If you have successfully started a business and are now looking to add an extra hand, you deserve a pat on the back. The prospect of getting a new hire may be overwhelming considering the stringent employment laws in California.
You likely understand that you will be in for a lot of paperwork but are clueless about where to start. But you do not need to worry. This guide highlights things you need to know before adding that extra hand to your business to ensure compliance with California and federal laws.
Get Your Paperwork Right
As a new employer, you will have the added responsibility of withholding federal income tax and depositing it with the IRS. To ensure compliance with IRS regulations on withholding taxes, every new employee must fill out a W-4 form which acts as a guide on the amount of tax an employer will withhold from their employee’s paycheck. You do not have to file the form with the IRS.
The second tax-related form you will need to fill out is the W-2 which details an employee’s earnings in a year. You may not have tax returns to file for new employees, but you will need to do it at the end of the year.
Creating and filing W-2 forms for your employees can be quite challenging when done manually. Also, it opens a door for errors which can get you in trouble with the IRS. But you do not have to go manual. With a W2 template, you may need to add basic salary information and have your employees’ W-2 forms ready in a click.
Employer Identification Number
To remit taxes to the IRS, you will need an Employer Identification Number (EIN). The EIN is the standard federal requirement for all employers in America. It is a nine-digit number that is more like a social security number for businesses.
Getting EIN for your business is pretty easy; you only need to go to the IRS website to get one. You also have to apply for a California employer identification number. The registration process involves filling out a DE-1registration form with the California employment development department (EDD).
Workers’ Insurance Coverage
Every employer in California must have a workers’ compensation plan in place. This means an employer must carry a workers’ compensation insurance cover or seek state approval to self-insure.
A violation of California workers’ insurance regulations can attract some pretty hefty penalties under California’s employment laws. Avoidance of penalties should not be the only motivation for having a workers’ compensation plan.
The program also offers employers protection against liability that could arise from workplace accidents involving pretty high payouts at times. Employers can choose between private insurance or state-run workers’ compensation funds.
Employee’s Eligibility Verification
Every employer in America must complete and retain a Form 1-9 for all employees, American or non-American. When completing the form, the employer must verify potential employee eligibility for employment by examining their identification documents.
Identity verification documents can include a passport, social security card, and driver’s license. A comprehensive list of federally acceptable identification documents is on the last page of Form 1-9.
While there would be no way of verifying the authenticity of documents presented by an employee when seeking employment, there is a requirement that the documents appear reasonably genuine. Employers that hire employees with documents that are evidently not authentic could face prosecution under federal laws.
Other statutory requirements include ensuring the workplace is OSHA compliant, creating an employee handbook, and setting up employee benefits.
You may also consider talking to a corporate lawyer to ensure that you haven’t left anything out. Alternatively, find someone that has done this before you and let them hold your hand.