You’re ready to hire employees, congratulations! Now what? Hiring employees can be scary, not only because of the cost, but also because of the potential liability to you and your business if you do not hire and manage your employees properly. To help ease your mind and arm you with the information you need to feel confident about hiring employees, here are 6 steps to follow:
First, you need an employer identification number (EIN) from the IRS. Hopefully at this point you’ve formed a business entity and/or already have an EIN assigned to your business. If not, now is the time. Even if you are a sole proprietor, you can still obtain a separate EIN for your business and not have to use your social security number.
Second, you must register as an employer with your state. This ensures that applicable taxes and other withholdings from wages are paid. For New York and New Jersey employers, the registration information can be found via the following links: NJ Dep’t of Labor Employer Registration Info and NY Dep’t of Tax Employer Registration Info.
Third, you are required by law to have Workers Compensation Insurance once you have an employee. The cost of the policy will depend on the number of employees you have and may be increased at the end of the policy period after an audit by the insurance company to verify the number of employees. Workers Comp provides coverage to employees who are injured while working, and pays for things such as medical care, lost wages, and pain and suffering.
Fourth, you should consider other optional insurance policies, such as Employment Practices Liability (EPL) insurance. Generally speaking, an EPL policy covers you against claims such as discrimination, harassment, retaliation, and unlawful termination. More information on what EPL insurance covers can be found at Protecting Your Business With Insurance.
Fifth, you need to figure out how you’re going to manage timekeeping for hourly employees and payroll. It is highly recommended that you use of qualified payroll service to manage timekeeping and payroll. Not only are there strict legal requirements for the timely and accurate payment of wages, but there are also requirements for the information that must be provided to an employee with each paycheck. Given the strict laws and high costs for a violation, compliance is critical.
Sixth, you should have employment policies, procedures, and documents ready to go. Obviously, this is essential to manage employees’ duties, scheduling, and expectations. However, it is also critical to protect your business’ interests. For instance, a well drafted Employee Handbook can actually limit an employer’s liability for a number of claims, such as discrimination, harassment, and wage claims related to accurate timekeeping. It will also ensure you’re complying with legal requirements for providing employees with notice of certain rights. Also, will your employees have access to information about your business that you want to keep confidential, or will they be involved in developing proprietary products or services? Will your employees have access to your business’ social media accounts or website? If so, you should have an agreement in place governing confidentiality, ownership, and use.
Lastly, we have a great article on types of questions to avoid during the hiring process.
Although this process can seem overwhelming, NextGen Counsel is here to assist you and empower you to make the right decisions.
Information contained in this post is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the with Michael H. Ansell, Esq., or other competent legal counsel.