Your employees are the key to your success. Filling important roles with top talent is important for growth, innovation, and productivity. When you’re ready to build your dream team, there are many aspects to consider.
You need to create an outstanding job description to lure top talent to your door, conduct a round of interviews, and eventually onboard the candidates you feel will contribute the most to your company.
However, there are many legal requirements employers must follow when hiring an employee. Here’s how Mosey can help you stay above board while you’re inviting new people to join your team.
How To Hire Employees for Small Business
Your business should be fully compliant upon hiring your first employee. All legal requirements must be sufficiently met before you can onboard anyone, even if you only intend to hire one or two people at the early stages of your business.
Some of these steps only need to be completed once. Other steps will need to be repeated with each new hire. Creating an optimized hiring system can help you stay on track for every necessary step of the hiring process.
Obtain an EIN
An EIN, or a Federal Employer Identification Number, is a unique identifier used to identify your company as eligible to hire employees. The IRS can grant you an EIN online in just a few minutes. You’ll need to provide their automated system with your personal social security number as proof of identity.
You’ll also need to answer a few questions about your business. Your EIN will be automatically generated as soon as you complete the simple process.
Complete Your State’s Unemployment Insurance Registration Requirements
All employers are required to register for state unemployment insurance if they intend to hire at least one employee who will work for more than 20 weeks per year or will earn more than $1,500 in salary per year.
After you register with your state’s unemployment office, you’ll be responsible for making quarterly unemployment insurance payments based on how much your employees earn per quarter. If your employee is ever eligible to collect unemployment benefits, your insurance contributions to state unemployment insurance will be used to provide temporary financial support.
Employers are also required to contribute to workers’ compensation insurance. Workers’ compensation insurance is used to provide support to employees who are temporarily ill or injured as a result of a workplace incident.
Every state has different coverage requirements for workers’ compensation insurance. Check state law to determine how you should register and your quarterly contribution.
Obtain Proof of Eligibility To Work in the United States
All employees are required to complete and submit Form I-9, which is provided by U.S. Citizenship and Immigration Services (USCIS). Form I-9 establishes an employee’s ability to legally work in the United States. This form isn’t reserved for employees who may have been born outside of the United States. Even employees who were born U.S. citizens must complete Form I-9.
You’re required to collect and store Form I-9 for each employee for up to three years. After three years, you’re allowed to securely destroy the document. You’re required to hold on to these forms for the allotted time period even if the employee no longer works with your company.
New Hire Reporting to the State
Each state has a registry that keeps track of new hires. Every time you hire a new employee, you must register them with the state. New hires do not need to be reported on a federal level because each state’s system connects to the federal government system.
The state works with the National Directory of New Hires to establish mandatory state and federal tax withholding for people whose wages are garnished for things like back child support payments or owed state taxes. The government will handle that part. You only need to provide them with your hiring information.
Establish Payroll and Tax Withholding
Your payroll system must account for payroll tax deductions. You’ll need to know how much to deduct from each employee’s check for things like Social Security and Medicare contributions. You may also need to deduct contributions for employee benefits like health insurance and each employee’s flexible spending account (FSA) or health savings account (HSA) if applicable.
Your employees may want to complete W-4 forms for additional withholdings. They aren’t required to take additional tax withholding, but some employees may prefer to do so. Employers must give employees the option to utilize additional withholdings.
Many employers choose to use a payroll company to manage these requirements, but it’s possible to handle payroll completely internally. Consider what will work best for your business and make a decision that fits your needs.
Implement Policies, Rules, and Mandatory Workplace Practices
Employees are entitled to information about workplace policies and rules per HR compliance guidelines. Your rules hold you accountable while providing detailed guidance to employees that will allow them to understand their rights, responsibilities, and expectations.
What happens to unused vacation time at the end of the year? How much are you willing to contribute to FSA or HSA accounts? When will employees receive their last paycheck if they leave the company or are terminated? Employees need these answers from the beginning.
You’ll also be required to hang labor notices and posters that inform employees of their rights. You may need to optimize your workplace for Occupational Safety and Health Administration (OSHA) compliance to keep the environment safe for your employees. Compliance with labor laws is just as important as compliance with hiring laws.
How Can You Utilize Lawful Hiring Practices?
It’s illegal to deny someone the opportunity to work for your company based on their status as a protected class. Hiring discrimination can have a long-lasting legal and reputational impact on a company. When deciding who to hire or who to fire, it’s important to be sure that discrimination isn’t playing a role in your decision.
Hiring and termination decisions should be exclusively made by empowered individuals who can be implicitly trusted to prioritize only a candidate’s suitability for a position. As per the Equal Opportunity Employment Commission, hiring or firing decisions cannot be made based on any of the following criteria:
- Age
- Disability (with some exceptions)
- Gender or gender identity
- Race, ethnicity, or national origin
- Sexual orientation
- Pregnancy or the likelihood that someone may become pregnant
Some states have laws that limit the usage or scope of employee background checks, primarily by only allowing employers to look a specific number of years backward into a candidate’s history. Employers may be forbidden from asking a candidate about the salary they earned at a previous job.
A number of states have implemented salary transparency laws where an employer must post an accurate salary range with a job description. Job applicants will understand what to expect and whether they’re applying for a minimum-wage position or a salaried career. Employers may not offer a salary minimum below the advertised starting point.
Although it isn’t always a legal requirement, it may be a strong business decision for employers to utilize transparent and ethical hiring practices. Consumers are increasingly aware of the ethics of the companies they shop with, and top talent seeks positions more selectively. Transparency in your values may help to draw a better pool of talent while increasing your customer base.
How To Maintain Compliance With Legal Requirements When Hiring Employees
You’ll only need to perform several key checklist items once, like obtaining an EIN or registering for workers’ compensation and unemployment insurance. Your registration will last for as long as your business does, provided you continue to make accurate quarterly contributions. You’ll only need to post labor signs once, and employee handbooks don’t need to be changed unless there’s a shift in company policy.
Every new employee must complete onboarding paperwork and be reported to the state as they’re hired. This includes employees who have previously worked for the company and have been re-hired. Managing the ongoing compliance requirements is the most labor-intensive part of meeting legal requirements for hiring employees.
Stay Compliant With Mosey
Your HR team has a lot of tasks to manage when your company enters a hiring cycle. It can be easy for small details to fall through the cracks. Mosey won’t let that happen. Our automated compliance platform allows employers to keep track of state hiring legal requirements and compliance issues.
Mosey’s checklist supports your hiring team as they move through onboarding top talent that will transform your company. Schedule a demo with Mosey to learn how we can help you stay on track.
