You formed your new company and are ready to hire your team. While the legal requirements will vary by state, industry and employer size, here are some of the steps you should take or consider to comply with federal and state law before extending your first offer of employment:
- Obtain A Federal Employer Identification Number
You are required to obtain an employment identification number (“EIN”), also known as a federal tax identification number, from the Internal Revenue Service. You can apply for an EIN by calling 1-800-829-4933 or registering online.
- Register With The State
Depending on the state(s) in which you intend to have employees, you may also be required to register with certain state agencies. For example, in Pennsylvania, employers need to register with the Pennsylvania Department of Revenue. The relevant state websites can be found on the Internal Revenue Service (“IRS”) website.
- Deposit And Report Employment Taxes
As an employer who pays wages, you will be required to deposit and report required federal and state employment taxes on wages you pay to your employees, such as federal income tax, Social Security tax, Medicare and state income tax. The IRS requires that you maintain tax records for at least four years.
In order to properly withhold, you must obtain an IRS Form W-4 from each employee on or before the first day of employment. The IRS Form W-4 must be submitted to the IRS. You will use the information provided on the IRS Form W-4 to complete and file an IRS Form W-2 each year for each employee to whom you paid a wage. A sample IRS Form W-2 can be found here.
Depending on the state(s) in which your employees are located, you may also be required to withhold state income taxes. Additional information regarding any state employment tax obligations you may have can be found on the U.S. Small Business Administration website.
- Obtain Workers’ Compensation Insurance
You are required to have insurance that provides benefits to employees who suffer work-related injuries and illnesses. This insurance, which is commonly referred to as workers’ compensation insurance, is governed by state law. To obtain workers’ compensation insurance or additional information about the state specific requirements, you should contact your insurance broker or the state agency responsible for workers’ compensation. Contact information for the state agencies is available from the U.S. Department of Labor here.
- Understand Your Unemployment Insurance Obligations
You may be required to pay unemployment insurance taxes. If your business is required to pay these taxes, you must register with your state’s workforce agency. Additional information regarding any state unemployment tax obligations can be accessed here.
- Post Required Notices
Certain federal, state and local labor and employment laws require that you post notices in the workplace to inform your employees of their rights and your obligations and responsibilities as the employer. The posters required under federal law and additional information regarding your posting obligations are available here.
In addition to the posters required under federal law, you will want to review any state posting requirements, which can be found by contacting the state labor office. Contact information for the state labor offices is available on the U.S. Department of Labor website.
- Verify Employment Eligibility
You may only employ individuals who may legally work in the United States – U.S. citizens and foreign citizens with proper authorization. Within three days of hire, you are required to complete a Form I-9 to verify an employee’s identity and ability to work in the United States. You are not required to submit the Form I-9 to the government but you do have to keep them for three years after the date of hire or one year after the employee’s termination, whichever is later.
Some states require that employers register for and use E-Verify to verify an employee’s employment eligibility. E-Verify is a web-based service that electronically verifies the employee’s eligibility to work in the United States. You can register for E-Verify here.
- Report New Hires
You are required to report newly hired employees to the State Directory of New Hires in the state in which the employee works within 20 days of hire. The state new hire registries can be found on the IRS website. If you have employees working in two or more states, you may register to submit the new hire reports to one state using the Multistate Employer Notification Form to avoid filing in multiple states.
Stay tuned for topics related to hiring your team, including pre-employment processes and procedures, employment contracts, protecting your information and intellectual property, personnel policies and employee benefits.