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Small Business Digest


Companies Need To Think, Plan Before Making Their First Hire

Companies need to think and plan before making their first hire.

Karen White, Vice President of Product Management, PayCycle Inc., offers 7 important things to know before a company brings its first employee in the door:

1.  Employer Registration. 
* Make sure the company has a federal employer identification number (FEIN); if they don't, they'll need one.  The IRS allows companies to register online at .  Companies also need to register with their state. 
* Some states (like California) assign a business an employer account number for reporting both withholding and unemployment insurance; in other states, employers must register with multiple agencies. 
* Some payroll providers can assist companies with new employer registration; make sure to ask when you're shopping around.

2.  Workers' compensation. 
* Most businesses are required to carry workers' compensation insurance.  From falls to cuts to carpal tunnel syndrome, people injure themselves on the job, and workers' comp is the government's way of ensuring that a company is prepared for the unexpected.
* Take care of this early on, otherwise the company might find itself running the business without employees until the workers comp kicks in.  After all, the company won't want to have them working without workers comp coverage in place.
* To ensure that the business is prepared for year-end workers' compensation audits, choose a payroll solution that provides the detailed reports that auditor's request.

3.  New Hire Reporting. 
* All states require that when a company hires someone, the company fills out a new-hire report.  Among other things, this helps states enforce collection of child support payments. 
* Some payroll services include new hire reporting among the features they offer; when investigating the payroll options; make sure to ask about it, especially if the company is in a high-turnover industry like food and beverage.

4.  Decisions…decisions
* The market will most likely dictate what the company needs to pay to hire quality people; but pay rate is only one element of an employee's compensation. 
* How often will the company pay employees?  In most cases, the company's decision depends on what works for the business and the employees. Many employees like the twice-monthly pay schedule because it provides an even stream of income that matches the frequency of big bills like mortgage payments; paying every two weeks means that some months have three pay days and others have only two. 
* If the company is using a traditional fully-outsourced payroll service, fees will be higher if the company pays employees more often.  However, some companies, like PayCycle, an online payroll service, charge a flat fee per month, regardless of pay frequency.

5. Time Off
* It's important to think about the company's time-off policies. 
* Will the company offer paid time off for vacation or sick days? 
* Will employees have any paid holidays? 
* What if an employee gets called for jury duty or suffers a death in the family? 

6. Absenteeism
* For example, in the restaurant business, high turnover is a given.  Clear rules about unplanned absences are critical.
* It will make it a lot easier if employees and the company are on the same page when it comes to disciplinary action associated with missing work.

7. Payroll
* Handling payroll- the calculations, tax deposits, and filings that keep the business out of trouble with the IRS - is critical.    
* PayCycle and some other services allow companies to sign up and run payroll the same day, even if the business doesn't yet have your federal or state ID's;
* Full service options may require a week or more advance notice to get a company going. 

If companies can just handle each of these 7 things, they'll be in good shape before bringing in the cavalry. 


© 2018, Information Strategies, Inc.
P.O. Box 315, Ridgefield, NJ 07657