You are a small business owner in Tennessee. You just realized you're ready to expand and hire your first employee. Assuming this person will be an employee and is not an independent contractor (we can save that for another discussion), what steps do you need to take?
Obtain an EIN (irs.gov).
Draft a job description.
Visit the TN Department of Labor and Workforce Development Website at https://www.tn.gov/workforce for the following:
Register with the TNLWD.
Review unemployment insurance requirements (See TNLWD Handbook for Employers, available for download).
Report each employee to Tennessee’s new hire reporting agency.
Post required notices.
Ensure you have workers’ compensation insurance if applicable.
Set up a payroll system to withhold taxes. You also need to make sure that your system allows for appropriate recordkeeping to demonstrate how you pay your employees. If you have hourly employees, you need to be tracking their hours worked.
Create an offer letter that sets out the hire date, general job duties, and general terms of employment. Determine if you also want to have an employment contract. Employees at will may not necessarily need an employment contract, but it depends on the context of what they will be doing.
Have each employee fill out a W-4. You will also be filing an IRS Form 940 each year.
Have each employee complete a Form I-9 and conduct E-Verification. The I-9 is a federal requirement, and TN includes the additional requirement of conducting E-Verify. Information on the steps to take is available on TNLWD’s website. There are specific timing requirements here to ensure compliance, and it is all tied to the employee’s “hire date,” so be careful choosing the hire date to make sure you can be compliant. Keep the I-9’s in a separate binder so that you have access to all of them at a single time, and can clear them out when you no longer need them (the greater of 3 years after hire or one year after termination).
Create an employee handbook or, if not a full handbook, general policies and procedures.
Set up personnel files. These would include job applications, employment offers, the W-4, and performance evaluations. Health information should be kept separately from the remainder of the personnel file.
Set up employee benefits. Under the Affordable Care Act, if you have 50 or more employees you must provide insurance to at least 95% of full-time employees. If you have 50 or fewer employees, you are not required to comply with the Employer Shared Responsibility provisions, but you may be eligible for a small business health care tax credit if you do provide health insurance.
This checklist is just the tip of the iceberg. You may want to know more about what a good job description looks like, what are some absolutely necessary employment policies and procedures, or even how often you should be giving performance evaluations (and what goes into those evaluations). If you start off on the right foot, you set yourself up for being able to attract and retain good employees, which increases your bottom line and highly decreases your stress level down the line. I look forward to working with you as you work through these questions.
Emily Hunter Plotkin is an employment law attorney and mediator based in Tennessee. Emily welcomes inquiries about her services, which include counsel on workplace rights and obligations and manager and employee training on legal compliance, employee management, and workplace conduct.