What legal precautions should a small business take before hiring employees?
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As a small business owner, hiring employees is a major milestone in the growth of your company. However, there are several legal precautions that should be taken before hiring employees to ensure that your business is in compliance with current laws and regulations.
Legal Precautions for Hiring Employees
- Obtain an Employer Identification Number (EIN): Before hiring employees, a small business must obtain an EIN from the Internal Revenue Service (IRS). An EIN is a unique nine-digit number that is used to identify your business and is required for tax and payroll purposes.
- Verify employment eligibility: It is important to verify the eligibility of all employees for employment in the United States. This can be done by completing Form I-9, which verifies a new employee's identity and eligibility to work in the United States.
- Comply with wage and hour laws: Small businesses need to abide by wage and hour laws, which includes paying employees minimum wage, providing proper overtime compensation, and ensuring proper record-keeping. Also, make sure to properly classify employees as exempt or non-exempt according to the Fair Labor Standards Act (FLSA).
- Develop clear job descriptions: Small businesses should develop clear and accurate job descriptions that outline the duties, responsibilities, and requirements for each position. This provides guidance for both the employer and the employee, and helps to avoid misunderstandings.
- Establish policies and procedures: Small businesses should establish policies and procedures that address issues such as vacation time, sick leave, time off, and disciplinary actions. These policies should be communicated to all employees and incorporated into employee handbooks.
- Obtain proper insurance coverage: Small businesses should make sure they have the proper insurance coverage to protect their business from any employee-related claims or lawsuits. This includes workers' compensation, liability, and employment practices liability insurance.
In addition to the precautions listed above, small businesses should also consult with an attorney to ensure that they are in compliance with all state and federal employment laws. This is especially important if there are any unique aspects to your business that may require additional legal attention.
