Human resources is a growing industry primarily because of the complicated federal, state, and local employment laws applicable to all businesses. From tax withholding and worker’s compensation insurance to non-discriminant hiring practices and immigration considerations, the hiring process can quickly overwhelm a business. The following specifications highlight the primary employment law considerations applicable to any growing companies. Although this list will be helpful, you should contact a qualified employment law attorney in your local jurisdiction as soon as you identify the need to hire employees, as there are even laws that apply to the advertising process.
Companies consisting only of contractors and non-employee owners are not subject to the same health, disability, unemployment, liability, and worker’s compensation insurance requirements applicable to “employers.” While carrying liability insurance, such as renters or property insurance, is always a best practice and may be required by local law, federal and state law requires employers to carry the following insurance:
- Employee Health Insurance – The Affordable Care Act (“ACA”) requires “large employers,” those with more than 50 employees, to provide all full-time employees with health insurance. This insurance must cover approximately 60% of medical services, and employers cannot require employees to pay more than 9.86% of their household income towards the policy. Many companies may not be subject to the ACA, but they may still elect to provide health insurance.
- Worker’s Compensation Insurance – Every state requires employers, even employers with only one employee, to carry worker’s compensation insurance. This insurance covers the medical expenses and lost wages of employees injured while “on the job,” but also prevents your employees from suing you for their injuries.
- Disability/Unemployment Insurance – Some states, such as California, require that employers pay into the state disability and unemployment scheme. This insurance covers employees who are temporarily disabled from work due to a non-work injury. Further, most employers are required to pay into the state unemployment scheme to provide for laid-off employees.
Insurance can be expensive, but at the very least companies must purchase worker’s compensation insurance and register with their respective state’s unemployment and disability schemes.
Tax, Immigration, & Financial Considerations
Many employers are subject to various federal and state immigration, wage, and hour laws, including overtime protections and tax withholding requirements. After hiring an employee, the employer must generally do the following:
- Classify the employee as “exempt” or “nonexempt,” i.e., salaried or hourly,
- Pay the employee the federal/state minimum wage and necessary overtime,
- Determine whether the employee is subject to the Fair Labor Standards Act,
- Complete IRS Form W-4 and any state tax documents for each employee designating his or her tax withholding’s, and
- Complete the I-9 Immigration form.
These requirements are not dependent on the size of the business or number of employees and must be done for every new hire. Further, federal and state laws require almost all employers to post certain employee notices, such as a recitation of employee wage rights, in a conspicuous area of the workspace.
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