Are you Ready to Hire?

Before you hire your first employee, ask yourself– are you ready to hire?

If you are receiving more orders or clients than you can handle, you might want to consider hiring some help.

When hiring, there are a couple key things to consider. First, you need to identify specific tasks you want to handoff and how much time it would take someone to perform.

For example, let’s say you want help with administrative work. You should:

• Create a list of the administrative tasks you are currently doing that you could handoff.
• Create a list of administrative tasks you want to do but don’t have time for.
• Calculate how many hours a week it would take to do this work.
• Think about whether this is a temporary or permanent need. Do you just need help for a season, or will you need help year-round?

Next, determine if you can afford the cost of hiring someone. Bringing on an employee costs more than their salary or hourly wage. You will be required to pay payroll taxes and may consider offering benefits to help attract and retain qualified employees. Other costs you may occur include work equipment, software licenses, meeting space, and more. At the same time, bringing on an
employee can expand your capacity and help you bring in more revenue. Your Indiana SBDC advisor can help with financial forecasting to determine if you can support bringing on an employee.

Only after you have defined the role and determined that you can afford the ongoing costs of a hire should you move forward with hiring your first employee.

Creating a Job Description

Prepare a written job description that indicates exactly what is expected of each employee. Make sure to set measurable metrics you can use to conduct performance reviews for each job.

• Establish a hiring process. Where will you post the job and what will you require? A resume is a good way to get a first impression of a candidate. From there, selected candidates should complete an application form and schedule an interview. Ask each candidate for the same position the same questions and document the interview. There are many good sample sets of structured interview questions and application forms on the internet. Depending on the skill required for the position, many employers ask candidates to perform a trial assignment or take an aptitude test.

• It can also be helpful to have a stated 30- or 90-day introductory period during which employer and employee can evaluate skills and compatibility with the organization and the position. Be sure to have a written declaration (handbook, application form, or otherwise) that employment is “at will” meaning the employer or employee may terminate the employment relationship at any time with or without cause or prior notice.

In some cases, it may make sense to start slowly and hire an intern before you hire a full-time employee. Hiring an intern is often a more affordable and practical option for small businesses that are just starting out.

One place to start looking for your next great hire in Indiana is through your regional WorkOne office.

Craft Your Hiring Strategy

Employees add another layer of complexity to your business that requires careful consideration and planning.

It is important to hire the right people, train them well, and keep them happy so they will stay and meet your tax obligations and other legal requirements.

Hiring and managing employees requires good recordkeeping systems, careful compliance, and a formal training plan to assure consistency and quality in performance. We encourage the following best practices:

• Prepare a written job description that indicates exactly what is expected of each employee. Make sure to set measurable metrics you can use to conduct performance reviews for each job.

Develop at least a simple employment handbook that outlines the following:

• The mission and vision of the business
• Employment policies such as work periods, time keeping, holidays, etc.
• Standards of employment

The Importance of Professional Assistance

Don’t be scared of professional consultants

Many business owners are wary about the cost of hiring professional consultants. However, the expense of using skilled professional consultants can be insignificant compared to the gains you could make by putting your time to revenue producing activity — or the costly consequences you could avoid if you don’t make the mistakes of failing to adhere to regulations, failing to submit documents, or making uninformed decisions.

There is no substitute for professional services to keep a business operating within financial and legal parameters. Professionals can assist with every aspect of a business, and they may be a good bridge as you grow from where you are now to hiring more full-time staff.

Listed below are some of the most important professional services most businesses need, especially early on.


• Financial Consultants can help you handle accounting, bookkeeping, tax prep, and cash flow analysis and projections.
• Legal consultants can help you with your business organization, contracts, agreements, and other general consulting.
• Bankers can help with loans, billing, and credit.
• Information technology specialists can help you set up, manage, and monitor hardware, software, and internet connectivity.
• Insurance brokers can help you get the coverage you need at a competitive price.
• Marketing consultants or agencies can help you create your brand, build a website, manage your social media, develop positive public relations, and more.

