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Don’t Hire an Employee Until You do These 8 Essential Things

Congratulations! Your business has grown to the point that you’re starting to consider hiring an employee to help manage the load. As an entrepreneur, this is an exciting time. It’s one of the first steps to growing your company, lightening your work load, and helping you make more money. 


But this isn’t a decision you should take lightly. There are lots of in and outs involved with hiring an employee, and if you aren’t fully educated and prepared for what you’re getting yourself into, you could find the situation quickly devolving into a nightmare.

If you think you are ready to hire your first employee there are important factors to take into consideration before you start building a staff. If you want your business to succeed you must make sure you follow all of the legal rules put in place for you and your future employee’s protection.

Here are the 8 things you need to do before hiring an employee.

1.Obtain your employer identification number

For use on tax returns and other documents that are submitted to the IRS, you must obtain an employer identification number (EIN). Remember, these numbers are only used for the purpose of tax administration and aren’t meant for any other activities. Getting your own EIN is easy. It is as easy as going to the IRS website and submitting an SS-4 Form.

2.Register with the state labor department

If you start adding employees to your business it is required that you pay state unemployment compensation taxes. Money from these taxes go into your state unemployment compensation fund. This fund is set up to provide relief for workers who lose their jobs.

3.Set up a payroll system (to withhold taxes)

A portion of each of your employee’s income will need to be withheld and deposited with the IRS. You will also need this to make Social Security and Medicare tax payments to the IRS. Some states require you to withhold money from employees for state taxes as well.

4.Double check your financial situation

Before you hire your first employee it is necessary to double and triple check on your businesses current financial standings. You need to make certain you have enough money in your budget to pay for an employee. All aspects of employee pay must be accounted for in your budget. You can use a paycheck calculator to help you get a better idea of exactly how much a particular employee will cost you. That way, you can better budget for the new hire and make certain they are compensated fairly.

5.Post required information and notices

Numerous government agencies require you and an employer to post notices that provide information on employee’s worker’s rights. These are all detailed at the Department of Labor’s website. The Department of Labor’s “Poster Advisor” can help new employers determine what information is required to be on display at your workplace.  In addition to this it is also necessary to comply with your state department of labor’s poster requirements. This is of requirements can also be found on the Department of Labor’s website.

6.Write down your workplace safety measures

It is a good idea to adopt and write out safety measures for your work place. Every employer must comply with the requirements set out by the Occupational Safety and Health Act (OSHA). This requires employers to provide a hazard free work place, train employees on job safety, notify government administrators about any serious accidents in the work place and to keep detailed safety records that can be accessed if problems arise.

7.Report each new employee to the new hire reporting agency

There is a new hire-reporting program in place that requires you as an employer to report information on all new employees for the purpose of locating parents who owe child support. Each state’s new hire reporting agency operates differently. Before you being to hire employees it is important to see what your states protocols are for this.

8.Create a handbook

This is not required, however it is a good idea to create an employee handbook for your new hires. In this you should detail your business’s employee policies. This handbook should make all policies in affect clear so if a problem arises between employer and employee you can reference the already distributed handbook. Any employee contract details should also be included in this handbook. Just make sure you actually stick to the rules you set forth in the book and are consistent in enforcing them.

So, are you ready to hire a new employee?