at 603-818-4131 or info@bluelionllc.com.
The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.
