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What startup founders need to know about new hire paperwork

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The employee recruitment process doesn’t end with an accepted job offer—a slew of new hire paperwork comes next. Your startup must file the proper forms to comply with regulations immediately after the hire, and before your new employee gets to work. 

All employees have required federal, state, and local paperwork to complete. You may not have to file or mail in all the forms, but you need to keep them in a place where your employees and representatives of the federal, state, and local bureaus can access them. Setting up a new hire paperwork system can help you navigate this process.

Three steps to take before processing new hire paperwork

There are three steps your company should take before onboarding your first employee. Start with:

1. A secure location for all new hire paperwork

Keep payroll and personnel records in a separate file for each employee, and store records in an area that only authorized staff can access. The U.S. Department of Labor’s Wage and Hour Division offers recordkeeping guidelines. 

Employees should be allowed to view their records upon request. To avoid misplacement or loss, don’t let employees take any documentation from the room. Federal and state auditors have a right to audit the records at any time. Ensure your company’s employee documentation is organized and in place, just in case an audit happens.

2. Employer ID number

Your business must register as an employer with the Internal Revenue Service (IRS) and get an Employer ID Number (EIN). You’ll need an EIN for payroll tax filings, reports, and payments. 

The process is short and straightforward. A founder, owner, principal officer, partner, grantor, or trustor can apply online for an EIN by providing their Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or an Employer Identification Number (EIN).

3. Registration with the IRS Payment System

Once your company has an EIN, register with the IRS Electronic Federal Tax Payment System (EFTPS). The EFTPS system will allow you to submit taxes withheld from employee paychecks.

New hire paperwork checklist for small business owners

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Once you have a secure location for employee documentation, the required IRS registration for payments, and an EIN, you can start gathering the following new hire paperwork for recruits: 

  • Form W-4
  • I-9 form
  • State tax withholding forms
  • Job application form
  • Employee handbook acknowledgment form
  • Direct deposit form
  • State employment agency registrations
  • Benefits forms

Not all paperwork on the checklist may apply to your business. Here’s a closer look at each item.

Form W-4 (mandatory)

All new hires (and current employees who wish to change their withholding amount) must complete the latest version of the W-4 before receiving their first paycheck. The W-4 includes marital status, number of dependents, and additional withholding amounts. 

Your startup will use the information to calculate payroll and the amount of federal income tax withholding from a paycheck. You should not advise an employee on how to fill out the form. They can find help directly from the IRS webpage featuring a withholding calculator.

Current employees may change their W-4 form as often as they like. A couple of reasons an employee may want to update the form is to add a new child to the number of their dependents or adjust their withholding amount to make up for a bonus or significant raise. Employers only have to keep the most recent W-4 on file.

I-9 form (mandatory)

The I-9, or Employment Eligibility Verification, confirms an employee’s eligibility to work in the United States. Besides completing the employment authorization form, the new employee must also provide documentation to prove their identity and work eligibility, such as a U.S. passport, Social Security card, or work visa.

The I-9 does not need to be mailed or filed, but it should be in the employee's file to prove you verified an employee's work eligibility, should immigration visit your business. As your startup grows, you can sign up with the E-Verify system to check on the work eligibility of new hires who may already be in the federal employment database.

State tax withholding forms (mandatory for most states)

The following states do not require tax withholding because there is no state income tax:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

Startups in all other states will need to collect state tax withholding forms from employees. Similar to a W-4, an employee must enter their marital status, dependent information, and the number of allowances they wish to claim to determine the amount of state income tax withheld.

Job application form (recommended)

The job application form contains verifiable information, such as education and the employment history of the new hire. The application should also include an emergency contact section, in case the new employee is injured at work.

Keep a signed job application form on file. Your company’s application should include wording that authorizes you to conduct background checks. Add an attestation for the employee to sign, which is their acknowledgement that they’ve provided true and correct information. Signed releases protect you from any fraudulent claims new employees may have made.

Employee handbook acknowledgment form (recommended)

Providing new hires with an employee handbook (or startup policies and procedures manual) can streamline the onboarding process. Requiring new employees to read the handbook and review standard company procedures saves you time during training. 

Besides saving you time during onboarding, a signed acknowledgement that the new hire read and understood your company’s policies could protect you legally in the future.

Direct deposit form (optional)

Employees may want their paychecks deposited straight into a designated bank account. Have a direct deposit form available so employees can provide the necessary information to take advantage of this option.

Benefits forms (optional)

Your company may offer employee benefits such as: 

If your startup offers any of the above or more, you must keep forms that show employee participation in the programs, even if they decline the benefits. A benefits package organizes and informs employees about the small business benefits you offer.

New hire paperwork tips for founders

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If you have a small or one-person human resources (HR) department, simplifying the new hire process is crucial. Here are some steps you can take to streamline.

Create a new hire package

There are a lot of forms to keep track of in the new hire paperwork checklist . Don’t wait to pull all the documents together on your new employee’s first day. Consider making a binder, booklet, or company package of all the materials you’ll need an employee to complete and sign. 

Include a table of contents page at the start of the booklet that lists the document names and page numbers for all the forms—this way they’re organized in chronological order. Doing so could save your company time and minimize errors from missing documents.

Keep startup forms and handbooks updated

Employee handbooks, your startup’s benefits package, and other HR documents should be ready for new employees to review, fill out, and sign. Assign an HR team member or another employee with the task of reviewing the master documents periodically, notify you of any changes necessary for authorization, and update the documents to keep them current.

Complete all new hire paperwork before anything else

To avoid compliance problems or late filing penalties, have your new employees complete and sign all new hire paperwork on their first workday. Ensure that your company’s designated HR person files or submits the required forms, and creates an employee folder, on the same day as well.

Create a consistent employee recordkeeping system

Decide in advance if you’ll store employee records electronically or in paper form. Either option is acceptable, as long as the documents are accessible and securely stored. Consistency is essential for keeping employee records up-to-date, organized, and compliant. 

Use payroll software to save on time and minimize errors

Payroll software can help automate your new hire process by allowing employees to complete tax-related employment forms online and in the same location that handles your payroll processing. Many online payroll software systems automatically update federal and state forms as they change.

Why a new hire paperwork system is essential

Your startup may have just a few employees right now. But as your small business grows, so will your number of new hires. And when you factor in employee turnover and federal requirements for the records you must keep, it’s easy to see how the process can get overwhelming. A new hire paperwork system can streamline things, so your company can focus on other aspects of onboarding and keep moving forward.

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