101 gnirih A Comprehensive Guide to Hiring Your First Employee By: Lori Spillane
COPYRIGHT NOTICE A Comprehensive Guide to Hiring Your First Employee by Lori Spilane Published by: Lori Spillane & Company Merrimack, NH 03054 https://www.lorispillane.com Copyright © 2021 Lori Spillane All rights reserved. No portion of this book may be reproduced in any form without the express written permission from the publisher, except as permitted by U.S. copyright law. For permissions contact: [email protected] Cover by: Lori Spillane Photography: Ashley Olsen Photography I'd love to say this e-book was entirely my idea, but alas, it was not. My sister-in-law Jessica Principe gave me the idea for this book after a discussion about hiring her first employee for her subscription box business. Thank you Jess! ISBN: [Ebook ISBN number] (ebook) Lori Spillane AUTHOR | BUSINESS GROWTH STRATEGIST | ENTREPRENEUR
welcome So you're considering hiring your first employee? How exciting is that?! Congratulations! Ok, so I know it can also be entirely overwhelming and downright terrifying. No word of a lie, even the most seasoned entrepreneurs draw a blank the moment it's time to hire a new employee. Yes, even after 10 years of hiring, they still seem to panic. That's why I knew I had to create this e- book; not only to make the process of hiring your first employee less overwhelming and more exciting, but also to help you create a hiring system that you will be able to implement for years to come. So, you're probably wondering who I am and what my background is., so let's go! Lori xoxo WWW.LORISPILLANE.COM
Hi there, I'm Lori Spillane I started my career as a bookkeeper in September of 2011. I soon decided to persue my degree in accounting, and before long, I had a successful accounting business that was bursting at the seams. I still work with some of my very first clients! As the years passed, 2 things became clear... 1- Even the most successful employers were asking the basic questions every time they hired a new employee, no matter how many they'd hired before, and 2- I had this uncanny ability to help businesses create streamlined systems and scale well over 7 figures, allowing the owners to give life to the original reason they started their own business...more free time and financial prosperity. As much as I love my business and my clients, I also love my downtime. I'm incredibly lucky to have two beautiful daughters and a hard-working husband who I adore. I'm an avid flower and vegetable gardener, a monarch butterfly breeder, and a homebody extraordinaire. I've unknowingly perfected my RBF...especially when it starts to get too peopley around me. My long time mentor lovingly nicknamed me OT. I'm the ultimate over thinker (so I can totally relate to you!) Enough about me, though, let's get your first employee hired! @lorispillaneco @lorispillane WWW.LORISPILLANE.COM
07Where the hell should you even ontent start? 08Payroll Services 11Workers Compensation Insurance Requirements 13Employer Requirements Minimum Wage Overtime Requirements Unemployment Interstate Employee Guidance 16Understanding Payroll Taxes & Reporting Requirements Employee Tax Breakdown Employer Tax Breakdown Federal Tax Payments Quarterly Reports Required Reports & Due Dates
22Employee Benefits & Paid Time Off ontent 24At Will Employment & Exceptions 26Let's Hire Your First Employee!! Choosing an Applicant Offer Letter You're Hired - Required Forms 37Website Login Tracker 39Resource Library Recommended Resources State References & Links
WHERE THE HELL SHOULD YOU EVEN START There are a number of things you Don't worry, I'm not going to bore need to know and understand before you with that. Yet. You will need to hiring your first employee. know and understand these doctrines and exceptions, but we'll go The first and one of the most over that later. important is your state's employment requirements and what exceptions Let's talk about the different things your state may or may not hold in you should have in place before you relation to at-will employment. start accepting applications from potential employees. WWW.LORISPILLANE.COM PAGE 7
01 PAYROLL SERVICES 01
Payroll Services There are hundreds, if not thousands of payroll companies out there ready to sell their services to you. So, how do you know which one is best suited for your business? You will need some type of software, unless you want to be stuck hand calculating payroll taxes one by one and then paying and filing the reports to the proper state and federal authorities on time. Trust me, you want a payroll service to do all the tedious tasks for you. There will be a few different options Then there's a full-service option. This within the services themselves. There option, while the most expensive, is also will be a basic option which will be the the most inclusive. Full service options most affordable. While the service will will not only calculate and withhold the calculate and withhold the proper taxes for you, they will deduct them and amount of taxes for you, you as the pay them to the proper authorities as employer are responsible for paying well as file the proper reports for you. them to the proper state and federal They will also produce W-2's at the authorities on time. You will also be beginning of the following year. Some responsible for filing the quarterly and companies offer paper check delivery annual reports and produce W-2's for to your office while others will create your employees by January 31st of the the check, but you have to print it. You following year. get to decide what is most important and worth the investment. WWW.LORISPILLANE.COM PAGE 9