It’s okay not to be an expert

If you don’t have much experience in a particular area of your business, talking to a professional consultant can make your life a lot easier. A lot of small business owners feel bogged down by the daily grind of operations, and you may be able to put your skills to better use by working with outside professionals to handle the nitty-gritty, especially early on when you want to find new, talented employees to help you deliver your products and services to customers.

Technology is a uniquely difficult area for most business owners to handle on their own, especially since it is constantly evolving. Professional services can help you determine which types of software and hardware you need and how you can keep your records and the records of your customers secure.

Employee vs. Contractor

If you don’t have enough work for someone to join your team full time, hiring outside contractors or temporary help is also an option. However, important distinctions exist between employees and contractors. No matter who is helping you get the work done, their employment status will affect your tax burden, liability, and benefit costs. The question of employee vs. contractor is a critical issue that does not have a simple answer and can have significant consequences. For example, if you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes and penalties.

The IRS can apply many different tests to determine whether an individual is an employee or contractor. If you are considering using contractors instead of employees for your business, be sure to consult with a competent tax advisor before making a decision.

Independent Contractors

People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business or profession and offer their services to the general public are generally considered independent contractors. However, whether these people are independent contractors or employees depends on the facts in each situation.

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. the earnings of a person who is working as an independent contractor are subject to self-employment tax.

Helpful Tips for Determining Contractor Status

Two types of evidence can help determine if the person has enough control and independence over their work to be considered an independent contractor:

• Behavioral
  • Does your company control or have the right to control what the worker does and how the worker performs his or her job?

• Financial
  • Are the business aspects of the worker’s job controlled by the payer? These factors include how the worker is paid, whether expenses are reimbursed, who provides tools and supplies, etc.

Type of Relationship

Are there written contracts or employee type benefits in place for insurance, vacation pay, retirement, etc.? Will the relationship continue? Is the work being performed a key aspect of your business?

You need to consider all these factors to determine if a worker is an independent contractor. And it may not be a simple answer; some factors may indicate that the worker is an employee, while others indicate that the worker is an independent contractor. No set number of criteria makes the worker an employee or an independent contractor, and no one factor stands alone in making this determination.

Determine the Relationship type

Are there written contracts or employee type benefits in place for insurance, vacation pay, retirement, etc.? Will the relationship continue? Is the work being performed a key aspect of your business?

You need to consider all these factors to determine if a worker is an independent contractor. And it may not be a simple answer; some factors may indicate that the worker is an employee, while others indicate that the worker is an independent contractor. No set number of criteria makes the worker an employee or an independent contractor, and no one factor stands alone in making this determination.

The key is to look at the entire relationship, consider your ability to direct and control the work, and document exactly how you determined whether someone would be considered an employee or independent contractor.

Unable to Determine Contractor Status?

Form SS-8

If, after the evidence, you and the worker are still not sure about their status, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding can be filed with the IRS: irs.gov/pub/irs-pdf/fss8.pdf.

The IRS will review the facts and circumstances and officially determine the worker’s status. Unfortunately, it can take six months or longer to get an answer. If you continually hire the same types of workers to perform particular services, it may be a good idea to file Form SS-8.

For more information on determining the differences between independent contractors and employees, you can refer to the IRS website: irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee. Or you can consult with a qualified human resources professional.

Training and Developing Employees

Training employees is extremely important. You want well-qualified employees who properly and consistently represent your business, add value to your brand and image, maintain the quality you expect, and build customer goodwill. A well-defined company policy handbook along with job descriptions that outline duties, responsibilities, ethical standards, and criteria for success are important employment tools.

To assure consistency and the quality of your employees’ work, we suggest that you continually document your steps, processes, and requirements for specific tasks or activities and that you create a training plan to ensure every employee understands these expectations and requirements. Cross-training employees in areas outside their job descriptions can also be very beneficial for small businesses. Some employers may also choose to invest in their employees by giving them opportunities and incentives for specialized or advanced education and training.

