4 Ways to Prepare to Hire Your First Employee

Congratulations! You have decided that you are ready to hire an employee. Before you set about posting job ads and interviewing candidates, you will want to make sure you have set the appropriate regulatory foundation to ensure you can be a successful employer and avoid the headaches down the road. Here are 4 things you must do and 2 things to consider to get yourself ready to hire your first employee.

1. Get an EIN

   If you haven’t already done so, you must obtain an employer identification number (EIN). This is required to submit any withholding taxes and any other documents to the IRS. Simply visit the IRS’ website to learn how to submit the appropriate paperwork.

2. Register with Your State

   You will also need to register with your state’s department of labor, so you can pay unemployment taxes. These payments go to an unemployment fund to provide temporary assistance to employees who have lost their jobs. Often your payroll service provider can support you with the application and filing process depending the agreement you have in place with them.

3. Purchase Insurance

   Once you’ve decided that you need to hire an employee, you’ll need to get insurance in place. If you’ve been operating your business for a while, you may already have the appropriate professional liability insurance for your industry. However, you will need to procure additional insurance to legally operate as an employer.

   First up is worker’s compensation insurance, which covers an employee in the event of an on-the-job injury is required. The legal requirements vary from state to state, and noncompliance can be costly. This can be purchased through a commercial carrier, or through your state’s Workers’ Compensation Program. The application process can take a few weeks, so you’ll want to be sure to start the process well before your new employee joins.

   Depending on the state where your business is located, you may be required to provide disability insurance as soon as you hire your first employee. Such is the case in New York California, Hawaii, New Jersey, Rhode Island and Puerto Rico. Disability insurance covers an employee in the case of illness or injury that did not occur on the job and is therefore different to workers compensation. Your human resources consultant and insurance broker will make sure you get this done correctly.

   CONSIDER: EPLI

   Although it is not required by law, employers should strongly consider immediately purchasing Employment Practices Liability (EPL) insurance. This insurance usually provides coverage for employment-related claims from current employees, former employees and job applicants alleging discriminatory practice, retaliation, harassment, and more. Insurance provider Hiscox reports that in 2016, 10.6% of US employers had a chance of having a charge filed against them. In my experience, the cost for this insurance, is so little, that when compared to the potential costs of defending a claim, it is a no-brainer. You will need to have a policy prohibiting harassment in place in order to be approved for coverage. While a policy is sufficient, we recommend that you take the extra step and have a complete handbook in place.

4. Choose A Payroll & Tax Filing Method

   You have an employee...now you must pay wages. What’s more, you’ve got to withhold a portion of those wages as taxes and pay to the IRS and various state agencies. You have several options at your disposal when deciding how to process payroll, and pay taxes. You may choose to process payroll yourself, work with your accountant or outsource to payroll provider.

   Each of these methods has benefits and drawbacks, however, outsourcing to a payroll provider has a lot of undeniable benefits. First, unless you got into business to do paperwork, a payroll provider can relieve you of the administrative burden associated with paying employees and filing taxes with the appropriate agencies. With a professional payroll provider, you are less likely to be non-compliant and you will have access to payroll experts who can guide you through the process regularly, whenever laws or regulations change or as you grow.

   CONSIDER: More Than Just Payroll

   With the recent advances in technology, many small business payroll providers are now offering more than payroll processing and tax filing services. These systems, better known as Human Resources Information System or HRIS, allow you to collect the required new hire paperwork and store it electronically. You’ll be able to track employees working time, vacation and sick time, maintain employee records of pay changes, and important dates. A few companies even offer you a way to provide healthcare benefits to your employees. While this may sound like an extra cost, many systems come with basic HR features included as part of the core payroll product. Many others allow you to add the modules you need as you grow and scale.

Once you have this foundation set, you are ready to start the process of finding candidates to interview for your position. Need help with any of it? Contact Us.