5 Things You Must Legally Do When Hiring Employees

Estimated reading time: 2 mins

Thinking of hiring your first employees? Before you start recruiting, there are a few compulsory measures you’ll need to take first. Failing to take these measures could result in costly fines or worse. Below are five things you must legally do before hiring employees. 

Obtain an EIN

Every employer must apply for an EIN (Employer Identification Number). This number is needed every time you submit a tax return or other business document to the IRS. Obtaining an EIN requires completing a SS-4 form, which you can apply for at the IRS website. Make this your first priority before completing any of the other tasks below. 

Take out insurance

Before you take on your first employee, you will need to take out worker’s compensation insurance. This insurance scheme is compulsory for all employers – it allows you to offer compensation to an employee if they are injured or made sick as a result of your work. It’s worth looking into different small business liability insurance packages. Certain packages may include other forms of insurance such as public liability, which isn’t mandatory, but can still be worth taking out to protect you against other disasters. By comparing different insurers, you can shop around for the best rates. 

Register with your state

You’ll need to register as an employer with your state Department of Labor. This is because, once you become an employer, you must pay unemployment compensation taxes to your state. Every state has their own method of registering – it’s worth visiting your state’s Department of Labor website to see what information you can find. You’ll need your EIN when registering. 

Set up a payroll system

Every employee needs to be registered onto a payroll from which you can pay each employee their salary. It’s important that you withhold a portion of every employee’s income to pay for taxes, which are then paid to the IRS at the end of each tax year. If you fail to pay your employees’ tax, it will be you who pays the consequences. Different states have different laws regarding tax, so it’s worth taking the time to do your local research. Make sure that you’re also paying any compulsory employee benefits. There are payroll software programs that you can use to automate all of this. 

Meet health and safety requirements

It’s important that your workplace is a safe environment and that you can take certain measures to protect your staff from injury or sickness. These health and safety requirements vary by state and by industry – it is often worth hiring a health and safety consultant to offer advice on the matter. An example of a health and safety requirement could include making sure that there are working fire alarms in your work premises or making sure that certain safety equipment is worn on a construction site. There are many optional health and safety measures that could also be worth looking into when hiring employees – you won’t get in legal trouble for not implementing these measures, however they could lower your insurance rates and improve employee trust.

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