To keep employees motivated and involved with the business, develop and maintain effective strategies and methods of two-way communication. Many business owners find it beneficial to include employees in strategic, operational, and process planning and to work together to set individual goals that contribute to achieving overall business objectives.

New Hire Reporting Requirements

Employers in all 50 states are required by federal law to report their new hires and re-hires to a state directory to expedite the collection of child support payments. This requirement establishes the employers’ role as a key partner in efforts to facilitate a family’s financial stability and for children to get the support to which they are entitled. You must report the following:

New employees who reside or work in the state of Indiana to whom the employer anticipates paying earnings. You must report employees, even if they work only one day and are terminated. Re-hires or recalled employees who return to work after being laid off, furloughed, separated, granted leave without pay, or terminated from employment after 60 days. Employers must also report any employee who remains on the payroll during a break in service or gap in pay and then returns to work after 60 days. This includes teachers, substitutes, seasonal workers, etc.

Temporary agencies must report any employee who they hire to report for an assignment. You only need to report employees once; they do not need to be re-reported each time they transfer to a new client. They do need to be reported as a re-hire if the worker has a break in service or gap in wages.

For more detailed information and reporting forms, contact the Indiana New Hire Reporting Center at (866) 879-0198 or by visiting: IN-newhire.com

Ensure Compliance with Employment Laws and Regulations

Employers have legal and ethical obligations to provide a safe and equitable workplace.

You must follow state and federal regulations governing workplace health and safety, as administered by the Indiana Occupational Safety and Health Administration (IOSHA).

Indiana Department of Labor’s INSafe division provides free consultation for Hoosier employers to design and implement safety and health management systems. INSafe operates independently from IOSHA, and they will not provide any information to IOSHA provided the employer agrees to correct all serious hazards identified by INSafe. To learn more about INSafe visit: IN.gov

Indiana employers must also display certain posters in the workplace, and posters are available for free from various government agencies. A few key posters and the associated regulations are listed below, but there may be more poster requirements for your business if you have additional requirements under federal or state jurisdiction.

At the end of this chapter, we have a larger list of state and federal required posters and agency contact information.

The First Policy We Will Focus on is a Drug-Free Workplace

Employers need to be aware of issues involving employees’ use of drugs and alcohol and how that can affect their work and your workplace. For additional information about programs to make the workplace free of drugs and/or alcohol, contact the Substance Abuse and Mental Health Services Administration (SAMHSA) at samhsa.gov or call 800-967-5752.

The ADA and ACA

Americans with Disabilities Act (ADA)

Employers are required to comply with the Americans with Disabilities Act (ADA). The ADA gives civil rights protections to individuals with disabilities similar to those provided to individuals based on race, color, sex, national origin, age, and religion. The ADA prohibits job discrimination against people with disabilities if they can perform the job’s essential functions with or without reasonable accommodations, and it guarantees equal opportunity for individuals with disabilities in public accommodations, employment, transportation, state and local government services, and telecommunications.

For publications and technical information about the ADA, contact the U.S. Department of Justice by phone at 800-514-0301 or online at: ada.gov

Affordable Care Act

The Affordable Care Act (ACA) was designed to ensure that Americans have access to quality, affordable health insurance.

• If you have no employees, ACA does not apply to you.

• Generally, an employer with fewer than 50 full-time employees or equivalents will be considered a small employer and is not required to provide health insurance coverage for employees.

• Employers with 50 or more full-time employees or equivalents will be considered a large employer and have responsibilities related to how and what health insurance they offer to their full-time employees.

More details on the Affordable Care Act as it applies to small or large businesses, and as it may change over time, can be found at irs.gov/affordable-care-act/employers. For enrollment information as well as how the Affordable Care Act may affect your business, visit HealthCare.gov.

Equal Employment Opportunity

Focusing on Anti-discrimination workplace legislation

Equal Employment Opportunity

The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or employee based on the person’s race, color, religion, sex (including pregnancy, gender identity and sexual orientation), national origin, age, disability, or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Of the many antidiscrimination acts within EEOC, three standouts include:

Age Discrimination In Employment Act

This prohibits any form of discrimination against applicants or employees older than 40 because of their age.