Recommended Payroll Services (I DO NOT RECEIVE ANY BENEFIT FOR RECOMMENDING THESE SERVICES. THEY ARE JUST THE ONES I HAVE FOUND TO BE THE MOST USER FRIENDLY AND COMPREHENSIVE) INTUIT/QUICKBOOKS ONLINE PAYROLL This one is one of my top choices due to both user friendliness as well as the seamless integration with QuickBooks Online accounting software (duh). They also offer workers compensation insurance based on each payroll. It's automatically calculated & deducted from your account each time you run a payroll. My only gripe with their services has been an issue with displaying earned PTO (paid time off) on employee paystubs (the were still tracked properly within the software though). GUSTO Gusto by far wins the user friendliness award. It is not only incredibly straight forward and simple, It has the full capabilities that Intuit payroll as well. However, they do not mail paper checks to the office or to employees, and they're a fairly new service, so their customer service is lack-luster at best. ADP This one wins the award for all-inclusiveness. Not only do they cover ALL of your payroll needs, but they also offer extensive HR options as well. The have partnerships with insurance companies to offer workers compensation and liability insurance. However, they are one of the more pricey options available. WWW.LORISPILLANE.COM PAGE 10
WORKERS hapter tw COMPENSATION Workers compensation insurance is insurance that covers your employees should a work-related injury or illness take place. It covers both the medical care of the employee along with lost wages. Different states have varying requirements as to when employers are required to carry a policy. The next page provides a quick overview of each state's minimum requirements for employers to carry a policy. Each state's name is linked to the corresponding State's Department of Labor Workers Compensation for your convenience. *Please note that this is not an extensive list. Please refer to your state's website for detailed information regarding required policy.
State Employee Minimum State Employee Minimum Alabama 4 Montana 1 Alaska 1 Nebraska 1 Arizona 1 Nevada 1 Arkansas 3 New Hampshire 1 California 1 New Jersey 1 Colorado 1 New Mexico 3 Connecticut 1 New York 1 Deleware 1 North Carolina 3 District of Columbia 1 North Dakota state fund Florida 4 state fund Georgia 3 Ohio 1 Hawaii 1 Oklahoma 1 Idaho 1 1 Illinois 1 Oregon 1 Indiana 1 Pennsylvania 4 Iowa 1 Rhode Island 1 Kansas 1 South Carolina 5 Kentucky 1 South Dakota **see below Louisiana 1 1 Maine 1 Tennessee 1 Maryland 1 Texas 3 Massachussetts 1 Utah state fund Michigan *See Below ***1 Minnesota Vermont ****see below Mississippi 1 Virgina state fund Missouri Washington 5 West Virginia Wisconsin 5 Wyoming Notes *Michigan -3 or more employees at any one time, or employs one or more workers for 35 or more hours per week for 13 or more weeks during preceding 52 weeks **Texas -Usually not required, unless in construction or government work ***West Virginia-1 employee, but with some Exceptions ****Wisconsin - If you have 3 or more employees you must get insurance immediately. If you have 1 or more employees who have been paid $500 or more in a calendar quarter, you must have insurance by the 10th day of the first month of the following quarter. If the employee lives in a state with a State Fund, the state requires withholding and payment of workers compensation with regular tax payments. The information above was sourced from Gusto and is not a replacement for legal advice or referencing your state's website for updated information and requirements WWW.LORISPILLANE.COM PAGE 12
chapter 03EMPLOYER REQUIREMENTS Now that you're joining the big leagues and becoming an employer, there are some additional requirements you may need to be aware of. You will need to be sure to register with your state and local authorities as an employer. Often times you will be required to set up an account with your state, county and possibly your local Department(s) of Labor. This will be where you will go to file your reports and pay your taxes and fees electronically if you are not using a full service payroll service to do this for you. The References page has links to each state's website for your convenience (Refer to page 39) .
