One of the most significant milestones for any start-up business is the day you hire your very first employee. Larger businesses often have a dedicated HR professional or department who manages the process of onboarding new staff, but this is your first employee, so it’s unlikely you have anyone with that kind of knowledge. There are some key steps to follow when hiring and managing your employees to protect both your company and the employee. If you are about to take on your first employee, these points will help you to make sure you’re compliant with local, state and federal employment regulations.

Employee Identification Number

The IRS needs to assign your business a unique 9-digit Employee Identification Number (EIN). This keeps a record of your business entity as legally allowed to employ people. You can get this number by applying on the IRS website, over the phone, or by submitting a written application by mail or fax.

Check work eligibility for each employee

You need to check that your new employee is legally able to work in the US. You will not need to submit a form to the government, but you should complete IRS Form I-9 to satisfy U.S. Citizenship and Immigration Services (USCIS). On the final page of the form, you will find what the list of documentation new employees must present to you, their employer, to verify they are authorized to work in the US whether they are a citizen or not.

Meet tax reporting standards (state and federal)

The amount of unemployment tax you pay will depend on whether your workers are independent contractors or employees. For example, independent contractors are responsible for filing and paying their own taxes and Social Security but you will need to pay taxes to the Federal government. If you are employing full or part-time staff, you will be responsible for withholding specific taxes depending on how many allowances the employee is entitled to. You can find out more in the Employer’s Tax Guide by the IRS.

Tell your state’s directory

The Personal Responsibility and Work Opportunity Reconciliation Act stipulates that all employers have to report new-hire data to their state’s directory. Usually, this should happen within 20 days of the hiring date but there are exceptions to this in some states.  

Get workers’ compensation insurance

You need to ensure you have adequate workers compensation insurance to protect both your employees and your business should an employee be injured, develop an illness or die in the course of their work duties. The insurance is there to support the employee and prevent businesses from being financially liable for their medical expenses and lost income.

Display worker’s rights on the premises

Most employers in nearly all states are required by law to display the most up to date information relating to state and federal workers’ rights. This could be done by displaying posters in common areas of the business where everyone has the opportunity to see them. To find out which posters you are required to display you should consult the U.S. Department of Labor’s Poster Advisor page.