What You Need to Know Before You Hire an Employee for Your Business

Before you hire an employee, you have to get your legal and financial house in order. You can’t afford to make many mistakes, because you could end up in significant trouble with the Internal Revenue Service (IRS).  Your employees may also sue you for your actions as an employer, if you’re not compliant with the employment laws and regulations in your state. Here’s what you need to know before you bring someone on board as a part time or full time employee:

You Need to Excel at Record Keeping

There are a few key areas where you must keep good records, including when you hire an employee. You can invite an IRS audit and end up with tax liabilities if you don’t obtain the necessary documents required by tax laws and regulations. Some of the paperwork you’ll need in connection with hiring includes:

• W-2s for your employees
• W-4s that your employees will sign and give to you
• State income tax forms
• Federal income tax forms
• Form I-9 to verify your employee’s ability to work in the United States

One thing you should consider doing before you hire an employee is to hire someone else to take care of your payroll. There are affordable payroll services, but you can also hire an independent contractor with human resources experience.

You Need to Buy Insurance

You need to purchase workers’ compensation insurance, and you may need to purchase unemployment and disability insurance on behalf of your employees. The exception is that it may not be mandatory to purchase unemployment insurance for your business depending on the type of business you have and the number of employees. You need to contact the agency in your state that oversees business taxation to see whether you have to buy it. You may also need to purchase disability insurance by law if you live in a state that mandates it. Otherwise, there is no federal law that mandates employers to purchase disability insurance for employees.

You Need to Understand Employment Laws

An employment lawyer can help you to avoid legal pitfalls and to institute best practices to ensure that you are in compliance with local, state and federal laws and regulations. You also have to understand the legal obligations that accompany your role as an employer, no matter how overwhelming it is. Some of the key areas where you should learn as much as you can before you hire an employee are:

• Equal employment
• Wages and overtime pay
• Family and medical leave
• Employment contracts
• Immigration and workers’ permits
• Workplace conditions

You don’t have to become an expert in these areas before you hire an employee, but you should get an overview of your responsibilities in each.

There are other alternatives to consider before you hire an employee. You can hire someone as a freelancer, consultant or independent contractor. These may be better options for you if you’re not ready to take on the responsibilities of an employer.