Minimum Wage As an employer, you are expected to stay on top of local and federal labor laws. Minimum wage is one of these. While the federal minimum wage is currently set at $7.25 (as of the time of this publishing), separate states may have increased that rate. Please refer to this article to see what your state's minimum wage is and any respective rules and regulations around it. Overtime Requirements When it comes to overtime, there are specific It is one of the most common misconceptions that I requirements you must follow. The have run into. Employers do not pay the actual Department of Labor has set forth the FLSA unemployment wages of their employees. Each (Fair Labor Standards Act) which states that, time you run a payroll, there are state fees and unless an employee is considered exempt, the taxes that the employer is responsible for paying. employer Is required to pay one and a half One of these is referred to as U.I. or SUI (soo-wee). times an employee's standard hourly wage for These are just acronyms for Unemployment any hours worked over 40 In a standard work Insurance or State Unemployment Insurance. week (7 consecutive 24 hour periods). Refer to the Department of Labor website for Each payroll, you as the employer pay a very tiny additional details. percentage of the total payroll in to your state. That helps fund the state unemployment fund used to Understanding pay unemployment wages for those that qualify. If Unemployment someone quits or you fire them, nothing changes for you. If I had a penny for every time an employer panicked when they had to fire an employee That said, if you are a serial fire-er (yes, another or an employee quit and they worried about made up word. I need my own dictionary don't I?), how they were going to pay unemployment in or you otherwise have a revolving door of addition to the wages of their new hire...I'd be employees, your insurance rate could fluctuate and rich AF. increase. However, there is a cap to the percentage a state can increase it to. WWW.LORISPILLANE.COM PAGE 14
Interstate Employee Great things don't Guidance come from comfort Another really important thing that zones. Hire the employers need to understand is what your employee. Take the responsibilities are when hiring from out of step. Do the thing. your home state. If your business is based in New Hampshire, and you hire someone from Massachusetts to work for you at your NH location, you will be required to create an employer account with the State of Massachusetts as an out of state business who employees a MA resident. Employees will be subject to MA state imposed income taxes despite working in NH. If a NH resident works in MA, they also are taxed a MA income tax for any income earned while working in a MA office. However, if they are working entirely remotely (covid-19 exclusions apply), then different laws may apply. This is where you would want to contact your employee's state department of labor or Secretary of State, or refer to their state's website for additional guidance. WWW.LORISPILLANE.COM PAGE 15
04 UNDERSTANDING PAYROLL TAXES & REPORTING REQUIREMENTS 04
Here's The Dirt Employer taxes are taxes that employers pay out of their profits for having There are 2 categories of withholdings employees. when running payroll for employees. Garnishments are withholdings from an 1) Employee Taxes employee's wages set forth by the court. 2) Employer Taxes Child Support and Alimony are both considered garnishments. Employees may also have garnishments and/or additional withholdings. Then Additional Withholdings are also deducted there's contributions. from an employee's wages. This is an optional amount that will help reduce the What the what?! Let's break this down into, amount they owe in taxes when Uncle Sam let's say, English. comes-a-knockin on April 15th each year. Great. Ok. So! Here's what each of those Contributions are employer based. If you means. Employee taxes are the amount offer benefits such as health insurance, life each employee has withheld from their insurance, 401k etc. and you choose to pay check by their employer to be paid to local, any amount towards an employee's policy, state and federal departments. It is money that is considered a contribution. that would have been part of their wages had they not owed them. We'll cover employee benefits later. EMPLOYEE/EMPLOYER TAXES GARNISHMENTS A percentage set forth by the local, state and Court ordered withholdings such as child federal governments that is owed by both the support, alimony, back taxes etc. employee and employer CONTRIBUTIONS ADDITIONAL WITHHOLDINGS Employer funds contributed towards An optional amount chosen by the employee employee benefits such as health insurance, to reduce their overall tax liability in April. dental insurance and 401k's. WWW.LORISPILLANE.COM PAGE 17
