Hiring your first employee can be an exciting process because it often signals the growth and success of your company. Your business is thriving and you may feel ready to expand your one-person operation to a two or more-person team to assist with growing responsibilities and new revenue opportunities. However, hiring your first employee also brings a whole slew of legal requirements that may be difficult to navigate without legal assistance. Consider contacting the experienced attorneys from Grabbe Law Office for guidance at https://grabbelaw.com/contact.

Administrative Requirements

Before hiring their first employee, a business should address the administrative requirements that come with employing workers. These include:

●       Obtaining an Employer Identification Number (EIN)

●       Registering with your state labor department

●       Creating a filing system for employment tax records

●       Establishing a system for personnel files

Obtaining an Employer Identification Number (EIN)

An EIN is a unique nine-digit number used for tax ID purposes and issued by the Internal Revenue Service. If the business is registered as a partnership or corporation, then it already has an EIN. If not, the business will need to file IRS form SS-4, available on the IRS website, in order to obtain an EIN.

Registering With Your State Labor Department

In order to hire employees, a business should register as an employer with their state labor department. Depending on the state, the state labor department’s relationship with businesses can vary. It may be helpful for a business owner to familiarize himself or herself with the state labor agency’s jurisdiction over businesses in order to understand topics such as state unemployment benefits and requirements around reporting new employees.

Creating a Filing System for Employment Tax Records

The filing system should cover amounts paid, filed returns, and employment dates. The IRS requires this information to be kept on file for at least four years. Implementing a methodical system for tracking all of this information may seem daunting, but a seasoned business lawyer can help guide you in developing a strong record-keeping system. The attorneys at Grabbe Law Office can help you understand all of your legal options regarding how to hire an employee and ensure that your financial and legal rights remain protected.

Establishing a System for Personnel Files

In addition to creating a filing system for employment tax records before hiring your first employee, you will also want to create a system for personnel files. This system will manage important documents including applications, resumes, employment contracts, W-4 forms and other critical documents. The United States Department of Labor specifies the records that an employer must keep. They include:

●       The employee’s full name and social security number

●       The employee’s address

●       The employee’s birthdate

●       The employee’s sex and occupation

●       When the employee’s workweek begins

●       How many hours the employee worked each day and throughout the week

●       How wages are paid

●       The employee’s hourly pay rate

●       The employee’s earnings - both daily and weekly

●       Any overtime earnings for the workweek

●       Additions to the employee’s wages

●       Deductions from the employee’s wages

●       The wages that are paid for each pay period

●       The date that the wages are paid and the pay period that the payment covers

As is the case with creating a filing system for employment tax records, it may be helpful to consult an attorney to ensure your filing system meets any and all requirements.

Payroll and Benefits

Another important aspect of hiring your first employee is setting up payroll and benefits. This includes:

●       Setting a payroll system to pay the employee and withhold taxes -  some businesses do this themselves while others go through an accountant or payroll service.

●       Creating a detailed compensation plan for the employee, including information about starting salary, benefits, bonuses, hours worked, and overtime policy.

●       Defining employee benefits - in addition to required federal and state benefits, some businesses may also offer optional benefits such as healthcare or retirement plans.

●       Acquiring worker’s compensation insurance to protect workers who suffer injuries while on the job. Worker’s compensation insurance is required in most states.

State Employment Requirements

Every business should make sure that they follow state employment requirements when hiring their first employee. One important requirement is reporting each new employee to the state’s new hire reporting agency. This is so that the state can locate parents who owe child support. Different states may have different requirements associated with reporting, so make sure to research what those are before hiring your first employee.

Another important requirement is that a new employee fill out the Form I-9.  The United States Citizenship and Immigration Services (UCSIS) requires employers to have every employee fill out this form. It verifies that the employee is eligible to work in the US. Businesses do not have to file this form with UCSIS but it should be kept in business files for three years and available for inspection. The I-9 form is kept separately in an I-9 folder and not alongside an employee’s personnel folder.

Additionally, the Department of Labor requires every employer to display notices on-site that inform employees of their rights. Your state department of labor may also have additional labor poster requirements that you must comply with.

Other Factors to Consider When Hiring Your First Employee

It is important to be aware of certain legal factors that you may not have considered when beginning the hiring process. For example, when screening candidates, make sure to be aware of their rights. It is illegal to ask a candidate about their age, sexual orientation, marital status, or race. This means that it is also illegal to look up a potential employee online since that might result in you accessing protected information about them - such as their sex, race, or nationality.

An Experienced Business Attorney Can Help You Hire Your First Employee

As a small business owner, the process of hiring your first employee might seem daunting, but you are not alone. According to the JP Morgan Chase Institute, nearly half of all Americans work for a small business. Every day, businesses handle these processes, often with the help of an attorney. An attorney may be able to help you develop strong record-keeping systems and navigate confusing compliance requirements. To find out more about how an attorney may be able to help you, consider contacting Grabbe Law Office at https://grabbelaw.com/contact.