The Only Hiring Guide You’ll Need: From Forms to Insurance

Posted by on April 3, 2013 in Business Management, Hiring [ 0 Comments ]

hiring legalWhen you just can’t do everything by yourself anymore, it’s time to start thinking about hiring employees in your business.

However, before you start bringing in candidates, you need to be aware of the legalities involved in becoming an employer.

From proper paperwork the hiring process, there are many important things that even an experienced business owner may not know.

Related: Organize your hiring process with recruiting software

Before Hiring

There are several steps you need to take in your business before you can get the ball rolling on new employee recruitment. The following elements need to be in place before your first employee walks in the door:

  • EIN: Your employment identification number or Employer Tax ID. This number is necessary for reporting tax and employee information.
  • Workers’ Compensation Insurance: Your business is required to purchase workers’ comp through a commercial carrier, your state’s insurance program, or on a self-insured basis. Many states also require you to purchase disability insurance for your employees as well.
  • Post notices: Employers must post – in a prominent location – certain posters that explain the rights of employees, employer responsibilities, and information about wage and labor laws.
Resource: Insurance Guides For Your Business

During The Hiring Process

Now that you’ve prepared your business for new employees, you need to start the hiring process: posting jobs, interviewing applicants, and screening new hires. Be aware that there are limits to the questions you can ask during the interview process, as proscribed by the Civil Rights Act, the Americans With Disabilities Act, and other regulations.

For example, you cannot ask about an applicant’s medical history or real or perceived disability. You can only ask if the applicant is capable of fulfilling the functions of the job with or without accommodation.

While it’s a good idea to screen all your new hires, employers are required to perform criminal background checks on employees who will be working certain positions, such as those that work with vulnerable populations. You can use your own background check software or outsource the task to a third-party background check provider.

Upon hiring one or more employees, you are responsible for:

  • Form W-4: Required of every employee to fill out on or before the date of employment. You must then submit it to the IRS.
  • Form I-9: Required of every employee to fill out within three days of hire. This form guarantees that employees have the right to work in the US.
  • The New Hire Reporting Program: You must report all newly hired or re-hired employees to the state within 20 days.
Resource: Everything you need to know about background checks

After Hiring

You must hold to the minimum wage laws, both state and federal. Federal laws provide clear guidelines on how to classify employees, whether as an independent contractor, common-law employee, statutory employee or statutory nonemployee. Be sure to classify your workers appropriately in order to avoid fines, penalties, and possible criminal charges.

Once your employees are working, your responsibility doesn’t end. Be sure to keep on top of:

  • Form W-2: Used for reporting the wages paid and taxes withheld for every employee. You complete one for each employee and send copies each year to your employees and the Social Security Administration.
  • Form 941, Employer’s Quarterly Federal Tax Return: If your employees’ wages are subject to income tax, Social Security, and Medicare withholding, you must report those taxes with your quarterly return.

Resource: A Guide to the Fair Labor Standards Act

Hiring employees can take a lot of strain off your shoulders as sole proprietor of your business. Despite the legal hoops you need to jump through in order to stay on the right side of the law, in the end you’ll have great employees who will help make your business grow and succeed.


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