Understanding the Legal Aspects of Hiring Employees for Your Small Business

One of the biggest indicators that your business is beginning to grow is when you need to look into hiring employees. Hence you need to do your research before approaching this major milestone as it does come with a lot of responsibilities.

This is mostly down to the legal aspects of hiring an employee, which is why learning the basics of hiring an employee is just the start of your journey. You will need to be compliant and there are things that you need to avoid so that you avoid any costly mistakes.

Therefore, read on to get a better idea of the legal aspects of hiring employees for your small business.

Major Legal Requirements for Your Small Business

The following are some of the major legal requirements for your small business:

1. Start to Prepare Your Business Legally

The place to start is to ensure that before you list a job post, you ensure that your business is legally eligible to hire employees.

Hence, do the following in those cases:

1. Apply for an employer identification number (EIN). In fact, this number is really important if you want to report for taxes and payroll.
2. Register your business with the state’s unemployment insurance office.

In most states, you might have to pay unemployment taxes in the following cases:

• If you have at least one employee working for 20 weeks
• If you earn more than $1500 in wages/quarter.

2. Verify the Eligibility of New Hires

As per US Federal law, as an employer, you have to verify that your new hires are legally allowed to work in the United States. In this case, you will be able to do it with the help of Form 1-9. However, you have to complete it within three days since the employee starts to work for you.

In addition to that, you must also review the passport/SSN to confirm the identity and work eligibility of the individual.

3. Learn About Wage and Hour Laws

Primarily, the Fair Labor Standards Act (FLSA) sets the following rules for employers:

• Minimum wage
• Overtime pay
• Child labor

In this case, as per this law, the minimum wage is $7.25/hour (also it can be higher in some states). Moreover, you must ensure that you are compensating for overtime.

Apart from that, you must also take steps to classify your workers properly. Otherwise, your business might face serious legal repercussions.

4. Set Up Payroll and Tax Withholding

After you hire an employee, you must withhold the following from their paycheck:

• Federal and state income taxes
• Social Security
• Medicare from their paycheck.

If you want to properly do this, you have to fill out Form W-4 when you start. Moreover, you must also issue Form W-2 at the end of the year to report withheld wages and taxes. In fact, many small businesses have W-2 tax form kits to ensure a simple process.

5. Provide Workers’ Compensation Insurance

In most states, workers’ compensation insurance is mandatory for employers. With this, you will be able to protect yourself and your employees in the event of a workplace injury.

6. Launch an Employee Handbook

Try to have an employee handbook for your business, even if you have only one employee. In this case, make sure it contains the following:

• Company policies
• Expectations
• Safety policies as per the Occupational Safety and Health Act (OSHA)

Essentially, if you properly communicate procedures and rules, you will be able to legally protect your business.

7. Report Your Employees to the State Registry

It is also important for your business to report new employees to the new hire registry of your state. This helps the state government to enforce child support orders. Also, it ensures tax reporting.

Protect Your Business Now!

Of course, it is a great thing for you to be able to hire employees for your small business. However, as anything in your business, it doesn’t come without legal complications. Hence why its important to follow the basic legal requirements so that you can build a strong foundation for your business and for your employees.

There is always the option of finding legal professionals to consult with to ensure you do it perfectly. Don’t forget as well that you need to interview your potential employees as you need to make sure they are up to the work you are going to provide them and to ensure their character fits in with the business dynamic and aims.