Hiring employees can be a daunting task, especially for a small business. There are many things you have to do as an employer to hire an employee, and failure to do these things could result in legal consequences. Luckily, there is a lot of information online (from government agencies) that help you with this process. This article will provide direction to hiring employees and provide reputable links to online sources. Note, this is not an exhaustive list.
1. Receive an EIN number from the IRS
EIN Number: You might already have this number from when you started your business, but if you don't, you will need to get one. It is FREE from the IRS website. Do not let an individual or business convince you to pay them money to get you an EIN number. Click on the link below to register for an EIN number.
2. State Tax Forms
Form K-4: You must have your employee sign the appropriate state tax forms, which lets you know how much tax to withhold from your employees. According to the KY.gov Employee Withholding Handbook, "All employees subject to withholding must complete an Employee’ s Withholding Exemption Certificate, Form K-4, Form K-4E or Form 42A809. These forms are used by the employer to determine the amount of tax to be withheld and should be on file immediately after an employee begins to work." The Kentucky Employee Withhold Handbook is linked below.
3. Federal Tax Forms
Keep Employment Records: Before you look around at the forms your employees need to complete, you must resolve to "keep records of employment taxes for at least four years (IRS.gov)," according to the IRS. You need to have a system in place to keep track of payroll and taxes withheld. You can do this yourself, but there are many professional payroll specialists companies in Kentucky that can do this for you (at a very reasonable fee).
Form W-4: Every employee must provide an employer with a signed withholding exemption certificate (Form W-4) on or before the date of employment. The employer must then submit Form W-4 to the IRS. See below for a link to Form W-4. Also, Turbo Tax has a good article HERE on what exactly a W-4 is
4. Employee Eligibility Verification
Form I-9: "All employers must complete and retain Forms I-9 for every person they hire for employment on or after Nov. 6, 1986, in the United States as long as the person works for pay or other type of compensation (uscis.gov)." This must be completed and signed by the employee within 3 days of hire. According to the SBA website, "Employers do not need to submit the I-9 form with the federal government but are required to keep them on file for three years after the date of hire or one year after the date of the employee's termination, whichever is later." Click below for the I-9 form.
5. Register with Kentucky's New Hire Reporting Center
Report Employee Hires: "Federal and State law requires employers to report newly hired and re-hired employees in Kentucky to the Kentucky New Hire Reporting Center (ky-newhire.com)." This can be done by a simple phone call to (800) 817-2262, or by going to their website and registering online. See link below.
6. Obtain Workers' Compensation Insurance
Purchase Worker's Comp: "All Kentucky employers with one or more employees are required to maintain workers’ compensation coverage (insurance.ky.gov)." Workers compensation can be purchase by any private insurance agent in KY, or it can be purchased through a KY state fund. It is recommended that the state workers comp fund be the last resort, if you cannot find a private insurance broker. The link to the state workers comp program is below.
7. Hang Certain Posters and Notices
This can be the most difficult thing to do when hiring employees, because there seems to be so many posters you "have to" hang in your business. Be careful: there are many individuals pretending to be legit companies trying to scam you into buying posters. Click on the link below to read a statement KY Attorney General Jack Conway about this. He lists the common required federal and state posters in his address.