Employee Tax Breakdown Employers are responsible for withholding Medicare - The rate is 1.45% of gross wages federal income tax, social security, for the employee. It is calculated the same medicare, and state & local taxes (where as social security but multiply by 1.45% (or applicable) from their employees' 0.0145). paychecks and paying them to the proper authorities. Social Security and Medicare State & Local Tax - Refer to your state's are often referred to as FICA. Here is a website (linked in references) to determine breakdown of each tax and the percentages if you need to be withholding a state to withhold: and/or local tax, and if so, how much it is. Federal Income Tax - A tax from the federal Remember, if you play government, that is collected by the local small, you stay small. city or state entities. This tax fluctuates based on your gross annual income. Use this calculator from the IRS to help you determine an estimate of what to withhold. *Not all states in the U.S. have an income tax. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming all do not impose an Income Tax on its residents. Social Security - The rate is 6.2% of gross wages for the employee. Multiply their pre- tax pay each pay period by 6.2% (or .062). That's the amount you need to withhold from their check and pay in for them. WWW.LORISPILLANE.COM PAGE 18
Employer Tax Breakdown Great, ok. So we've covered employee taxes. State Unemployment - Each state imposes an Those don't have a financial impact on your unemployment tax which is in addition to the business other than the time it takes to federal unemployment tax. Each state not withhold and pay the taxes and file the only has different rates, but also assesses reports. rates differently across employers. Refer to your state's website for more information. So, what are YOU as the employer financially (See page 39 for your state's page). responsible for? You also are required to pay a portion of social security and medicare Each state has their own requirements for (FICA), as well as Federal Unemployment Tax payment of taxes. Some accept paper checks (FUTA) , State Unemployment Tax (SUTA or while others require electronic payments. SUI) and state administrative fees. Refer to your state's website on the resources page for more information regarding Social Security - Each employer is responsible requirements. for contributing the same percentage as the employee to the social security fund. That is 6.2% of each employee's gross wages. Medicare - Each employer is also responsible for contributing the same percentage as the employee to the medicare fund. That is 1.45% of each employee's gross wages. FUTA - This one is a bit different. The rate is 6% on the first $7,000 of gross wages an employee earns. However, most states receive a credit of 5.4% of that, which in turn reduces the amount to 0.6%. The percentage drops to zero after wages surpass $7,000 in a calendar year. WWW.LORISPILLANE.COM PAGE 19
Federal Tax Payments When it comes to federal payroll taxes, you must file them either monthly or semi- monthly. The IRS will determine which frequency you will be required to pay by. You are required by the IRS to pay electronically using the EFTPS system. While you make payments through the EFTPS system monthly or semi-monthly, you are required to report these payments only on a quarterly basis using the 941 or an annual basis using form 944. The IRS determines which form you will use and how frequently you need to report. Quarterly Reports In addition to the federal tax payments and reports, you will also be required to report to your state on a quarterly basis as well. Where local city and state taxes apply, you will need to make payments on a quarterly, monthly or semi-monthly basis. See page 39 for the link to your state's page. *Form 941 and Form 944 are included at the end of this book for your reference. PAGE 20 WWW.LORISPILLANE.COM
In any given moment we have two options: to step forward into growth or step back into safety. Abraham Maslow Required Reports and Due Dates Federal Reports Due Date 941 - payroll taxes April 30 941 - payroll taxes July 31 941 - payroll taxes October 31 941 - payroll taxes January 31 January 31 W-2's January 31 W-3 January 31 940 - FUTA Note: These may vary based on the requirements set forth by the IRS. These dates and forms are updated annually and are subject to change. There are additional forms and reports you may be subject to file to the state and federal governments. Please contact your CPA or you may DM me for additional guidance. WWW.LORISPILLANE.COM PAGE 21
chapter five EMPLOYEE BENEFITS & PAID TIME OFF Aside from the requirements previously discussed, employers may be required to offer additional benefits as well. If you are a business of at least 50 full time or full time equivalent employees, you are required to provide family/medical leave as well as health insurance which is mandated by the Affordable Care Act. Family Medical Leave - All public employees and employees of private employers with 50 or more employees are eligible for 12 weeks of unpaid leave which keeps their wage along with their position or an equivalent position protected as long as the reason for the leave qualifies. Each employee is eligible for up to 12 weeks during a 12 month period. 26 weeks of unpaid, job protected leave is offered to caregivers of military personnel in any given 12 month period as well. Some states and local entities may have additional requirements, so be sure to check with your local governing body. All other benefits are at the discretion of the employer. Culture matters. How management chooses to treat its people impacts people for better or for worse.
