Having started your own business – and likely with just you at the helm – the day when you can finally afford to take on your first employee, can be an exciting one. But, while it is exciting, it can also be pretty daunting, especially with so many things to get right before making an official hire.
To help you take on your first employee without a hitch, here is the procedure you should follow:
Apply for an EIN
Any business with employees must apply for an EIN, or Employer Identification Number, and while it can be done through the website of the IRS using Form SS-4, there are a few criteria for eligibility:
- You must base your business in the U.S. or one of its territories
- Anyone applying must have a valid Taxpayer Identification Number
- Only one EIN can be applied for in a day
Register your company with the relevant Secretary of State
You must register your company with theSecretary of State’s office relevant to your location, and also register it with the revenue department in your state, or other tax body, which can often be done online.
Register your company with the State Department of Labor
Every state requires businesses to provide their employees with unemployment insurance, and to register with the appropriate agencies in order to pay both unemployment and state payroll taxes.
Otherwise known as SUI, State Unemployment Insuranceis a program mandated at federal level, that requires all employers to make a contribution towards unemployment insurance in each state in which workers are employed by them. For companies with employees in more than one location, SUI will need to be applied for in each relevant state; have your EIN to hand when doing so.
Obtain Workers Compensation Insurance
In the majority of states, businesses are required to provide workers compensation insurance for all employees. Lawsuits involving employee illnesses and injuries in the workplace (or related to their work), can often be avoided by having a robust workers compensation policy in place, and is required by law to give you and your employees the protection you deserve.
Display the necessary DOL posters
You may not know it, but as an employer, you’re required by law to put posters up in prominent positions that inform your workforce about labor laws that are critical to them. You can find details of all required posters on the Department of Labors website.
Determine how you will run payroll
It’s important to have a reliable and accurate payroll process in place, and one of the best ways of ensuring that your employees are paid accurately and on time, is to outsource your payroll requirements. Involving so much more than merely writing checks, some business owners spend as many as 20 hours each month on payroll; time that could be put to better use when taking advantage of a third party payroll service provider.
Create an employee handbook
The easiest and most effective way to create an employee handbook is to pay an expert to do it for you, and since it should contain essential information for employees about workplace policies and can protect you from legal action, it’s not something worth taking any chances with.
Taking on an employee should mean that your business is going well – perhaps even better than expected – and for that you should be congratulated; however, it is a process that can be fraught with problems, and one which many new employers struggle to get right first time around. If you’re about to take on employees for the first time, consider working with an experienced payroll service provider, who can make sure that you’re compliant with all relevant rules and regulations, and ready to enter the next phase of your business journey with confidence!