The US Small Business Administration revealed that there are 30.7 million small businesses in the country as of 2019. These businesses hired 47.3 percent of the nation’s total private workforce. If you have your own small business and plans to start hiring employees to expand your company, there are several things you need to do first before starting your hiring process. These steps are necessary to help you avoid unwanted problems in the future.
Comply With State Regulations
Before hiring employees, you need to acquire an employer identification number (EIN). You will use this every time you file tax returns and other documents submitted to the IRS. To obtain the EIN, you have to file the IRS Form SS-4 that you can download at the IRS website.
After securing the EIN, you must also prepare to pay the state unemployment compensation taxes. The amount will go straight to the unemployment compensation fund of the state where your business operates. They will use it to offer short-term solutions to workers who suddenly lost their jobs. Then after hiring new staff, you must report the name of your employee to the new hire reporting program of your state. It is a requirement to help the government locate parents who run away from paying child support.
Secure A Workers Comp Coverage
You will also need workers compensation insurance if you plan to hire any number of employees. This will protect your staff who might deal with on-the-job illnesses or injuries in the future. Your company must pay for it since no payroll deductions are allowed for this kind of insurance. Most states require all businesses to comply with this type of insurance under their Workers Compensation Board. While it can take a chunk from your company’s budget, it will also protect you from spending a lot of money in case one of your employees encounter an accident while under your company’s premises.
Develop a Payroll System to Withhold Employees Taxes
When you hire an employee, you have to withhold a percentage of his income and deposit it to the IRS. You must also deduct Maxicare and Social Security payments as well. You can get more information about the taxes that should be taken from your employees by reading the Employer’s Tax Guide which you can get from the IRS website. Your state may also require you to withhold certain taxes, so check with the tax agency of your state to get the proper information.
After complying with all the government requirements, your company must also prepare for the arrival of your employees. First, you need to follow the requirements under the Occupational Safety and Health Act (OSHA) such as providing a hazard-free workplace. Though it is not required, you can create an employee handbook that discusses your company’s policies. It is also ideal to create a personnel file for each employee to organize their job-related documents like CVs, employment offers, IRS Form W-4, and performance evaluations in the future. You also need to organize your calendar so you will never forget the government-mandated holidays.
By taking the aforementioned steps, business owners can ensure that they are prepared to hire on employees and start growing their companies without any issues.
- The Enthusiastic Employee: 16 Myths on Employee and Performance Management
- Types of Insurance for Your Home Business
- How to Hire and Retain Good Employees
- Benefits Associated With Workers’ Compensation Insurance
- The Costs of Pay Scale and Employee Turnover on the Bottomline