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Updated: March 27th, 2020
Hiring your first employee is a huge milestone, but it can be an intimidating process. You will be expected to know and comply with a variety of laws and regulations. A good way to ensure you’re covering all your employment law bases is to remember that for almost every federal requirement, there will be a state requirement (and even sometimes a local (i.e., county or city-level) requirement).
The four main areas can be broken into: (1) Employee Verification and Reporting, (2) Wages and Taxes, (3) Required Benefits, and (4) Compliance.
Here is a basic employment law checklist to help you navigate these requirements:
A good way to stay organized is to create a good recordkeeping system and Employee Handbook. The IRS requires that you keep employment tax records for at least four years. While good recordkeeping will save you a lot of headaches if you get audited, it can also provide a great business advantage as well. Good recordkeeping will help you monitor the progress of your business, identify sources of income and losses, and make filing taxes (and getting deductions) a lot easier. On those same lines, an employee handbook will help you implement policies that will make your business operate more effectively and protect you from liability.
Louis DeNicola is the president of LD Money Media LLC and an experienced finance writer who specializes in credit, personal finance, and small business finance. Within the small business sphere, he helps business owners understand their financing options, cash flow management, business credit, and taxes. In addition to Funding Circle, you can find his work on BlueVine, Credit Karma, Experian, Wirecutter, and Lending Tree.