Hiring Your First Employee
Hiring paid employees requires that the organization follow several laws and regulations. Failure to do so can have serious consequences, so it is important to make sure your organization is appropriately prepared. While not a comprehensive list, before hiring the first paid employee make sure to consider the following:
- Confirm whether or not the organization has adequate funds to pay the individual on an ongoing basis.
- Decide if the organization can offer employment benefits.
- Create a basic personnel handbook to address employment classifications, benefits, office work hours and schedule, compensation, annual reviews, and other policies.
- Register with the Minnesota Unemployment Insurance Program. This is required under Minnesota state law. More information is available from the Minnesota Department of Employment and Economic Development’s Unemployment Insurance Program.
- Obtain appropriate workers’ compensation insurance. All employers are required by Minnesota law to either purchase workers’ compensation insurance to provide benefits to their employees for work-related injuries or obtain approval from the Minnesota Department of Commerce permitting self-insurance. For more information, visit the Minnesota Department of Labor and Industry.
- Put a payroll system in place. While not required, small organizations will greatly benefit from hiring a third-party administrator for payroll services, which include withholding and payment of payroll taxes and filing of required tax forms with the IRS. Failure to file and pay withheld payroll taxes can result in significant penalties, including seizure of board member assets if the organization is unable to pay.
- Determine if the position would be considered a paid employee or an independent contractor. This determination is decided by guidelines established by state and federal regulatory agencies, including the Internal Revenue Service, and is not determined by what classification best suits the organization.
- Determine whether the position is exempt or non-exempt. More information on wage and hour division is available from the United States Department of Labor.
- Create a clearly defined job description for the available position.
- Have all paid employees complete a W-4 to report tax withholdings to the IRS and the Department of Homeland Security’s Form I-9 to demonstrate eligibility to work in the United States.
- Providing a letter of hire to each paid employee which includes start date, job title, employee classifications, work schedule, salary, and whom they report to.
- Stay informed of frequent changes to employment law.