Taking on additional help should not be taken lightly. You should be aware that becoming an employer brings additional paperwork, liabilities, expenses, training time, and legal obligations once this transition has been made.
When you are ready to bring on employees, there are a few tasks that must be done in preparation to be sure your business is compliant and not subject to unnecessary liabilities.
- Obtain Workers’ Compensation Insurance. Most states require employers with one or more employees to carry workers’ compensation insurance, which provides lost wages and medical benefits to employees injured in the course of employment. Depending on the state, it could take time to get coverage established. You can start by searching for licensed agents in Kentukcy here.
- Apply for a Federal Employer Identification Number (Federal Tax Identification Number or EIN). The EIN is required when you deposit taxes, file a return or communicate with the Internal Revenue Service (IRS) or Social Security Administration (SSA). Most businesses can submit an application online quickly and easily. Your EIN will be issued immediately once you’ve submitted the SS-4 application.
- Register for Unemployment Insurance with the Appropriate State. In some states, Kentucky included, non-exempt businesses are required to register for an unemployment insurance account if they pay $1,500 or more in gross wages in a single calendar quarter or if the business has at least one worker performing services during any part of 20 different weeks out of a calendar year. In other words, if you hire someone, you need unemployment insurance. Most states require employers to submit contribution and wage reports on a quarterly basis. Kentucky businesses can register online here.
- Register with the State New Hire Reporting Program. The new hire reporting program is a state directory that aids agencies in locating parents, establishing child support orders, and enforcing existing child support orders. Employers must register as a reporting company before reporting the first employee and all employers are required to report new or rehired employees to the center within 20 days of the employee’s hire date. Kentucky businesses can register online here. Registration requires an EIN.
- Prepare the Required Federal and State Forms. All new hires must complete Form I-9 no later than the first day of employment, which verifies the employee’s identity and right to work in the United States. Employers must complete Section 2 of the form within three business days of the employee’s first day of employment. Employees must also complete Form W-4 and the state’s tax withholding form, which must be kept on file by the employer for each employee. These forms are used to calculate the correct amount of federal and state income tax to withhold from each employee’s wages.
- Display Mandatory Posters. Employers are required by both federal and state laws to clearly and conspicuously display official labor and employment notices regarding worker rights. These posters can be obtained at no cost to the employer from the applicable agency websites or bought from one of several companies that provide a single, laminated poster that includes all required postings. Check the Department of Labor’s website for information about which posters you must display in your workplace.
If you are a small-business owner thinking about hiring your first employee, you can learn more about the steps you need to take in our most recent white paper.