I’ve Hired My First Employee, Now What?

Congratulations! Hiring staff is a big step and a big responsibility. You are now in charge of someone else’s livelihood, which is a daunting thought. Your company is growing, and it isn’t just about you anymore. Hire well. Your employees represent you and your company. Making the right hiring choices can make or break you.

What you need to know…

1. Apply for an Employer ID Number (EIN) at www.irs.gov. Contact your state Department of Revenue to register with the state and obtain an account number.

2. Verify work eligibility. Have him/her fill out Form I9, Employment Eligibility Verification.  Find the form at https://www.uscis.gov/i-9. Save it to your computer so you can print one whenever you hire a new employee.

3. Have him/her fill out Form W4, Employee’s Withholding Certificate. This specifies the number of deductions to be withheld on paychecks. Form can be found at www.irs.gov. Save it to your computer so you can print one whenever you hire a new employee.

4. Consider an employee agreement / non-compete. Consult an attorney for this kind of agreement.

5. Report new hire(s) to the state. Google [Your state] New Hire Reporting Center and set up an account.

6. Setup Personnel files. Include resume, applications, Form I9 Employment Eligibility Verification, Form W4 Employee’s Withholding Certificate, background
checks, employee ‘in case of emergency’ form, direct deposit information, reviews and/or any other relevant documents.

7. Consider employee benefits.

8. See your insurance agent to obtain Workers Comp insurance which is required by law.

9.Register with the state Unemployment Insurance agency and set up your account.

10. Take the time to research your state’s employee/employer tax requirements. (i.e. a handful of states require company paid disability insurance.)

11. Inform employee(s) about state and federal employee rights. There are posters of the required notices you can get and put up or for remote workers, put a copy in their employee handbook. You can obtain them from QuickBooks if you already have the software. On the Employees Menu, click on Labor Law Posters.

12. Write and distribute the Employee Handbook for your business. I recommend getting an HR consultant for assistance. Before putting in anything that might be the least bit questionable, consult an attorney.

13. Research, purchase and setup your payroll system (preferably with help from Fiscal Foundations). Correct setup is an absolute requirement as penalties for mistakes can cost you thousands of dollars. Get help from an expert unless you are VERY familiar with the software and payroll requirements.

14. Setup a Payroll Reserve account as a subaccount of your checking account in QuickBooks. It’s good to have at least 2 to 3 months of payroll in reserve – or try to work up to that goal. Employees count on their check – and many live from one paycheck to the next. Consistent, fully funded paychecks are absolutely necessary if you plan to have and keep employees.

15. Setup a Payroll Tax Reserve account in QuickBooks as a subaccount of your checking account. Managing cashflow is critical – especially when you have staff you are responsible for. Payroll taxes need to be paid on time to avoid penalties and interest.

16. File proper forms when they are due:

  1. Withholding reports to your state. Check frequency requirements. They usually notify you by letter when you sign up for your account. Frequency might be monthly, quarterly or annual.
  2. State quarterly unemployment tax returns.
  3. Form 941, Employer’s Quarterly Federal Tax Return (see IRS.gov/Forms & Instructions). Forms are due by the end of the month following end of the quarter. Taxes may be required to be deposited monthly or biweekly.
  4. Form 940. Employer’s Annual Federal Unemployment (FUTA) Tax Return.
  5. Annual Form W-2’s to employees and Form W-3 to the IRS reporting wages paid and taxes withheld. These must be filed with the State Department of Revenue too.
  6. Form 1099-MISC to contractors who provide you services (not products), who are not S-Corporations or C-Corporations, and to whom you paid $600 or more in the calendar year.

17. We recommend you request help from an expert as mistakes can be costly in penalties, interest and fees to clean up the problem. Call your Fiscal Foundations Accounting Consultant. Don’t have one? Call our Client Solutions Director at 612-868-2800.

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