How to Hire Employees: Tips From the SBA – SmallBusiness.com


Are you about to hire your first employee? While we have provided tips on how to become an employer before, here are some more tips provided by the Small Business Administration (SBA).


Before finding the right person for the new job you have, you must create a plan for paying employees Follow these steps to set up the payroll:

  1. Get an Employer Identification Number (EIN)
  2. Find out if you need a state or local tax ID
  3. Decide if you want an independent contractor or an employee
  4. Secure a new employee return a completed W-4 form
  5. Schedule payment periods to coordinate withholding tax for the IRS
  6. Create a compensation plan for vacations, vacations and licenses
  7. Choose an internal or external service to manage the payroll
  8. Decide who will manage your payroll system
  9. Know which records should remain archived and for how much
  10. Report payroll taxes as needed on a quarterly and annual basis

The IRS maintains the Employer Tax Guide dor, which provides guidance on all federal tax filing requirements that could apply to your small business's obligations. Check with your state tax agency for employer filing stipulations.

Know the difference between an employee and an independent contractor.

The distinction between employees and independent contractors can affect your bottom line, as this affects the way you withhold taxes and avoids costly legal consequences. Know the differences before hiring your first employee.

An independent contractor operates under a separate business name of his company and invoices for work completed. Independent contractors can sometimes qualify as employees in a legal sense. The Equal Employment Opportunity Commission created a guide to make the determination.

If your contractor is found to meet the legal definition of an employee, you may have to return taxes and fines, provide benefits, and reimburse the wages stipulated in the Fair Labor Standards Act.

Do you plan to offer benefits to employees?

Medical care and other benefits play an important role in hiring and retaining employees. Some employee benefits are required by law, but others are optional.

Benefits Required for Employees

  • Social Security Taxes: Employers must pay Social Security taxes at the same rate as their employees
  • Compensation: Required through a commercial insurance company, self-insured or State Workers Compensation Program
  • Disability Insurance: Disability payment required in California, Hawaii, New Jersey, New York, Rhode Island and Puerto Rico
  • License benefits: Most license benefits are optional outside of those stipulated in the Family and Medical Leave Act (FMLA)
  • Unemployment Insurance: Varies according to state and you may need to register with your state's workforce agency

Optional benefits for employees

Your small business can offer a full range of optional benefits them to help attract and retain employees. Even if the benefit you offer is optional, you may still have to comply with certain laws if you choose to offer it.

Companies that offer group health plans must comply with federal laws, for which the Department of Labor is the host. a guide .

Employees can expand coverage through the Affordable Care Act and some may qualify for benefits through the Reconciliation Act of the Omnibus Consolidated Budget (COBRA). Companies must extend the option of COBRA benefits to employees who are fired or laid off.

Retirement plans are a very popular benefit for employees. Consider offering an employer-sponsored plan, such as a 401k plan or a pension plan. The federal government offers a wide range of resources to help small business owners choose their retirement and pension plans.

Employee incentive programs

Employee incentive programs can boost morale and create greater attractiveness for open positions: common incentives such as options, flexible hours, wellness programs, corporate memberships and company events .

Consider benefit management software if your budget allows. You can make your accounting easier and more efficient. Detailing these benefits in the employee handbook helps your staff make decisions, and can use it as a reference for workplace requirements.

Follow federal and state labor laws

Protect the rights of workers and their business by adhering to labor laws. which means that you must ensure that business practices conform to industry regulations

See the resources of the state and federal law of the Department of Labor.

Source: SBA | Photo: GettyImages

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