I. Overview
II. Financing and the Business Plan
III. Permits, Licenses, and Other Legal Concerns
IV. Organizing Your Business
V. Hiring Employees
VI. Employee Pay and Compensation
VII. Business Insurance
Frequently Asked Questions

Hiring Employees

A number of state and federal laws impact the process of hiring a new employee. You must be careful to maintain legal compliance at all stages of the hiring process, from advertising and interviewing to hiring and employment. At all times, employers must refrain from illegal discrimination. You should take precautions to ensure you do not hire illegal immigrants. You must also observe age regulations and respect privacy rights.

The consequences of failing to abide by these rules can be severe. You should consult with an attorney who is experienced in business planning and employment law to ensure that you maintain compliance with federal laws as well as laws that apply in your jurisdiction.

Before you advertise for a new employee, you should determine the requirements for the job. Use these requirements to determine which questions should be asked on the job application. Using the requirements as a guideline can help to guide your decisions and examine each applicant fairly.

Private businesses are not required to advertise for job openings, and jobs can be filled however the owner or manager wishes as long as the employer maintains compliance with federal, state, and local regulations. You should be aware that advertising can be of great advantage to your business. Advertising a job opening can bring you a much wider pool of qualified applicants, increase the odds of finding the right person, and help to eliminate the question of discrimination. A wider pool of applicants lets you maintain your options, view a more diverse group of applicants, and still allow you a full examination.

You should also consider writing down your company’s policies and procedures in an employee handbook, to minimize misunderstandings over policies, compensation, and other employee issues. Every new employee should be given a handbook.

A number of federal laws prohibit discrimination. These must be followed strictly when hiring or paying employees. All of the following laws are enforced by the U.S. Equal Opportunity Commission:

• Title VII of the Civil Rights Act (1964), which bars discrimination in employment based on race, color, religion, sex, or national origin.
• Equal Pay Act (1963), which prohibits unequal treatment of men and women performing substantially equal work.
• Age Discrimination in Employment Act (1967), which prohibits discrimination against workers over 40.
• Title I and Title V of the Americans with Disabilities Act (1990), which prohibits employment discrimination in the private and state or local government sectors against individuals with disabilities.
• Sections 501 and 505 of the Rehabilitation Act (1973), which prohibits discrimination in federal employment against individuals with disabilities.
• Civil Rights Act (1991), which provides for damages in claims of employment discrimination.

Even after the hiring process is complete, businesses must meet a number of regulatory and filing requirements. For the state, you must:

• Report the new hire to the state employment agency.
• Register the new hire and pay state unemployment taxes.
• Withhold and pay any state income taxes.

Filing concerns for the federal government include:

• Have the new hire complete the Employment Eligibility Verification I-9 form.
• Have the employee complete the IRS W-4 form.
• Withhold and pay payroll, Medicare and Social Security taxes to the IRS.
• File an IRS SS-4 Form to obtain a federal Employment Identification Number (EIN) for the new employee.
• File an IRS 940-EZ form to report federal unemployment taxes for each employee.

In addition, you must:

• Prepare an injury and illness prevention plan in compliance with Occupational Safety and Health Administration (OSHA) standards.
• Acquire workers’ compensation insurance.
• Post all notices required by the state and federal Department of Labor.
• Inform all employees of employee benefits.

The process of hiring employees can be complex, and it exposes your business to potential damages. You should obtain the counsel of an attorney with experience in business planning before beginning the hiring process.

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