If you’re running a company in the U.S., you will inevitably start hiring employees at some point. In this blog post, we’re following up with hands-on advice on how to become an employer in the US; following up previous blog on the same subject http://www.uslawfornordics.com/hire-first-employee/ .
Congratulations! Business is doing well and you are ready to move your products and/or services into the United States market. You have chosen your location and set up your corporation – now you are ready to hire employees and get your business “moving” in the United States. In many ways, being an employer in Denmark is similar to being an employer in the United States. However, there are also many differences. For example, in the United States employers are subject to federal laws governing employee rights as well as a variety of state laws that may go beyond federal laws to give additional rights to employees. Because there are 50 different states, in addition to the District of Columbia and Puerto Rico, it is important that an employer knows the applicable laws and regulations where the business is located.
Register with Tax Agencies
During the process of setting up your U.S. corporation, you will have applied for your company’s federal employer identification number (“FEIN”) through the Internal Revenue Service (“IRS”). The IRS administers and collects Social Security, Medicare, federal income and federal unemployment taxes (“FUTA”).
In order to process payroll for your employees, you will also need to obtain a state unemployment identification (“SUI” or “UI”) number by registering in each state where you have employees. Most states also collect state income tax.
In addition, some states have local city taxes or state-mandated and state-run workers’ compensation or disability insurance programs. You should discuss your employee locations with your payroll provider and they can help you determine the agencies where you will be required to register.
Processing Payroll
U.S. tax agencies are very aggressive when it comes to levying penalties and interest on employers who make mistakes on their payroll tax returns or deposits. Therefore, we always recommend that employers engage a reputable payroll provider instead of trying the “do-it-yourself” method. Payroll providers are able to prepare accurate payroll records and tax returns in addition to collecting the required taxes directly from your bank account on the check date and submitting the taxes to the appropriate tax agency. Most can also provide direct deposit for your employees.
Workers’ Compensation Insurance
Almost all employers in the United States are required to provide Workers’ Compensation insurance coverage for their workers. This insurance provides wage replacement and covers healthcare expenses for any injuries that occur while the employee is working. It does not cover disabilities or sicknesses unrelated to work.
Labor Law Posters
Many different governing agencies in the U.S. require employers to post notices of employee rights in a common location where all employees will be able to read them. Because there are so many different required postings, most employers in the U.S. purchase large labor law posters that include all of the required notices. Generally, they purchase a “federal” poster and the appropriate “state” poster. Many times these posters are provided free of charge when signing up with a payroll service.
Employer Policies and Employee Handbooks
In the U.S., there are a large number of federal and state laws regarding employee rights, discrimination, and harassment in addition to numerous wage and hour laws. Many of these laws only apply to companies with a minimum number of employees (this varies from law to law). In addition to the basic agreements specified in an employee’s contract, it is important for a company to establish company-wide policies that inform employees of company expectations, employee benefits, and an acknowledgement that the employer adheres to federal and state laws.
Employers new to the U.S. will benefit from either having their pre-existing policies reviewed by a U.S. attorney or by customizing a standard, prepared handbook to ensure that they are in compliance with applicable law.
Employee handbooks are beneficial for the following reasons:
- Policies are written down and gathered together in one place to prevent future misunderstandings about rights and obligations;
- Handbooks provide a forum to explain benefits available to the employee; and
- The prepared handbooks already have the applicable laws addressed in the policies, so managers who are new to the U.S. can use the handbook to learn more about U.S. labor laws.
Employee Paperwork
All new employees in the United States must complete a Form I-9, Employment Eligibility Verification Form, provided by the Department of Homeland Security, within three days of beginning employment. Each new employee must submit documentation that the employer will use to verify their identity and their right to work in the United States. The directions on the form include a list of acceptable documents.
In addition, all employees should complete a Form W-4, Employee’s Withholding Allowance Certificate, provided by the Internal Revenue Service, prior to receiving their first paycheck. This form allows the employer to calculate the correct amount of federal and state income tax to withhold from the employee’s check. Some states have their own withholding allowance certificate.
