Question:

What steps do I need to take to hire an employee? It seems a little overwhelming and I don’t even know where to begin.

Answer:

We know it can be daunting to hire your first employee. But we’ve got you covered with these ten (10) basic steps for hiring an employee. Sure, there are other things you might consider, based on your industry or your clientele, but this is the framework we suggest you start with!

1. Get Your Recruiting Materials Dialed In

There are two essential sets of recruiting materials that you should have dialed in from the beginning of your recruiting process: the job description and your interview questions.

Job descriptions help your organization assess the skills necessary for the position, set performance expectations for candidates from the moment you start your search, and help you evaluate possible accommodations for disabilities.

Your job description should include a brief description of the position, the essential functions and responsibilities of the position, and any required certifications or education. You should note that essential functions are really important to get right, as this information could be the key defense to a lawsuit under the Americans With Disabilities Act.

And of course, don’t forget to give your interview questions some polishing! There are certain invasive questions you should never ask in an interview, because they can run afoul of anti-discrimintation and other labor laws. Examples of some of these types of questions are:

• “What is your religious affiliation, if any?”

• “Are you pregnant?”

• “What is your political affiliation, if any?”

Just do us a favor: speak to an attorney before going rogue, okay? Great, thanks champ.

2. Decide on Employee Classification

Employers must classify all employees as either exempt or non-exempt. Most employers try to classify their employees as exempt because these employees are exempt (as the name would suggest) from certain wage and hour requirements, like rest periods, meal breaks, and overtime. This means less oversight (time tracking!) for the employer.

But note, to classify an employee as exempt, the employee must meet certain requirements under law. In other words, you can’t just say wave a magic wand and *poof*, your employee is exempt. Because if it were that easy, everyone would be exempt!

By default, employees are classified as non-exempt, and generally, it’s a good rule of thumb to assume all of your employees are non-exempt, unless they clearly meet the job duties and salary requirements of an exempt position.

Non-exempt employees are usually paid hourly (though they can be paid salary) and must be paid overtime if they work more than 40 hours in a workweek or more than eight hours in one day. There’s also such a thing as double overtime if they work even longer hours, but for the sake of brevity, we won’t launch into a discussion about that in this resource.

3. Pull Your EIN

If you’re a formal entity, like an LLC or a corporation, you probably already have an EIN number. But, if you’re not aware of what an EIN is, this is essentially the Social Security number for your business, and you’ll need this for your tax returns and other documents. If you don’t have one, you can apply for your EIN here.

4. Apply for Workers’ Compensation

As soon as you have an employee on your payroll, you’re required to carry Workers’ compensation insurance. In fact, you may be required to carry this even before you hire an employee, depending on your entity structure. Workers’ compensation insurance protects your employees who might suffer on-the-job injuries or illnesses. The coverage is not only for employee safety, but also for the company’s peace of mind; you can rest easy knowing that your employees are covered if an accident were to occur. Not sure where to find a carrier? Speak to your payroll & benefits administrator (or if you have other business insurance, your broker) for their recommendations!

5. Create an Account with the EDD

The Employment Development Department, or “EDD” is California’s hiring agency. When you pay payroll taxes, they are funneled to the EDD and credited to your employer account. You can enroll in the EDD’s e-Services for Business portal here.

6. Setup Payroll

Payroll is super important to get right. One, because your employees want to be paid, duh. And two, because each check should have the proper amounts withheld for payroll taxes. There are tons of payroll providers out there; your CPA might have a recommendation for you based on their systems. Our small team uses Gusto!

7. Get Your Internal Paperwork In Order

Generally, there are four basic sets of documents that we recommend for any employer: (1) an offer letter and job description OR an employment agreement; (2) an employee handbook; (3) a non-disclosure agreement; and (4) an arbitration agreement.

The offer letter and job description or employment agreement is what you’ll use to solidify the basic understanding of the relationship. We don’t recommend both; this is an either/or situation.

The employee handbook is the document that contains alllll the important information your employees need. This includes legally required policies and notices, like your anti-harassment policy, as well as internal policies, such as how you handle mandatory paid sick days. Pro tip: this document is usually very long (30-40ish pages) and is pretty hefty to review; in our experience, it’s usually cheaper to have your attorney draft from scratch rather than filling in possible holes! So before you start, ask your attorney for a quote on their handbook.

