As a business grows, entrepreneurs may not be able to handle the workload alone. At first many entrepreneurs work with independent contractors, but there will come a point in time a business owner will want more say in the work product or more management power over work tasks. When that happens, an entrepreneur needs to hire employees.[i] There are certain legal formalities that must be met before entrepreneurs become employers.
This is a step-by-step timeline for hiring employees.
- Obtain a federal Employee Identification Number (EIN)
A company’s or an individual’s EIN is a method through which the Internal Revenue Service identifies a business. The federal EIN is also how New York State identifies businesses operated within the state. Businesses can apply for an EIN online or by contacting the Internal Revenue Service at 1-800-829-4933.
- Register the business at www.nynewhire.com
Businesses operating in New York now have the option of maintaining employee benefits and reporting employer taxes online. Registering for online reporting is simple. Business owners only need to supply their EIN, business address, and contact information.
- Have employees file the necessary paperwork with the company
Employees must fill out this form so employers can withhold the correct amount of federal tax from each paycheck. Every new employee must fill this out, and existing employees must fill out a new form when their personal or financial situation changes (e.g. an employee gets married or becomes a parent). Employers submit this information to the IRS. The W-4 is available on the IRS website.
- I-9 (employee eligibility)
The Employment Eligibility Verification form (form I-9) is required for all employees hired in a business. Employers are responsible for getting this information from the employee within 3 days of hire. This form must be filed in company records for three years after hire or one year after termination, whichever is latest; it does not get filed with the government, although U.S. Citizenship and Immigration Services can request to see the form. It is the responsibility of every employer to maintain employee eligibility information for the required period of time.
- New York New Hire Reporting
New York requires each employer to register each new hire or employees rehired after 60 days of separation from the company. Employees must be reported within 20 days of hire or rehire. This information is registered with the New York Department of Taxation and Finance. Employers can register new employees online at www.nynewhire.com or by filing Form IT-2104, Employees Withholding Allowance Certificate.
- Obtain employee benefits
- Required benefits
- Workers Compensation Insurance. All employers in New York must have workers compensation insurance for their employees. This can be done through a private insurance broker or through the State Insurance Fund, a not-for-profit agency that provides insurance for New York employers. Proof of insurance must be filed with the Board in Form C-105.
- Unemployment Insurance.[ii] Each employer must pay a tax on his or her employee’s salary for the Unemployment Insurance Fund.
- Disability Insurance. Employers in New York must provide disability benefits to employees for off-the-job injuries or illness. Insurance can be obtained through private brokers approved by the Workers Compensation Board or through the State Insurance Fund. There are more than 200 hundred authorized private insurance brokers in New York. The Workers Compensation Board encourages employers to look for a broker that specializes in the business’s specific trade when looking for insurance. Employers can find brokers through trade associations or listings such as the yellow pages.
- Family Medical Leave. Under the US Family Medical Leave Act certain employees may take unpaid, job-protected leave for up twelve weeks to take care of their selves or a family member. This only applies for larger companies (50 or more employees).
- Health care. Under the Affordable Care Act certain employers are required to provide health insurance for employees. The Act separates employers into four categories—self-employed, less than 25 employees, less than 50 employees, more than 50 employees—and regulates them according to those categories. To see where a specific business falls read about the Act on the Small Business Administration website.
- Benefits that are permissible but not required
- Leave plan—paid time off, vacation, sick days, jury duty, bereavement, holidays, etc.
- Health plan—if not mandated under the law
- Retirement/Pension plan
- Employee Incentives
- Required benefits
- Post the necessary notices
Employers must post certain information in the office where employees can view the material. The NY Department of Labor regulates these requirements. Below are a few commonly required notices. New York and federal notices are available online.
- Workers Compensation/Disability certificate. This is a notice of compliance with the Workers Compensation Board.
- New York Human Rights Law/Equal Opportunity Employer. Notice to employees that employers cannot discriminate against them on any of the enumerate grounds: race, creed, age, color, disability, national origin, sex or marital status.
- Unemployment Insurance certificate. This gives the employer’s information to show employees they are covered by the New York Unemployment Insurance Law.
- Smoking. All areas where smoking is prohibited must have a notice.
- Fair Labor Standards Act.
- Uniformed Services Employment and Reemployment Rights Act. This outlines the policy regarding employment of servicemen and women.
- Whistleblower Statutes.
- File taxes
State and federal wage withholding must be reported quarterly and annually. Employers are also required to file regular installments for unemployment insurance. This is tracked in New York and employers are given incentives based on timely filing.
- Keep records
Entrepreneurs need to keep good records for every aspect of their business. Employee information, payroll, taxes, insurance, incident reports, etc., all of these need to be organized within the company.
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