A Small Business Checklist to Hiring Your First Employee

by
Operations
January 25 |

You’ve been running your business as efficiently as possible, managing things all by yourself. Even if you’ve achieved your targets, you might realize that there’s too much for one person to do. In order to stay competitive and keep thriving, you’ll need extra help. But before you decide to bring other crew onboard, you need to understand what hiring your first employee entails. There’s a whole new list of paperwork, liabilities, and of course, expenses.

To help you in the hiring process, we’ve laid out a checklist you can follow to ensure you make the right decisions and still comply with rules and regulations.

The First Step Before Hiring an Employee

Ask yourself how much you really need an employee

It’s understandable that you need a helping hand during the busy months, but what about in slow months when you can do things by yourself? If your small business is expanding, and there are additional tasks to do such as checking and balancing inventories or attending to customer needs whilst you’re doing other important tasks, then you’ll need to hire an employee. Without additional help, you might be losing customers. Make sure you have steady tasks to give out each day, otherwise consider hiring a part-time instead of a full-time employee.

Are you financially prepared to hire an employee?

Hiring an employee will incur expenses. Once you hire an employee, you have to add on a budget for social security taxes, payroll taxes and benefits such as health insurance and worker’s compensation insurance. You need to consider working equipment like computers and a workstation for your employee.

Are you ready to handle the exhausting red tape?

As soon as you begin the hiring process, there are legal and federal laws that all business owners should understand and follow when advertising a job, interviewing and testing, and finally, when making an offer.

  • When it comes to paying and classifying employees, federal laws give clear instructions with regards to minimum wage. (Either the federal wage or that which your state requires.)
  • All employers should maintain records of employee time worked, salary and overtime paid.
  • You need to follow workplace safety regulations at all times and purchase worker’s compensation if required. Any employee benefits should be in line with federal regulations.

The Hiring Process

Before you start hiring the first employee, you need to cover these bases:

Get an employer identification number

For most small businesses, you will need an employer identification number (EIN) for various purposes like filing your tax returns and other important documents you have to submit to the IRS, opening a business account and hiring employees.

To obtain your EIN, complete the IRS Form SS-4. Each state has a different registration process to acquire an employer identification number. You can visit the Department of Labor in your state for further details.

You’re responsible for paying state unemployment compensation taxes when you have an employee. You’ll have to put your federal tax withholding, tax statement, state tax and federal wages in order.

File IRS Form 940 every year

Another thing you have to do is file an IRS Form 940 to report your federal employment tax. This applies if you paid a salary of $1,500 or more in any quarter of a year in which the employee has been in your company for 20 or more weeks.

For every new hire you’ll need an I-9 form. You need to keep up with your employment taxes for a minimum of 4 years.

1. Structure Your Insurance

Before you hire your first employee, make sure you include worker’s compensation in your business insurance plan. It’s vital for all business that will be doing any manual labor work.

2. Prepare a Job Description

Once you have your tax and insurance in check, it’s time for the fun part of hiring your first employee. You need to prepare a job description. You want the job description to be interesting to catch the eyes of your potential candidates. There are many hiring sites available online where you can post your job advertisement. Make sure the candidate you’re looking for matches the criteria outlined in the job description.

3. Record all recent employees to Your State’s New Hire Reporting Agency.

The new hire reporting programs demand employers to give information on new hire employees, with the intention of finding any parents who avoid child support. New hire reporting is not the same in all states, so to locate the address of your state’s hire reporting agency you can visit the Administration for Children & Families’ website.

4. Workplace Poster

Some government agencies require employers to display a workplace poster to promote safety regulations. Displays may vary from one state to another, so work with your local Department of Labor to find out more.

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