According to the latest government jobs figures, private-sector employers, including many small businesses, are increasing their work forces. The private sector added 230,000 jobs in March, pushing the jobless rate down to 8.8%. If you’re one of the small businesses looking to add to its payroll, here are tips from the Small Business Administration on how to successfully and legally make a new hire.
Obtain an Employer Identification Number
Before you hire employees, you need to contact the IRS to obtain an Employer Identification Number [EIN]. This code is used to report taxes and other documents to the IRS as well as to state agencies.
Set up Records for Withholding Taxes
The IRS requires employers to keep records of employment taxes for at least four years. It’s in business owners’ best interest to also keep thorough financial records to assist in tax filings. There are three types of withholding taxes: Federal Income Tax Withholding (Form W-4), Federal Wage and Tax Statement (Form W-2) and state taxes.
Employee Eligibility Verification (Form I-9)
To ensure a worker’s eligibility to work in the U.S., employers are required to complete an Employment Eligibility Verification Form form with three days of hire.
Register with Your State's New Hire Reporting Program
According to the SBA, all employers are required to report newly-hired and re-hired employees to their state within 20 days of their hire date.
Obtain Workers' Compensation Insurance
Businesses with employees must carry workers' compensation insurance to cover any costs if an employee becomes injured on the job.
Unemployment Insurance Tax Registration
Under certain conditions, businesses with employees must pay unemployment insurance taxes. According to the SBA, if your business meets these conditions, you must register with your state's workforce agency.
Obtain Disability Insurance (If Required)
If employers are located in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island, you are required to buy disability insurance for non-work related sickness or injury.
Post Required Notices
State and federal laws require employers to inform employees of their rights and employer responsibilities in the workplace. These notices must be prominently displayed, and can be obtained for free from federal and state labor agencies.
File Your Taxes
New employers must comply with new federal and state tax filing requirements. The SBA suggests reading the IRS Employers Tax Guide to understand all federal tax filing requirements.
Get Organized and Keep Yourself Informed
After increase payroll, employers should stay organized and informed of labor laws. The SBA suggests keeping good records, adopting workplace safety practices, understanding employee-benefit plans, learning management best practices and applying standards that protect employees.
If business is thriving and you’re looking to hire your first employee, follow these steps from The Small Business Administration.