graphic of how to hire your first employee

How to Hire Your First Employee

Once you have decided to hire your first employee, there are several steps you have to take to ensure that you are abiding by federal and state regulations and that you’re hiring qualified, loyal employees.

Obtain an EIN

An employer identification number (EIN) is necessary for reporting employment taxes and for reporting employee information to state agencies. You can apply for an EIN online, by fax, or by mail.

Conduct Interviews & Check References

When you have found potential employees, make sure to spend time interviewing each one to determine who will be the best fit for your company. After you’ve narrowed down your candidates, check their references so you don’t have unwanted surprises down the road.

Set Up Employment Tax Records

According to the IRS, you must keep employment tax records for four years after the tax is due or after the tax is paid, whichever is later.

To determine how much federal income tax you must withhold  from your employee’s paychecks, your employee will have to complete Form W-4 on or before their date of employment. You can either determine how much federal income tax to withhold from each paycheck, you can either use the wage bracket tables or use the percentage method.

Every tax year, you will have to file Form W-2 for each employee to report to the federal government wages paid and taxes withheld.

In addition to federal employment taxes, you may also be required to withhold state taxes from your employee’s paychecks.

Set Up a Payroll System

You’ll have to set up a payroll system to simplify and automate the process of withholding that amount from each paycheck.

File Your Taxes

To report and deposit income, social security and Medicare taxes withheld from your employee’s paychecks, you will have to file Form 941, the Employer’s Quarterly Federal Tax Return.

Verify Employee Eligibility

You will have to verify that your employees are eligible to work within the United States. To do this, you and your employee must complete Form I-9 within three days of hire. You don’t submit Form I-9 to the federal government, but you are required to keep the form on file for three years after the employee’s date of hire or one year after the date of the employee’s termination, whichever is later.

You can easily verify your employee’s eligibility by enrolling in E-Verify.

Set Up Employee Records

Set up your employee records early so that all the necessary information is easy to find when you need it. Information to record for each employee includes:

  • Employee’s full name and social security number,
  • Mailing address,
  • Birth date (if the team member is younger than 19 years old),
  • Sex and occupation,
  • Time of day and day of the week the employee’s workweek begins,
  • Hours worked each day,
  • Total hours worked each workweek,
  • Basis on which wages are paid (i.e. weekly, monthly, etc.),
  • Regular hourly pay rate,
  • Total daily or weekly earnings for each workweek,
  • Total overtime earnings for each workweek,
  • Additions or deductions from wages,
  • Total wages paid per pay period, and
  • Date of payment and pay period covered by each payment.

Register with Your State’s New Hire Reporting Program

You are required to notify your state directory of all new hires within 20 days of the employee’s hire date.

Obtain Workers’ Compensation Insurance

When you hire your first employee, you have to carry workers’ compensation insurance coverage. You can do this through a commercial carrier, on a self-insured basis, or through your state’s Workers’ Compensation Insurance program.

Post Required Notices

As an employer, you are required to display certain posters in your workplace to inform your employees of their rights and your responsibilities. These posters include “Employee Rights Under the Fair Labor Standards Act”, “Employee Rights and Responsibilities Under the Family and Medical Leave Act”, “Equal Employment Opportunity is the Law”, and more.

Stay Organized & Keep Your Employees Informed

As an employer, you have obligations to your employees, such as maintaining a healthy and safe workplace, providing benefits, and keeping your employees updated on your company’s policies. You can keep your employees up-to-date on company policies, employee expectations, and your employer responsibilities by compiling and maintaining an employee handbook.