Despite the challenges facing many businesses, some companies are still experiencing growth. If your business is expanding, you may find that it is time for you to make your first hire. As you begin this process, it is critical to note that expansion, while providing a great opportunity to increase productivity and scale, can also expose your business to additional risks. As you prepare to expand your workforce, keep the following questions in mind:
Are you hiring an independent contractor or an employee? One of the most important things to remember is that a worker’s classification impacts your legal liability and tax obligations. For example, you are not responsible for withholding taxes for an independent contractor. However, you are required to withhold certain taxes from an employee’s wages. A worker’s classification on paper alone is insufficient; the actual dynamics of the working relationship determine it. If you exert substantial control over what a worker is doing, and the worker has very little independence, the worker will likely be classified as an employee and therefore entitled to the rights of an employee. Be diligent in establishing the parameters around each working relationship.
Have you complied with the Department of Labor’s requirements for notices and reporting? The U.S. Department of Labor (DOL) is dedicated to maintaining labor standards and enforcing workplace fairness. As part of its mission, the DOL requires that employees be made aware of the rights afforded to them under the law. Accordingly, the DOL requires that specific notices be posted in the workplace or shared digital sites where employees will be able to see them. Additionally, the DOL requires that specific types of information be maintained and reported to the federal government. This includes employee names, dates of birth, and other pertinent information regarding hours worked and wages earned.
Have you created the proper systems to remain in compliance? As an employer, your saving grace will be establishing systems that allow you to remain in control while simplifying your tasks. For example, you should systemize payroll. Some companies choose to outsource this task to a payroll service or to use third-party software. The systems that you choose depend on your unique business needs. Therefore, before you commit to a particular system, determine which features are most important to you and focus on finding tools that best meet those requirements.
Do you have the requisite insurance? As a business owner with employees, you must be prepared for circumstances over which you have no control. It is important to ensure that your business is adequately insured to cover any mishaps or accidents that may occur. Moreover, obtaining workers’ compensation insurance is mandated in certain jurisdictions.
Have you completed the required federal documentation? Ensure that you have obtained or filed the following documents required by the Internal Revenue Service (IRS) or the U.S. Citizen and Immigration Services (USCIS):
- IRS Form SS-4: Application for an Employer Identification Number
- IRS Form W-4: Enables you to withhold certain federal taxes from employees’ paychecks (to be completed by the employee)
- USCIS Form I-9, Employment Eligibility Verification: Required by the USCIS to ensure that an employee is eligible to work in the United States
We Can Help
If you are on the verge of making your first hire, you do not have to figure out all of the requirements by yourself. Our firm is here to help. We can assist you with organizing your internal documents and processes, filing the required documents locally and federally, and avoiding major problems that can arise from noncompliance. Call our office to schedule a digital meeting today.