For many startups and businesses, hiring your first employees can be an anxious process. Hopefully, this checklist will help entrepreneurs get past the initial hurdles and feel more confident moving forward.
The Ultimate Checklist for Hiring Your First Employee in New York is in chronological order to the extent that some things need to be done before others, but the exact order doesn’t always matter. Do what you can as soon as you can to ensure you comply with federal and state requirements.
This blog is written under the assumption that your entity is formed in New York. If your entity is formed in another state, you’ll need to file an Application For Authority with the State of New York before doing business there.
Get Your Employer Identification Number (EIN)
If you have not already applied for an EIN, this is the first thing you need to hire an employee. Your EIN is unique to your business the same way a social security number is unique to a person. This number will be used on payroll taxes, employee benefits, and several employee-related forms in the future.
You can apply for your EIN online via the IRS website. You’ll need to answer a few questions about your business, such as the type of entity it is, who the responsible party is, and where the company is located. Upon completion, you will get your EIN on the confirmation page. The IRS will subsequently send you a hard copy of the official document.
Preparing the appropriate SS4 form and applying for an EIN on your behalf is included in all of our flat-fee startup packages.
Register for Unemployment Insurance
Once you hire your first employee, you will have to pay taxes to New York state’s unemployment compensation fund. This insurance program provides short-term compensation to those who lose their jobs. Some exceptions exist, but unemployment insurance is mandatory for most companies. You can register online with New York Business Express (NYBE), the state’s online portal for businesses.
Obtain Workers’ Compensation Insurance
New York law requires that you have workers’ compensation insurance if you have employees. The insurance must be through an insurance carrier authorized by the New York State Workers’ Compensation Board. You can also request approval from the board to be self-insured, but this is rare.
Workers’ comp insurance protects you by covering medical treatment for on-the-job injuries and illness, temporary and permanent disability benefits, and death benefits when a fatal injury occurs. You can choose from one of more than 200 private carriers approved by the New York State Insurance Department or purchase a policy from the State Insurance Fund by calling 1-888-875-5790.
Create Your Payroll System for Withholding Taxes
Hiring your first employee means you also need to withhold some of their income for payroll taxes. You also need to pay FICA (Medicare and Social Security) taxes to the IRS. As of today, the Social Security tax is 6.2%. It’s important to note that the employer and employee both pay 6.2% per paycheck. The Medicare tax for employers stands at 1.45%. Employees pay 1.45% on their wages, plus an additional 0.9% depending on how much they make.
You will need to have your employee fill out several forms that will determine the amount you take out for income tax, and fulfill some of New York’s requirements.
Have Your Employee Fill Out Required Documents
Part of the hiring process includes having your employees fill out the appropriate legal documents, so you can report to the proper agencies, withhold the proper money from your employee, and pay the proper amount of taxes.
- Employment Agreement. While by default, employment is technically “at-will,” having a well drafted employment agreement will help you reduce your liability profile and establish important terms with your employees.
- Form I-9. Your employee needs to fill out this form to prove their eligibility to work in the United States. You can also verify eligibility online at the United States Citizenship and Immigration Services (USCIS) website.
- Form W-4. This is the employee form for federal tax withholding. Employees need to fill out one when they are hired and a new one each year.
- Form IT-2104. This is the New York State withholding form that must be completed before an employee starts working for you. You have 20 days from the hiring date to submit this form. You can also complete this task online at the New York New Hire Reporting Center.
With all of the major tasks completed, you will be ready to let your new employee join you. If you have any questions or need further legal counsel concerning employee contracts, business taxes, or anything else related to your startup or small business, contact The Law Office of Elliott J. Brown.