The non-disclosure agreement, or “NDA” as you might hear it referred to, is a document that outlines confidentiality requirements for your organization. Other information you might find in an NDA is conflict of interest policy information and work product assignment language. Depending on your industry, this could be a great, protective document for you.

An arbitration agreement is also a great idea. An arbitration agreement is basically an agreement between you and your employees to resolve any differences in front of a private arbitrator (usually a lawyer, judge, or other expert professional) rather than in a lawsuit in civil court. During arbitration, the arbitrator reviews evidence, listens to the parties in dispute, and then makes a decision, which can be binding just like the decision in a civil court would be. However, the arbitration process is less formal than a courtroom hearing or trial, can often be speedier, and is usually less expensive, which makes it an appealing option for employers.

And wouldn’t you know it, we actually offer all of these documents as a bundle, so if you need help creating these, ask us about our Employee Onboarding Package!

8. Execute the Proper Legal Documentation

We covered internal documentation, so it’s only natural to move on to the documentation you’re required to have to satisfy state and federal requirements. There are three main documents you should have on your radar: the I-9, the W-4, and the DE-34.

The I-9 should be filled out within three (3) days of hire of each employee. This is a federal document used to verify employment eligibility to work in the United States. You don’t need to submit this anywhere, just keep it in your records. Employers must keep the I-9 form in their files for three (3) years, or one (1) year after the date of employee’s termination (whichever is later) and make it available for inspection by officials of Immigration and Customs Enforcement (ICE); in other words, you’ll never hold on to this document for less than three (3) years. Your payroll provider may provide the form to your employee, but if they don’t (and you don’t want to assume, you should check!), you can download the I-9 form here.

The W-4 is a tax form. This form tells you, the employer, the allowances the employee claims for tax purposes, which enables you to withhold the correct amount of tax from each employee’s paychecks. Again, check with your payroll provider; they may provide this form to your employees. If not, you can download the form here.

The DE-34 is a California-specific form that is used to report a new hire to the EDD and should be filled out within twenty (20) days. You can download this form here, or if you want to be green, you can report your new employees through the e-Service for Business portal here.

9. Ensure You Have An Illness And Injury Prevention Plan In Place

Per the California Department of Industrial Relations: “In California every employer has a legal obligation to provide and maintain a safe and healthful workplace for employees, according to the California Occupational Safety and Health Act of 1973. As of 1991, a written, effective Injury and Illness Prevention (IIP) Program is required for every California employer.” You heard ‘em.

There are legal requirements as to what each plan needs to entail. You can learn about these requirements here if you’d like to create your own plan. You’ll also want to make sure your plan addresses COVID-19 protocols; read more about that here.

Want us to save you some time? Send us an email for information regarding our templated plan!

10. If You Don’t Have an Employer-Sponsored Retirement Plan in Place, Register for CalSavers

You may have heard of the CalSavers Retirement Savings Program (or “CalSavers”), which was created by state law to ensure all California workers can save for retirement through automatic payroll contributions facilitated from their workplace. Previously, California state law required California employers to participate in CalSavers if they do not sponsor a retirement plan and have 5 or more employees. However, as of August 26, 2022 this law has changed in a huge way! California employers are now subject to CalSavers if they have at least one eligible employee and that satisfies the requirements to establish or participate in a payroll deposit retirement savings arrangement.

A couple of caveats:

• You’re not subject to CalSavers if you sponsor your own private retirement plan (like a 401k), but you will still have to file an exemption to show that you’re in compliance!
• Sole proprietorships, self-employed individuals, or other business entities that do not employ any individuals other than the owners of the business are exempt from this; they don’t count as an employee for that “one eligible employee” standard.

Make sure you do your research and have a plan for complying with this new requirement before you bring your first employee on to avoid penalties.

To Wrap Up….

That’s it, you’re an expert now! Okay, maybe not really, but do you at least feel a bit more prepared? We hope so. If you still have lingering questions, feel free to reach out to our team for a free 30-minute consultation at bertie@inbetterwetrust.com. We’ll walk you through your additional questions and see how else we can assist through this exciting time for your organization!