Paid Time Off Employers are able to offer paid time off (PTO) for their employees at their own discretion. This includes but is not limited to holiday pay, sick pay, vacation time, personal days etc. Hourly vs. Salary As an employer, you can choose whether to pay your employees an hourly rate or a salary. Should you choose an hourly rate, you will need to implement a time tracking system that allows a manager to approve the hours before running payroll. Hourly employees are required to have the opportunity to take a 30 minute un-paid lunch break after 5 straight hours of work. For your local state requrements, please refer to the following handbook. Payday on a Holiday If a payday falls on a bank holiday, employers are required to submit payroll In a timely manner which consists of payment being received by employees on the business day BEFORE the holiday. Under no circumstances should the employee not receive their pay after the holiday. If a paper check is issued before the holiday but the employee does not retrieve the check until after the holiday, that Is acceptable so long as the check Itself was made available previous to the holiday. WWW.LORISPILLANE.COM PAGE 23
06AT-WILL EMPLOYMENT & EXCEPTIONS All states in the U.S. except Montana The first and most accepted exception is recognize at-will employment practices. called the Public Policy Exception. If your That means that employers can fire an state practices this exception, you are employee with or without justification or prohibited from firing an employee for notice. That is, of course, as long as it is not performing a legal act or refusing to illegal (discrimination of age, gender, race, perform a legal act on behalf of the religion etc). employer. There are 3 different exceptions to this An example would be, you cannot fire an practice, and different states recognized employee for voting. See page (38) for different exceptions. Some states don't more information. recognize any. So what are the 3 potential exceptions to at-will employment? WWW.LORISPILLANE.COM PAGE 24
At-will employment PAGE 25 exceptions The next exception is called the Implied Contract Exception. It basically states that any verbal or written promises made between an employer and employee, including within a handbook, are considered a contract. Therefore, the employer requires just cause to fire the employee on any of these bases. The 3rd exception is called Good Faith & Fair Dealing Exception. Truly, the name of this one says it all. States that adopt this exception expect that employers will treat all employees fairly when making the decision to fire them. Each state has some variation of (or none at all) of these exceptions. Refer to page 39 for your state's page to learn more. WWW.LORISPILLANE.COM
LET'S HIRE YOUR hapter seve FIRST EMPLOYEE!! I know, I know...FINALLY! All that boring, mind numbing stuff is out of the way and we can finally get to the exciting part. You're about to hire your first employee! What forms do you need? What reports are you required to file? How do you start paying them? I'm going to go ahead and make a general assumption that 99.8% of you will be using some type of at least basic payroll service to help along the process. So the following instructions will be based on that assumption. If you're part of that 0.02%...feel free to call me an ass for making the assumption.