Equal Pay Act

Employers can’t pay female employees less than male employees for equal work on jobs that require equal skill, effort, and responsibility.

Pregnancy Discrimination Act

This act prohibits job discrimination based on pregnancy, exclusively as it pertains to an employee’s ability or inability to work.

Other Legislation to be aware of

Fair Labor and Standards Act
The Fair Labor Standards Act (FLSA) establishes a minimum wage, overtime pay requirements, recordkeeping regulations, and youth employment standards covering employees in both the private sector and in federal, state, and local governments.

Employees whose jobs are governed by FLSA are either “exempt” or “nonexempt.” Nonexempt employees are eligible for overtime pay, and exempt employees are not. For an employee to be classified exempt from overtime FLSA requirements, the job must meet strict salary and duty tests. To learn more, you should consult with a qualified human resources professional or employment lawyer. For further information about FLSA, visit: dol.gov

Family and Medical Leave Act
The Family and Medical Leave Act (FMLA) allows employees with at least a year of service to take up to 12 weeks per year of unpaid, job-protected time off for the birth of a child, adoption of a child, or to care for themselves, a sick child, spouse, or parent who has a serious health condition. The FMLA applies to organizations with 50 or more employees. For more information, go to the U.S. Department of Labor’s website at dol.gov

Indiana Minimum Wage Law

Minimum wage can vary over time and can be different at the federal and state level. Employers subject to both state and federal minimum wage law should pay the higher applicable rate of those two. For more information, refer to the Indiana Department of Labor website at IN.gov

*Disclaimer* Immigration documentation must be kept separate from personnel records and never inserted into an employee’s personnel file.

Uniformed Services Employment and Reemployment Rights Act

Uniformed Services Employment and Reemployment Rights Act
The Uniformed Services Employment and Reemployment Rights Act (USERRA) makes it illegal to discriminate against employees who volunteer or are called to military duty. When reservists return from active-duty tours of less than five years, they must be reemployed to their old jobs or equal jobs. To discover more about USERRA, visit: dol.gov

For more information about employment laws and discrimination, you can contact the Indiana Civil Rights Commission at IN.gov or (800) 628-2909. For EEOC information, visit eeoc.gov or call 800-669-4000.

Payroll Taxes

Any business with employees must comply with federal and state payroll tax withholding requirements. It is critical that you understand the various deadlines and requirements, or that you use the services of someone who does. The major types of payroll taxes in Indiana are:

• Income Tax Withholding (federal, state, and, if applicable, local)
• Federal Social Security and Medicare Tax (FICA)
• Federal Unemployment Tax Act (FUTA)
• Indiana Unemployment Tax (UIA)

Every employee of your business is subject to these taxes—including you. Typically, business owners can expect to pay about 16% of their draws to satisfy the four types of taxes listed above. More information about the different payroll taxes is provided in the following sections.

Income Tax Withholding

Any employer of one or more persons must withhold federal and state income taxes from wages paid to employees. A city income tax may also apply. To find out if a city levies a tax, contact that particular city tax assessor or city treasurer. Each employee should complete a Federal Withholding Exemption Certificate (W-4) and an Indiana Employee Withholding Exemption & County Status Certificate (WH-4). Your business will then need to withhold a designated amount of taxes from each employees’ wages, including the following:

• Federal
  • For more information about federal income tax withholding, contact the IRS at 800-829-4933 or visit: irs.gov

• State
  • Before hiring employees, an employer must register as a new withholding agent through the State of Indiana. Registration with the Indiana Department of Revenue (DOR) is available through INBiz. For more information, refer to the DOR New and Small Business Education Center IN.gov

• City or Local
  • Contact your city treasurer or assessor to determine if a city income tax is applicable for your new employees. If the city does have an income tax, they can provide the required registration forms.

