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Employee Hiring: Small Business Checklist

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Last editedOct 20213 min read

Your start-up business is beginning to take flight, so it’s time to think about hiring your first employee. This is an important milestone for any small business owner. Here’s our checklist for hiring an employee to make sure you tick all the legal boxes while finding the right fit.

Get set up with the IRS

One of the first steps to hiring an employee is to get your tax situation in order.

1. Register your business with the IRS

Once you’ve chosen a name and business structure, you’ll need to register with both state and federal authorities. The IRS will issue you an Employer Identification Number (EIN) which is a unique nine-digit code you’ll need to pay your employees. It serves as your business tax ID, much in the same way that a Social Security Number serves as a personal tax ID. At this stage of hiring your first employee, you should also pay a visit to your state’s labor department website to see what the specific regulations are.

2. Set up your withholding taxes

The second item on our checklist for hiring an employee is figuring out withholding taxes. You’ll need to include:

  • Federal income tax with a Form W-4

  • Federal wage and tax statement with a Form W-2

  • State withholding form

You’re required to hold onto employment tax records for six years or more, so it’s a good idea to set up accounting software at this stage to track all this new paperwork.

3. Set up reminders for important dates

You should also be aware of all the various tax deadlines before your new employee gets started. These include dates such as:

  • January 31: W-2 forms are due for each employee

  • February 28: Copy of W-2 forms must be sent to the Social Security Administration

You can visit the IRS online calendar to stay on top of all essential dates.

Find the right fit for your business

Now that you’ve squared away the tax situation, it’s time to turn to finding the perfect person to fit into your small business. Here are the next steps to hiring an employee:

4. Write a clear job description

Think carefully about what you want to accomplish with this hire. What needs is the person going to fill? Which problems will they solve? Think not only about the cost of hiring an employee, but also what you want them to do on the job. With these questions, you can write a detailed job description including required skills, background, and salary.

5. Conduct job interviews

After writing the perfect job description and narrowing down resumes throughout your recruitment process, you will have whittled down the candidates to a select few. Prepare questions and assessments in advance, thinking not only about the candidate’s work history and skill set, but also their aspirations and personality. How will they fit into your small but growing business?

6. Check references

It’s tempting to skip this step in a bid to cut down on the cost of hiring an employee, since time is money. However, neglecting to perform an adequate background check can backfire in the long run. Make sure your candidate is not only legally authorized to work within the US, but that their identity checks out and that they have positive references from past employers. Once hired, new employees will need to fill out Form I-9 with valid documentation such as a driver’s license and Social Security card.

Set up payroll and insurance

You’ve worked through all the preliminary steps to hiring an employee, so now it’s time to get them set up with your company.

7. Take out workers’ compensation insurance

You’re required to have this insurance if you hire any employees. You can either opt to take out a policy through your state Workers’ Compensation Insurance program, through your own self-insurance, or through a private provider.

8. Get started with payroll

Whether you use accounting and payroll software or outsource your payroll to a third-party accountant, you need to get these books set up before your new hire’s first day. There’s comprehensive software out there that makes it easy to get started but be sure that it can handle IRS reporting and invoicing.

9. Display required workplace posters

The Department of Labor requires that all workplaces clearly display posters related to employee rates. You should request and display these in the office where your new hires can see them.

10. Keep detailed records

From taxes to payroll and insurance, it’s clear that there’s a lot of paperwork involved with employee hiring. This is why the final step in our checklist is to create separate files for each employee. These files should include all relevant information including contact details, tax details, payment details, and a signed copy of their original employment contract.

The bottom line

This may seem like a lot to remember, particularly when you’re new to employee hiring. Yet once you’ve put many of these systems in place, hiring additional employees will seem like smooth sailing. Keep on top of employee management with regular check-ins and incentive programs, to boost satisfaction on the job.

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