Hiring your first employee as a new business owner is both an exciting and frightening experience. Not only do you have a person relying on you to pay them so they can provide for their family while balancing your business’s cash flow needs, but there is also a lot of paperwork and reporting requirements to be aware of.
Here are the 8 steps a business will need to make when hiring their first employee in Pennsylvania.
Steps To Hiring Your First Employee In Pennsylvania
Step 1: Register as an Employer
Employers will first need a Federal Employer Identification Number (FEIN) – Form SS-4 from the Internal Revenue Service (IRS) in addition to the Enterprise Registration with the Pennsylvania Department of Revenue and Unemployment Compensation Account Number from the Pennsylvania Department of Labor & Industry.
Step 2: Employee Eligibility Verification
Each new employee must complete the I-9, Employment Eligibility Verification Form from U.S. Citizenship and Immigration Services. The I-9 Form confirms citizenship and eligibility to work in the U.S.
The employee must complete Section 1 by their first day of work, and the employer will complete Section 2 by the end of the third business day after the employee starts.
Employers don’t submit the I-9 form but are required to keep the form on file for three years after the date of hire or one year after the employee’s termination, whichever is later.
Step 3: Employee Withholding Allowance Certificate
Each employee will provide their employer with a signed Withholding Allowance Certificate (Form W-4) on or before the date of employment. The W-4 Form determines how much federal income tax will be withheld from the employee’s paycheck.
The employer does not typically submit Form W-4 to the IRS but will keep a copy on file.
See IRS’s Publication 15 – Employer Tax Guide for more information on federal withholding.
Step 4: Submit the Pennsylvania New Hire Reporting Form
Employers are required to report newly hired employees (and re-hired employees) with the Pennsylvania Center for Workforce Information & Analysis within 20 days of the employee’s hire date.
Required information includes:
Employee information that will be needed includes the employee’s name, address, social security number, date of birth, start date, or the first day the employee begins work.
Employer Information includes Federal Employer Identification Number, contact name, employer name, employer’s address, and contact phone number.
The Commonwealth of Pennsylvania New Hire Reporting Program Form can be submitted online or by mail:
Pennsylvania New Hire Reporting Program
P.O. Box 69400
Harrisburg, PA 17106-9400
or fax: 717-657-HIRE
The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) requires new hire information. This information is recorded in the State Directory of New Hires and the National Directory of New Hires (NDNH) and matched against state and federal child support databases to locate parents and aid in child support collections.
Step 5: Payroll Taxes
After hiring employees, payroll taxes will need to be paid. Payroll taxes include:
Federal Income Tax Withholding
Employers withhold money from each employee’s paycheck to pay the employee’s federal income taxes based on the information provided in their W-4. The employer pays no part of the withholding tax but is responsible for collecting and remitting the withheld taxes.
Federal income tax withholding reports are filed using Form W-2, Wage, and Tax Statement with the IRS. Additionally, IRS Form 941 is due quarterly, and IRS Form 940 is filed annually to report any unemployment taxes due.
State Income Tax Withholding
Similar to federal income tax withholding, taxes are withheld from an employee’s paycheck for state income taxes. Use Form REV-419, Employee’s Withholding Form.
Social Security & Medicare
Social Security and Medicare taxes are paid under the Federal Insurance Contributions Act (FICA). The employer pays half of FICA, and the other half is paid from the employee’s wages.
Unemployment Insurance
Employers pay state and federal unemployment taxes based on a percentage of each employee’s salary. These taxes are known as State Unemployment Taxes (SUTA) and Federal Unemployment Taxes (FUTA).
Step 6: Obtain Workers’ Compensation Insurance
All businesses with employees (even a single part-time employee) must carry workers’ compensation insurance coverage to cover medical costs if employees are injured on the job. Worker’s Compensation Insurance is administered through the Pennsylvania Department of Labor & Industry.
Step 7: Labor Law Posters and Required Notices
Pennsylvania businesses must display Federal and State of Pennsylvania labor law posters where employees can easily view them. These posters inform employees of their rights and employer responsibilities under labor laws, such as federal minimum wage, anti-discrimination laws, and workers’ compensation rights.
Pennsylvania labor law posters can be individually printed from the Pennsylvania Department of Labor’s website.
Step 8: Stay Up To Date
It is important to understand the differences between employees and independent contractors. Employers will sometimes improperly classify employees as independent contractors who have different rules on payroll taxes, minimum wage, overtime, and other labor laws. An individual’s status as an employee or an independent contractor may be determined by filing IRS Form SS-8, Determination of Employee Work Status for Purposes of Federal Employment Taxes, and Income Tax Withholding.
The process of hiring your first employee in Pennsylvania can feel overwhelming, and there is a lot to keep up with, but with a clear understanding of what’s required, you’re setting your business up for success. Labor laws are complex and ever-changing, so be sure to keep up-to-date with the Pennsylvania Department of Labor & Industry and the U.S. Department of Labor, and remember to seek professional advice if needed.
