When you are hiring an employee for the first time, or the first time in a while, it is especially important that you prepare ahead of time, to help comply with applicable laws and regulations and to end up with the best fit for the job. Here’s a checklist you can use to help.
KEY POINTSWhen hiring an employee:
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Before you post the job opening
Ensure you have your EINs.
If you haven’t done so already, you will need to apply for a federal and state (and in some cases local) employer identification number (EIN) with the appropriate tax agency. The EIN will be used to manage payroll taxes and other employer obligations. Understanding your tax obligations is also key. If you are hiring a family member, your tax obligations can differ depending on the type of familial relationship and your business structure. Consult your tax advisor for details.
Understand workers’ compensation requirements.
Most states require employers to have workers' compensation insurance. Currently, Texas is the only state that doesn't require private employers to carry it. Some states exempt very small employers, or have specific rules regarding coverage. Keep in mind that even if you are hiring a family member, your state may still require workers’ compensation coverage for that employee. Check your state law for details.
Review unemployment insurance obligations.
Most employers are required to pay both federal and state taxes to fund unemployment insurance programs. Employers are subject to Federal Unemployment Tax Act (FUTA) tax on the wages they pay employees who aren't household or agricultural employees. State unemployment tax laws may differ on who is covered. For example, certain family members may be excluded from state coverage while agricultural workers may be covered. Check your state law for details.
Decide how you plan to track hours of work.
Employers must keep accurate records of non-exempt employees' work hours to comply with federal, state and local laws. Employers may choose their preferred timekeeping method (such as time clocks, timesheets or badge readers), provided it is complete and accurate. It is a best practice to track employees' time to the minute worked.
Write a job description.
Job descriptions can help you identify the essential functions of a position and the qualifications needed for a role. They can also help you set clear expectations with employees, evaluate performance, make compensation decisions, identify training needs, handle requests for reasonable accommodations, and make exempt vs. non-exempt classification decisions. As such, it is a best practice to maintain a written job description for each position within your organization.
Determine the compensation package that you’ll offer.
Review your budget, any internal pay data, and salary surveys to compare pay data of other businesses similar in size, industry and location, and develop a suitable pay range for the position. Make sure the pay range meets or exceeds the applicable minimum wage (for non-exempt positions) or federal and state minimum salary requirements (for exempt positions).
Keep in mind that some state and local jurisdictions require job postings to include the pay range for the position and/or require employers to disclose the pay range at a certain point in the hiring process. Check your state and local laws for details.
If your company is unable to offer a high base salary, consider a mix of direct and indirect compensation. Direct compensation includes wages, salaries, commissions, and bonuses. Indirect compensation may include health insurance, paid time off, retirement plans, and commuter assistance.
Federal, state and/or local laws may require you to provide certain benefits in addition to workers’ compensation and unemployment insurance. This may include, but isn’t limited to, sick leave, family and medical leave, a retirement plan, and health insurance (if you have 50 or more employees). Check applicable laws for details.
Choose a pay frequency that complies with state law.
When thinking about pay frequency, you should understand pay frequency laws and how the laws may impact your business. While federal law doesn’t specifically address how often wages must be paid to an employee, most states have pay frequency laws detailing such requirements.
Outline your vetting process.
At a minimum, you will want to use an application form, prepare a list of interview questions, and determine standardized metrics to rate candidates based on job-related information.
Some employers perform pre-employment tests to evaluate candidates. Many employers conduct reference checks and background checks after they have extended a conditional job offer.
Whatever vetting practices you adopt, they must comply with applicable laws. For example, various federal, state and local laws restrict the information that employers can seek and use to make hiring decisions.
The vetting process should also be applied consistently. In other words, each candidate who makes it to that step of the hiring process for the job should be subjected to the same vetting procedures.
Draft effective policies.
Some laws require employers to provide information to employees via a written policy. Additionally, several policies are considered must-haves (even if you plan to hire just one employee). Policies are also important for communicating company expectations and requirements.
Create an effective onboarding process.
A new hire's first days, weeks and months establish the foundation for the rest of the employment relationship. An effective onboarding process can help make this time period more productive.
Develop procedures for recordkeeping.
