Congratulations, you’ve hired a new employee! Adding staff is an exciting milestone for a budding business, and it’s easy to get overwhelmed when preparing for his or her arrival.
In the rush to get your employee up and running, don’t overlook the mandatory federal and state recordkeeping requirements that apply to new hires. Here’s a handy to-do list:
1) Complete an I-9 Form
Federal law requires you to verify an employee’s eligibility to work in the United States. Within three days of hiring, you must complete Form I-9, Employment Eligibility Verification, which involves reviewing approved documents to confirm the employee’s citizenship or work eligibility. You can download Form I-9 at the U.S. Citizenship and Immigration Services (USCIS) website. Better yet, to ensure accuracy, use the I-9 Form and Template Set from ComplyRight. (Fines for incorrectly completed I-9s can be steep.) Although you don’t need to submit the I-9 to the government, you must keep it on file for three years after the employee’s hire date or one year after the employee leaves your company, whichever comes later.
Also, be aware that the USCIS just released a revised version of the I-9. Starting January 22, 2017, you must use only the new version dated 11/14/2016.
2) Have the Employee Complete a W-4 Form
The IRS Form W-4 indicates the number of allowances an employee wants to claim. This is important because it determines how much you need to withhold from the employee’s paycheck. Download this form from the IRS website or use this downloadable PDF version for an electronic record.
The IRS requires you to keep employment tax records (including the W-4) for at least four years after the taxes were paid. State recordkeeping laws may apply as well, so be sure to check.
3) Set up Payroll
As an employer, you must withhold part of each employee’s wages for taxes and remit the taxes to the appropriate authority. These taxes include federal income tax, Social Security and Medicare tax, and, if applicable, state income tax.
You can manage payroll yourself, or consider using a third-party payroll service. Payroll service providers stay abreast of tax law changes, automatically withhold the proper taxes from an employee’s wages and even send you reminders when it’s time to file your taxes. Look for a service that is designed and priced specifically for small businesses.
4) Report and Register Your New Hire
Every state has its own new-hire reporting agency to track down parents who owe child support and aren’t paying it. You must report every new hire to this agency within 20 days of hiring. (Find your state’s new-hire reporting agency at the Office of Child Support Enforcement website.)
Depending on your state’s law, you also may have to pay state unemployment taxes for your new hire. These taxes fund the state’s unemployment compensation program for people who are out of work. Brush up on the laws in your state and how to register at USA.gov.
5) Display Mandatory Labor Law Posters
Once you’re a business with at least one employee, you must post federal and state (and in some cases, city or county) notices regarding certain labor laws (like the Federal minimum wage and anti-discrimination laws). These postings convey employee rights and your responsibility as the employer.
Both federal and state postings should be displayed where workers can easily see them. Also, any time a government agency makes important changes to these official postings, you must replace the outdated posters with updated ones. Otherwise, you could be liable for fines or put yourself at risk for lawsuits.
Because the number of required postings is growing – and it’s difficult to track all the regulations issued by different agencies – many employers rely on a reputable posting service. This can save you considerable time in making sure your business stays in complete compliance.
More Help for New Employers
Hiring is an essential and exciting part of building your business -- but you must follow a specific action plan with every new employee. For additional guidance, sign up for a free informational webinar, “Hiring Your First Employee: A Guide to Getting It Right,” presented by ComplyRight on behalf of SCORE.
Can’t attend the webinar? Download the e-guide, “So You Want to Be the Boss.” Both resources will give you the confidence and know-how to hire smart and make sure you leave no critical detail unattended.