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October 14, 2007
Hiring your first employee can be overwhelming. Many small business owners don’t know where to begin or what they must cover to avoid potential legal and financial liabilities.
Most of the critical steps are listed below, but I would encourage all businesses owners when hiring for the first time to go over the regulations with a business advisor and a tax specialist to avoid any employment pitfalls.
When you hire employees, begin by getting an employer identification number (to use on tax returns and other documents you submit to the IRS. You can download the EIN form from the IRS Website at www.irs.gov.
Once you bring on employees, you will have to pay state unemployment compensation taxes. These payments go to your state's unemployment compensation fund, which provides short-term relief to workers who lose their jobs The California State Employment Development Department website has a wealth of information and forms to ensure that employers follow regulations. The website is www.edd.ca.gov. California Worker’s compensation insurance information is available on the EDD website.
Employers will need to withhold a portion of each employee's income and deposit it with the IRS, and also make Social Security and Medicare tax payments to the IRS. The IRS has a special site for employers at www.irs.gov/businesses. I found the IRS Publication # 15, Employer's Tax Guide to be a very helpful guide.
Employers must comply with the requirements of the Occupational Safety and Health Act or OSHA, to ensure a workplace free of hazards, train workers on safety regulations, notify government administrators about serious workplace accidents, and keep detailed safety records. The rules vary depending on the type of industry. For specific information, go to website of the Occupational Safety and Health Administration at www.osha.gov and seek advice through your trade organizations.
Several government agencies require employers to post notices providing information on worker rights for their employees. For information on required federal posters, go to the Department of Labor website at www.dol.gov.
For each employee you hire, create a file in which to keep job-related documents, such as job applications, employment offers, IRS Form W-4, performance evaluations, and sign-up forms for employee benefits. Medical records should be kept in a separate, confidential file, in a locked cabinet. Employers need to keep I-9 Forms, which document an employee's immigration status, in separate files and save the documents for at least one year after the employee has separated from your company.
It is also is an excellent idea to have a handbook describing your business's employee policies and making it clear that employment is at will unless an employee has signed a written employment contract.
These are a few of the critical first steps employers need to take when hiring employees. For more information we invite you to join us at the Napa Chamber Business’ Builder’s Breakfast featuring “The Pitfalls of Employment (and how to avoid them),” on Wednesday, October 17th, 7:30 to 9:30 a.m. at the Napa Chamber 1556 1st Street. The cost is $10; call the SBDC to reserve a place at 253-3210.
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