Holy cannoli, this is really happening! When you're creating your application, be Soooo....now what? sure to keep in mind your business values. Think about what type of atmosphere you'd The first step is to write a detailed job like to provide. How do you expect to be description. Write down everything you treated and how do you expect your plan to have this employee take care of. employees to treat your customers/clients Keep it in a safe place and adjust it as should they come in contact with them? changes arise. I recommend including a copy of this with their offer letter should Consider requesting a resume from each you choose to hire them. applicant. This will give you another viewpoint of their history and personality The next step is to create an application. before even speaking with them. Making it as specific to your business as possible is crucial to finding the right Once you've accepted enough applications, applicants to interview. choose which ones you'd like to interview. WWW.LORISPILLANE.COM PAGE 27
Choosing an Applicant So you've whittled down the applicant pool to a few impressive options. The next step after interviewing each is to decide which one is the best fit. I want to caution you here. The best fit will not always be the person with the most experience or the most impressive resume. It will also not always be the person with the most in common with you or the best personality. Remember, this is not a personal relationship. It is a professional one and I urge you to remember this throughout. Otherwise, it could be a very bumpy ride. Offer Letter Once you've settled on the applicant you'd like to hire, your next step is to give them an offer letter. The letter should include the position they're hired for, the rate you are willing to pay them, their start date, any benefits included, and a date by which you would like them to notify you of acceptance or denial of the position. I also recommend including a job description and any other pertinent information you are able to provide. I have included a sample offer letter that you are welcome to customize and use. WWW.LORISPILLANE.COM PAGE 28
You're Hired Acquiring the right talent is the most Congratulations!!! You've officially just important key to hired your first employee! growth . Now what? Mark Benioff Before the employee starts, you will need to CEO Salesforce provide them with a number of items. PAGE 29 The first are the legal forms you need them to fill out in order to run payroll. W4 I9 Direct Deposit form (should you choose to offer it) In addition to these forms, if you will be offering benefits to your employee, you will need to collect the information required to add them to your policies. Lastly, you will need to provide them with a copy of the employee handbook with a signature receipt form. You will need to collect this paperwork before the employee starts. Be a stickler here...they do not start without all these forms completed and in your hands. I have included a basic handbook which you may customize and use for your business. WWW.LORISPILLANE.COM
THIS IS THE SIGN YOU'RE WAITING FOR
NH WATERCARE CORP. estimonia Lori is amazing to work with! Especially when it comes to management, employee handbooks, and hiring processes. Lori is great to turn to when overwhelmed with what you should or should not be doing, and has saved us so much time with her knowledge.
Website Login Tracker USE THIS TO KEEP TRACK OF ALL THE DIFFERENT ONLINE ACCOUNTS YOU HAVE AND THE USERNAME AND PASSWORDS YOU SET UP. THAT WAY, WHEN IT COMES TIME TO ADD AN EMPLOYEE, IT'S QUICK AND EASY TO FIND. Use Website link User name Password WWW.LORISPILLANE.COM PAGE 32
RESOURCE LIBRARY 01AT-WILL EMPLOYMENT 02MINIMUM WAGE EXCEPTIONS REQUIREMENTS BY STATE Find out what exceptions your state Find out what your state mandated recognizes. minimum-wage is. https://www.bls.gov/opub/mlr/20 https://www.paycor.com/resource 01/01/art1full.pdf -center/articles/minimum-wage- by-state/ 03WORKERS COMPENSATION 04INTERNAL REVENUE STATE REQUIREMENTS SERVICE Check out your local and state The IRS should be the only federal requirements for workers website you refer to for tax related compensation insurance here. information. https://gusto.com/resources https://www.irs.gov 05EMPLOYEE HANDBOOK 06BUSINESS GROWTH LAWS CONSULTING This page is a great resource for Find all the different types of employment handbook laws. consulting and packages I offer to help your business grow and scale. https://www.employmentlawhandbo ok.com/ https://www.loirspillane.com/ WWW.LORISPILLANE.COM PAGE 33
Alabama Montana ecnerefer etat Alaska North Carolina Arizona North Dakota Arkansas California Nebraska Colorado Nevada Connecticut New Hampshire District of Columbia New Jersey Deleware New Mexico Florida New York Georgia Hawaii Ohio Iowa Oklahoma Idaho Illinois Oregon Indiana Pennsylvania Kansas Rhode Island Kentucky South Carolina Louisiana South Dakota Massachusetts Maryland Tennessee Maine Texas Michigan Utah Minnesota Missouri Vermont Mississippi Virginia Washington West Virginia Wisconsin Wyoming
Learn More Now
Learn More Now
Learn More Now
Learn More Now
Learn More Now
Learn More Now
Learn More Now
Search
