Hiring Your First Employee


You have been running your new company alone and doing all the work alone. Finally, you have reached a turning point, or your breaking point, when you must accept assistance onboard your tight ship in order to survive and thrive.

However, you should be aware that adding more staff comes with a whole new set of legal responsibilities, liabilities, costs, and, of course, paperwork before you hire just anybody. According to one estimate, it typically costs close to $4,000 to find, hire, and train a new employee.

Beyond the paperwork, recruiting errors may have a negative impact on an organization’s financial line and reputation by contributing to high turnover, absenteeism, greater healthcare expenses, workplace violence, and theft.

We have outlined the procedures and safeguards you should take to make sure you make educated judgments while remaining within legal and ethical bounds in order to assist you to navigate the legal repercussions of the hiring process.

1. Do not believe your gut feelings. 

Realize that criminal, underqualified, and emotionally unstable brains lurk in all uniforms and job titles, regardless of whether your new hire will be submitting reports or installing computer networks. Actually, falsified or exaggerated information may be found in close to 40% of all resumes and job applications.

Additionally, there are an increasing number of cases alleging negligent hiring in this nation; if a staff member injured someone as a result of their conduct, you might be held liable and sued. Additionally, it is risky to recruit on the basis of gut instinct in light of the growth in terrorism, business scandals, and identity theft.

What exactly are background checks looking for, and what kinds of things are prohibited? The search often includes verifying past job claims, determining worker’s compensation claims, criminal and imprisonment records, drug tests, credit histories, and driving records, as well as criminal and incarceration records. An identification (Social Security) check is carried out in various circumstances.

While a lot of this data is publicly accessible, other personal documents, such as those pertaining to school, service in the military, and health, are private and need the applicant’s permission before being accessed. You should make an effort to get authentic academic qualifications if you can. A fake credential or degree may now be created with a few keystrokes thanks to technological advancements.

A criminal conviction may be reported forever, but arrest records, settled tax liens, accounts that have been put in the collection, civil lawsuits, and judgments cannot be included in an employment background check after seven years. There are certain states with stricter reporting laws. For instance, bankruptcy is prohibited in California after 10 years.

Federal law mandates that you notify the subject of the inquiry in writing if you intend to contract out a fact-finding mission to a third party. Additionally, you must provide the applicant an opportunity to respond to any negative material if the applicant is being rejected for a job as a result of what you have learned about them.

Be wary, though: There are plenty of con artists and for-profit organizations who collect “virtual rap sheets” on the internet. The information provided by these internet brokers is not always up to date or reliable, and the cheap prices they claim could be misleading.

Recognize that your chances of paying more will increase as you explore more jurisdictions.

2. Check for prohibited drugs. 

Our society’s fight against substance misuse is far from ending since more than 250,000 drug and alcohol-related fatalities occur each year nationally. Addicts may be a tremendous drain on an organization’s productivity and financial health, whether their drug of choice is cocaine or sleeping pills. Did you realize that drug addiction accounts for 65% of workplace accidents? Additionally, workers who abuse drugs are six times more likely than non-drug users to submit worker’s compensation claims.

Pre-employment and random drug testing is an employer’s strongest lines of defense in removing such weak links from the workplace. These checks are genuinely required for several professions, including material handlers, child care providers, instructors, private and corporate investigators, state and federal employees, and police officers.

Remember that it is prohibited to ask a candidate about their usage of prescription medications during pre-employment interviews before doing your own drug test. A job offer, however, may be withdrawn or rejected if a candidate declines to submit to a drug test.

3. Check for undesirable conduct. 

There are other screening options available depending on the job you are looking to fill. Additional evaluation techniques used by company owners today to aid in the selection of the finest job applicants include psychological testing, handwriting analysis, skill and aptitude exams, and even lie detector tests. 

By using such profiling, you may choose individuals who possess the abilities and disposition necessary to be successful in your company. Before implementing such exams, be ready to provide evidence of their job-relatedness, non-discrimination, and statistical validity to prevent any potential legal issues.

Hiring Season

You must be aware of the dos and don’ts of conducting an in-person interview after your behind-the-scenes review is over and you have identified a few good prospects.

1. Certain inquiries are off-limits. 

It is prohibited to inquire about an applicant’s age, sexual orientation, marital status, race, or religion in a written job application or in person. Additionally, inquiries about the nature of physical, psychological, or mental impairment are only permitted if the candidate will need special accommodations in order to do a particular job. Other significant federal statutes to keep in mind throughout your conversation include:

  • The Civil Rights Act of 1964’s Title VII prohibits discrimination and harassment based on race, religion, sex, or creed.
  • Act of 1967 prohibiting age discrimination in the workplace
  • America’s 1990 Americans with Disabilities Act
  • The 1993 Family Medical Leave Act

2. Check your sources. 

Ask the candidate for at least three references before extending a formal employment offer. One personal reference and two professional ones are required to support the applicant’s moral character. Do not skip this step; instead, pick up the phone and contact those references. If you only inquire, you could be surprised by what references are ready to share with you about an application.

Keep your questions as objective as you can, and if you are speaking to the candidate’s professional references, make sure they directly connect to the job performance and responsibilities, to the information on the application or résumé, or to the information shared during the interview. 

Avoid asking inquiries about ethnicity, age, disability, national origin, religion, or marital status when checking references since these issues are forms of discrimination that also apply to interviews and employment. Ask about the person’s character and work ethic after finding out how long they have known them. You might also inquire if they would employ the candidate personally if they had a suitable job opportunity.

3. Determine the employee’s classification and remuneration. 

Federal rules provide explicit instructions on how to pay and categorize a new hire in both situations. When it comes to paying hourly compensation, the lowest you may go is the current minimum wage of $5.15. And if it is a young individual you are hiring, the Fair Labor Standards Act establishes a 14-year-old minimum age for work in non-agricultural jobs.

