Congratulations! If you are considering hiring your first employee it means that you have enough business that you need some help. That is exciting, and a good sign of growth. Hiring your first employee can be a daunting process for anyone not familiar with the process and the legal requirements. Compliance with state and federal regulations is incredibly important. You don't want making your first hire to turn into a legal nightmare. To help, I have laid out a few steps that you should take before you put out that now hiring sign.
First, if you don't already have one, you need to obtain an Employer Identification Number, also known as an EIN. You will need an EIN to report taxes and file documents with the IRS and with many state agencies. You can easily obtain an EIN online through the IRS website. You will also need to check and see if your particular state requires you to have a state tax identification number, some states do and some don't.
Second, acquire the correct forms and put in place a good, reliable system for keeping tax records. The IRS has strict requirements for record keeping, plus good record keeping is important for any business regardless of the IRS requirements. As for forms, you will need to have your new hire complete and sign Form W-4 as part of their hiring packet. You have to submit that form to the IRS. Additionally, every year you will have to send Form W-2 to the IRS for each employee, letting them know the amount of wages you paid the employee and the taxes you withheld. You will also need to send Form W-2 to the employee and the Social Security Administration. There are various deadlines for these submissions that must be met. Don't forget to comply with any state tax requirements as well.
Third, you may want to obtain worker's compensation insurance. Texas is the only state that does not require all business to carry workers compensation if they have employees, but you may want it anyway.
Fourth, you should register with the new hire reporting program. For Texas, this is done through the Texas Attorney General's Office. You are required to report your new hire within 20 days of their hire date.
Fifth, you are required by federal law to verify that your new hire is eligible to work in the United States. To accomplish that task you must complete Form I-9 within three days of hiring your new employee. The I-9 is completed by examining certain documents that will confirm the employee's eligibility to work in the United States. Although the I-9 does not have to be submitted anywhere, you do have to keep it on file. You can electronically verify an employee's eligibility on E-Verify, and in Texas there are some instances where you must do so.
Sixth, ensure that you have posted all the notices required under state and federal law. These posters inform your employees of their rights and of your responsibilities based on the existing labor laws.
Seventh, make sure you understand what taxes you need to file and stay on top of filing those taxes. You don't want to face the wrath of the IRS! Most employees' wages will be subject to income tax withholding, Medicare taxes, and social security taxes. Typically, you will need to file Form 941 on a quarterly basis.
Eighth, consider the work environment you will create for your employee. Compliance with state and federal mandates is important, but your workplace environment is the key to retaining good people. Consider how you will make your business inviting to prospective employees. Will you offer competitive wages? Benefits? Additional training? These decisions have to be made by evaluating what you can afford, what your competitors are offering, and what will attract good people. Don't fall into the trap of seeking the cheapest labor you can find. You are going to invest time in training your employees and in developing them, make that time and money count!
Finally, you need a method to effectively communicate your company policies, benefits, and procedures to your new hire. An employee handbook is important to communicating these items. Organized and effective training is also critical. People learn differently, and the "Tell, Show, Do, Review" method of training is one way to effectively each to different learning styles. Tell them what your policies and procedures are in orientation and in their handbook. Show them how those policies and procedures are implemented in your business. Have them demonstrate their understanding for you, and then review their demonstration by tying their actions back to the written policies and procedures. No business is too small to need good training and good materials for communicating your policies and procedures.
Of course, compliance with state and federal laws is critical to avoiding costly errors and lawsuits, but so is creating a good work environment and effectively communicating with your employees. Employment is an evolving area of law and that means it is important that you keep yourself informed of changes that may impact your business. Making that first hire can seem daunting, but so did opening your own business. It can be done, and if done properly, it will add value to your business!