Many federal, state and local laws require employers to retain certain employee records. These laws typically dictate which records employers must retain, for how long, and who should have access to those records. Make sure you have a written recordkeeping plan that complies with these rules.
Gather new hire notices and forms that you’ll need.
Employers must comply with numerous paperwork and notice requirements when hiring a new employee, including family members. In addition to new-hire notices, many federal, state and local laws require employers to display posters prominently in the workplace.
Once you are ready to post the job opening
Tap into multiple recruiting methods.
Consider a wide variety of recruiting methods that fit your budget, such as online job boards, posting jobs on your website and social media pages, or asking for employee referrals. If you’re looking to fill a highly specialized role, consider using a professional recruiting firm or reach out to industry organizations.
Use inclusive language.
Ensure that job advertisements use language that encourages all qualified workers to apply and avoid keywords or phrases that could discourage them from applying. For example, if the position has specific physical demands, focus on the task that needs to be done, rather than how it's done (such as, the position requires "moving" 50 pounds, instead of "lifting" 50 pounds). Employees with disabilities may be able to perform the essential functions of the job with an accommodation, such as using a cart, dolly, or mobility aid.
Comply with pay disclosure requirements (if applicable).
As mentioned above, several states and local jurisdictions require private sector employers to disclose the pay range for a position to an applicant or employee. Under some of these laws, employers must include salary range information in any job posting. Check your state and local laws for details.
Ensure candidates complete an application form.
An employment application provides your company with an opportunity to make standardized inquiries into an applicant's work and educational background. The standardized collection of data can make it easier to identify which candidates meet the minimum qualifications for the job and to fairly compare candidates to one another.
Even if a candidate has provided a resume, they should also be required to submit an employment application, as the application form generally elicits information that applicants often exclude from their resumes. Check the laws that apply to your business to confirm your employment application does not ask for information that may be considered off-limits, such as pay history or information that may elicit whether the applicant is a member of a protected class.
Screen applications and resumes.
Using the job qualifications that you've identified in the job description, review resumes and applications to compile your list of applicants you would like to invite for an interview. Many employers select three to five candidates for interviews. However, some employers will conduct phone interviews among a larger group of candidates before narrowing the field for in-person interviews.
Conduct interviews.
Prior to the interview, provide the candidate with directions to the worksite, the name(s) of the interviewer(s), a list of any materials they are expected to bring, and the estimated duration of the interview.
During the interview, ensure that you ask about a candidate's experience handling specific work challenges that they would likely face in the new job and other job-related questions. Remember, interviews must be conducted carefully to adhere to federal, state and local laws. For instance, employers should avoid interview questions that are expressly prohibited by law or otherwise considered off-limits, including inquiries that may directly or indirectly reveal an applicant is a member of a protected group.
Select a candidate and extend a job offer.
Using your candidate-rating metrics, select the candidate you believe is the best fit for the position and extend a conditional offer in writing. In the job offer, include the job title, supervisor, location, work hours, starting pay, and an abbreviated summary of benefits. Additionally, clearly state the conditional nature of the offer and identify any contingencies that could lead to withdrawal, such as results of a background check, drug testing, references, and/or the individual's inability to demonstrate work eligibility. Also make clear that the offer letter shouldn’t be considered an employment contract.
Perform background & reference checks (if applicable).
After obtaining authorization from the candidate who accepts your offer, conduct background checks and reference checks in accordance with applicable laws.
Send rejection letters.
Once you have disqualified a candidate, inform them of your decision. This helps maintain goodwill with applicants and is especially important if your needs change and you want to tap into former applicants for future openings.
Follow your onboarding process.
After any post-offer screening is completed, the process of welcoming and introducing the new hire should begin. Send an email or letter confirming their start date, expressing your excitement that they'll be joining your organization, and letting them know that you're available to answer any questions they may have.
You may also want to create a list of any training they will need on workplace processes and procedures to help acclimate them once they start working. Also, be sure to procure the necessary equipment, set up their workspace, and ensure that IT systems are ready for their first day of work.
Conclusion
Whether your business is growing and you’re hiring for the first time or you’re increasing staff size to expand operations, you’ll want to develop an effective hiring process that complies with federal, state and local laws and meets your business needs.
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