There are 30.2 million small businesses in America, some operating solely by their founders and others having a handful of employees already. In the middle is the small businesses that are growing and ready to take on their first employee. It can be an exciting time and a sign of success, but it can also be very daunting as it comes with lots of laws and regulations that you must follow, as well as trying to find the right person for the job.
The legal responsibilities that come with hiring employees
Before hiring, you need to get an employer identification number which is used on tax returns and other documents that the IRS deals with. You’ll need to set up a payroll system and get employees to fill out an IRS form W-4 so that you know how much of their income to withhold for taxes. Any employees will also need to complete an I-9 form to verify their eligibility to work in the US.
You then need to report every employee you hire to your state’s new hire reporting agency, set up personnel files, and follow work safety regulations. It’s a good idea to create an employee handbook, put up information posters, and look into employee benefits, especially once you start to expand further, to keep your business safe and reputable.
Different types of insurance you may need
Now that you’re hiring your first employee, you’re going to need insurance. Industry professionals at Cerity explain that insurance requirements can vary widely depending on which state you’re in and the industry you’re operating in, but there are generally three to be aware of. Workers’ Compensation Insurance provides a wage replacement and medical benefits to your employees if they’re injured at work in exchange for mandatory relinquishing their right to sue their employer for negligence.
Furthermore, unemployment Insurance may be required and allows the government to give benefits to people who have faultlessly lost their jobs. Finally, there are six states that require employers to insure for disabilities that are unrelated to the workplace, including New York, California, and New Jersey.
How do you know your business is ready?
Hiring employees can be costly and doesn’t include just a salary. There’s employee benefits, insurance, and you may need to rent an office to work from. A lot of jobs can be outsourced to freelancers or professional companies, including accounting, manufacturing, web design, marketing, and administration assistants, but it depends on what your own skills and capabilities are, as well as your workload.
Deciding to hire over outsourcing can come down to whether the job will need doing regularly or occasionally. However, small businesses often benefit from an employee who is used to working in a small company and is flexible and skilled enough to do a little bit of everything. Thus, candidates with big-business credentials usually aren’t a good fit as they’re used to a set job role, regulations, and processes.
Hiring your first employee as a small business can be exciting, but be sure to get your insurance first and have any required paperwork ready to be sent so that you’re organized. This will also help your new employee to trust that you know what you’re doing.