You must choose whether your new hire will work full- or part-time, depending on your hiring requirements and budget. Part-timers are defined as individuals who work 20 hours or less each week, whereas full-timers put in 30 hours or more, according to the U.S. Department of Labor. You should examine comparable rules with your local department of labor since state laws on the distribution of benefits to part-time workers vary.

You must designate your employee as an independent contractor, a common-law employee, a statutory employee, or a statutory nonemployee for tax purposes. Misclassification may result in a penalty of 1.5 percent of the disputed earnings plus the applicable withholding taxes. Criminal charges may also be brought.

Your workers are regarded as common-law employees so long as you maintain the authority to direct their actions (such as when and where the individual works, the tools and equipment they use, and where they buy supplies).

Any person who is legally permitted to record their income and expenditures as a company is considered to be a statutory employee. Its officers make up the majority of this type of personnel, but it also includes workers like:

  • A full-time traveling salesperson who, on the company’s behalf, solicits orders from restaurants, wholesalers, and other comparable businesses. The goods must be intended for resale (for instance, food sold to a restaurant) or to be utilized as supplies for the buyer’s company.
  • A commission or agent-driver who delivers meat, vegetables, bakery items, drinks (other than milk), or dry cleaning or laundry services
  • An employee working from home using supplies or products provided by the company
  • For all federal tax reasons, including income and employment taxes, a statutory nonemployee—which includes direct sellers and licensed real estate agents—is classified as self-employed.

Independent contractor works for themselves and often for many businesses. Typically, this individual works from home, gets paid on a commission or per-job basis, and submits bills for his or her services. They are not obligated to get the same benefits as regular workers or have taxes withheld on their behalf by their employers. 

Freelancers and consultants are also affected by this. It is a good idea to write an agreement with an independent contractor that specifies that person is not an employee for tax reasons.

4. Organize your records. 

You will need to finish and process a folder’s worth of records before your newest team member clocks in for even one hour of work. There are 12 records that an employer is required to keep on each employee for the duration of their employment, according to the U.S. Department of Labor:

  • Complete name and social security number of the employee
  • Postal address, with ZIP code
  • Date of birth, if the worker is under 19
  • Sex and employment
  • Hours worked each day, the time and day of the week that an employee’s workweek starts, as well as the overall number of hours worked each week
  • The basis for paying employees’ salaries (weekly, bi-monthly, and so on)
  • The regular rate of pay per hour
  • Total “straight time” wages for each workweek, whether daily or weekly.
  • Total profits from overtime for each workweek
  • All increases to or decreases in an employee’s pay
  • Total compensation for each pay period
  • Date of each payment and the pay period that it covers

You will also want to confirm that your documentation is organized before submitting your taxes. According to the Internal Revenue Service, the following taxes you will have to pay and associated paperwork you will have to complete as an employer

  • A W4 form to submit to your state and federal agencies once a year, withholding the appropriate amount of federal income tax from a full- or part-time employee’s salary.
  • Full-time or part-time employees must submit a W2 form to the Social Security Administration and pay FICA payroll taxes to your state and federal governments once every year.
  • Every new recruit must complete an I-9 Employment Eligibility Verification form.
  • Taxes are paid to the federal government either quarterly or once a year on 1099 employees (independent contractors).
  • The identical paperwork must be sent to the tax or labor agency of your state as well.
  • Proof of workers’ compensation coverage. 

Such an insurance protects a company from its legal obligations for accidental or fatal injuries incurred by workers while on the job. Although it is required by federal law, the state oversees the administration of this benefit.

State and federal unemployment taxes, but only if either of the following conditions is met: (1) they pay wages to employees totaling $1,500 or more in any quarter of a calendar year; or (2) they employed at least one person on any given day of any 20 weeks in a calendar year, regardless of whether the weeks were consecutive or not. 

This may depend on a worker’s part- or full-time status in certain jurisdictions, but the precise criteria depend on your state’s workforce agency, which you should consult.

5. Take caution with any immigration-related matters. 

With over 10 million illegal immigrants residing in the country, it goes without saying that this group of people has significantly impacted our workforce. You must confirm and submit documentation demonstrating a foreign national’s ability to do so here if you are sponsoring or petitioning for them to work here.

You must also submit an I-140 form (Immigrant Petition for Alien Worker) on their behalf to the U.S. Citizenship and Immigration Service in order to prevent civil, criminal, and payroll audits for your business (USCIS). Such qualifications should be accompanied by an Employment Authorization Document, generally known as an I-9 check.

Depending on the kind of job the foreign national will be conducting, there are extra, specialist categorization forms to complete. Contact the USCIS for further information on this procedure and an employer’s responsibilities.

6. Purchase the appropriate insurance.

Many experts suggest purchasing disability (or loss of income) insurance for yourself and essential staff from the beginning, even though only Puerto Rico, California, Hawaii, New Jersey, New York, and Rhode Island mandate employers to give money to handicapped employees who are wounded on the job.

Disability insurance comes in two main flavors: short-term (which lasts from 12 weeks to a year) and long-term (which covers anything over a year). The waiting time before payments are given is a crucial aspect of disability insurance. 

An employee must typically wait seven to 14 days before receiving short-term disability benefits. An employee must wait between 30 days and a year before applying for long-term disability. You may lower your premiums by selecting a longer waiting period if having an employee out of work for a little length of time would not adversely harm your company.

That is all there is to legally becoming someone else’s boss; the fundamentals. Remember the reason you went solo in the first place even if you may feel frightened by the scale of your new position. Investing in your own future comes with a cost. Hopefully, productivity and profit will outweigh your investment.

If you are interested in more articles like this, here’s one about how to expand your company globally.

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