• Social Security and Medicare Witholding
  • In addition to federal income taxes, federal law also requires that employers withhold and deposit Social Security taxes from employees’ wages. The employer must also pay an equal amount. Tax rates and maximum earnings subject to tax may vary from year-to-year. The latest information is available at irs.gov or by calling 800-829-4933.

Federal and State Unemployment Insurance

Federal Unemployment Insurance Act

The Federal Unemployment Insurance Act gives authority to the IRS to collect fees and for the U.S. Department of Labor to pay administrative expenses in order to operate state unemployment systems. If you file an application for an employer identification number (EIN) with the IRS and indicate that employees will be hired, the IRS will mail a packet of information that includes forms for
FUTA tax deposits and an annual report form. For more information about the FUTA tax, forms, and deposit requirements, contact the IRS at 800-829-4933 or online at: irs.gov

State Unemployment Insurance

The Indiana Department of Workforce Development (DWD) operates Indiana’s unemployment insurance program, which collects unemployment taxes from employers and provides temporary income for workers who are unemployed through no fault of their own. Employers pay both state and federal unemployment taxes, and no deductions can be made from an employee’s wages to cover these taxes. Review the DWD Employer Handbook for more information. IN.gov

Health and Safety Standards

Employers are required to comply with federal and state health and safety standards and laws through the Indiana Occupational Safety and Health Administration (IOSHA). For a complete set of safety and health standards by industry, contact IOSHA visit: IN.gov

Tracking Workplace Injuries and Illnesses

An often-overlooked key component of IOSHA standards is the requirement for employers to record and report certain workplace injuries or fatalities. Failure to do so can result in citations and penalties. Each employer is required to report:

• Work-related fatalities (within eight hours)
• In-patient hospitalization (within 24 hours)
• Work-related amputations (within 24 hours)
• Loss of an eye (within 24 hours)

Accidents or fatalities can be reported to IOSHA at (317) 232-2693 or online at IN.gov
 
Workers’ Compensation

All states require employers to carry insurance coverage for employees’ work-related illnesses and injuries. Benefits are usually paid through an insurance company on behalf of an employer, though some larger businesses may be approved for self-insurance.

Approximately 500 different rating classifications for workers compensation insurance exist based on the type of business an employer operates. Premium rates for a given classification vary widely among insurers. Insurers also have different merit and experience rating plans, schedule-rating plans, and premium discount tables, which can affect an employer’s final premium cost, so shop carefully.

Additional information and assistance are available at the Workers’ Compensation Board of Indiana. Call (800) 824-COMP or visit: IN.gov

Required Workplace Posters for Indiana

The following is a list of Indiana required workplace posters and where they can be obtained.

• Department of Workforce Development Unemployment Insurance Poster IN.gov

• Workers Compensation Board Workers Compensation Notice Poster IN.gov

• Occupational Safety and Health Administration Safety and Health Protection Poster IN.gov

• Department of Labor Minimum Wage Poster IN.gov

• Department of Labor Teen Work Hour Restriction Poster *only required if you employ minors IN.gov

• Civil Rights Commission Equal Employment Poster IN.gov

Required Federal Workplace Posters

The following is a list of workplace posters required by the federal government and where they can be obtained.

• Job Safety and Health: It’s the Law!: osha.gov

• Equal Employment Opportunity Is the Law: eeoc.gov

• Fair Labor Standards Act (FLSA) Minimum Wage Poster: dol.gov

• Employee Rights for Workers With Disabilities Paid at Subminimum Wages: dol.gov

• Employee Rights Under the Family and Medical Leave Act: dol.gov

• Employee Rights Under the National Labor Relations Act: nlrb.gov

• Your Rights Under USERRA: The Uniformed Services Employment and Reemployment Rights Act: dol.gov

• Employee Rights: Employee Polygraph Protection Act: dol.gov

Other Required Posters for Your Business

Other posters may be required for specific types of businesses or employment circumstances. For more information, visit the United States Department of Labor website: dol.gov