So you’ve decided to take your company to the next level by expanding your staff. Great! But being an “Employer” under the law is more than just a title, so before you extend your first offer, make sure your startup is set up for success. Part One of this three part series will focus on several of the federal and local filings and registrations that new employers will need to make in preparation for their first hires.
First, the Internal Revenue Service (“IRS”) requires every employer to have an employment identification number (“EIN”). An EIN, sometimes referred to as a Federal Tax Identification Number, is required to report business and employee tax information. As such, any new employer’s first task should be to obtain an EIN. After applying for a federal EIN, new employers should confirm whether the state in which they conduct business also requires employers to obtain local EINs. In addition to the appropriate EIN(s), new employers should have an appropriate tax recording system in place because the IRS has varying recordkeeping requirements for employers.
Second, based on where the company is headquartered, the new employer may need to register with the appropriate state unemployment insurance agency. Unemployment insurance programs provide temporary income to eligible employees. Eligibility is typically determined based on the circumstances surrounding the employee’s separation. A list of the appropriate state unemployment agencies is available on the IRS’s website.
Third, new employers will need to purchase insurance for the appropriate state workers’ compensation program, disability program, and any other basic benefit plans, and/or health insurance programs. In exchange for procuring insurance, several states’ workers’ compensation laws insulate employers from liability with respect to certain workplace injury claims. These insurance benefits are typically only available for employees, rather than independent contractors, so ensuring that workers are properly classified as “employees” rather than independent contractors is crucial.
Once the determination of the benefits which will be offered to employees is made, written policies regarding these benefits should be collected and organized in an employee handbook. In addition, the handbook should identify other relevant employment, including anti-harassment and anti-discrimination, harassment reporting, disciplinary actions, and attendance.
After completing the necessary filings and registrations, you’re ready to iron out the details of the specific positions for which your company will be hiring. In Part Two, we’ll discuss drafting job descriptions and their role in classifying employees under federal and state wage and hour laws.
Special thanks to Lily Kurland for drafting this post!