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whether you're thinking about hiring your first employee or your 15th employee this video will walk you step by step through the things you should be doing before you hire during the hiring process and after you hire we're talking payroll taxes employee performance and frankly everything i wish i knew 10 years ago well over 100 employees ago when i hired my first employee i want you to hire correctly legally and on budget so this video is for you hey everyone quran here from life accounting where we help you save on taxes and increase your wealth today's topic is all about hiring employees and we're jumping right into the steps you need to take before you hire [Music] step number one is to get an ein you see an ein or employer identification number is like the social security number for the business it's used for tax purposes and is needed to hire employees if you filed your business taxes before or have a business bank account then you likely already have an ein if you don't have an ein you can get one in minutes and for absolutely free by visiting the irs's website step 2 decide if you want an independent contractor or an employee employees and contractors are vastly different in terms of affordability flexibility and time commitment needed from you when you hire a contractor you give up the right to determine how the work gets done and what tools can be used to complete the job when you hire an employee you decide what will be done how it will be done and when it will be done when you hire a contractor your only financial obligation is what they charge you to do the job when you hire an employee you bear all costs including the training tools mistakes taxes and turnover when you hire a contractor okay okay i think you get it by now in short the reason you will hire an employee over a contractor is because of the relationship it provides you you are willing to take on the extra responsibility in exchange for loyalty and control step number three make sure an employee is within the budget look i've seen many business owners make a huge mistake they believe that the true cost of an employee is the employee's hourly wage or salary and completely forget about all the other costs that come with having an employee of course you have their wage this includes the salary commission and bonuses but then you have federal payroll taxes on top of their wages remember employers are responsible for 6.2 percent of the employees social security taxes on up to 142 800 in earnings for 2021. oh and don't forget medicare taxes which is 1.45 of the employees earnings you also have to pay full to taxes as an employer which stands for federal unemployment taxes the current food to tax rate is six percent of the first seven thousand dollars in wages for the year some states also require that you pay unemployment taxes at the state level then some states require you to have workers compensation insurance after a certain number of employees and the best part about it all is that we haven't even begun to talk about the cost of providing benefits perk supplies and space so as you can see the true cost of an employee doesn't end at the hourly wage and salary step number four is to create an employee handbook and standard operating procedures your employee handbook helps new employees to better understand your company culture company values policies benefits and simply protects you from litigation standard operating procedures help new employees to better understand why their job is important what steps you like the employees to take to do their job and the expected outcome of the job you should have an sop a standard operating procedure for every possible task in your business if you think it's common sense trust me it isn't until it's on paper together the employee handbook and sops help to standardize and systematize your business you and your employee both know what is expected now ideally you want to create your employer handbook and your standard operating procedures before you hire because you need adequate time to critically think through the standardization and systemization of your company okay now it's time to get into the process of hiring an employee step number five create a job description now i'm not going to spend too much time here but i do want to tell you two things when it comes to your job description first your job description should be as detailed and aligned with the actual job as possible your goal is to find someone an employee who knows up front what they are getting themselves into and chooses to apply based on that look the last thing you want is to wait your time in interviews with people who are shocked by the duties and responsibilities of the job secondly unless the position you are hiring for is extremely unique or you are a wizard at copywriting i would suggest that you take a look at no less than five other job descriptions from companies for the same position not only will you start to understand what your job market competition is offering but i guarantee you will find a clearer way to express the job duties within your own description by taking a sneak peek at what others have written step number six create a system for identifying top talent nothing and i mean nothing is worse than hiring someone you believed was going to get in the role and crush it only for them to become a nightmare employee i've definitely had my fair share of that in the past but lately i have truly dialed in on what we consider top talent for our business and it's not what you think you see most business owners believe that an employee with the skill to do the job is a perfect fit for the job but i'd argue that an employee with the right personality for the job is 10 times more important than having the skill to do the job once my team and i switched to skills only being a prerequisite to your resume being looked at and a personality fit a requirement to get an interview we've seen our employee turnover drop dramatically and employee satisfaction increase we currently use a program called hire select to test applicants aptitude personality emotional intelligence and skills it's simply been a game changer for us and happy to share with you entrepreneurs so you can find the best candidates all right let's talk about what happens after you make the hire so you found your ideal candidate they've reviewed and signed their employee contract and their start date is approaching here's what i want you to do next step number seven check workers compensation insurance requirements as mentioned before different states have different requirements for workers compensation insurance for example here in georgia most employers with three or more full-time part-time or seasonal employees are required to have workers compensation insurance and if the business is incorporated or at llc the corporate officers or members are included in the three or more employee account regardless if they exempt themselves from coverage so be sure to check your specific state requirements now step number eight is to set up payroll choosing to use a payroll system such as quickbooks payroll will allow you to onboard new employees ing to federal and state standards pay employees withhold federal and state payroll taxes report your new hire to your state's reporting agency and file important tax forms now don't get me wrong you can attempt to do this manually but saving a penny could cost you thousands in mistakes in time so for this reason use a payroll system to make the process of onboarding employees paying employees withholding taxes and filing important tax form easy accurate and automatic step number nine have the employee complete form w-4 form w-4 is used so you know how much taxes to withhold from the paycheck of the employee it's required that all employees whether full-time or part-time complete a form w-4 now a payroll service should include this step when onboarding a new employee step number 10 fill out form i-9 form i-9 is used to verify the identity and employment authorization of employees that are hired in the united states each new employee must complete and sign the first section by the end of their first day employers must complete and sign the second section by each new employee's third day once again a payroll service should include this step when onboarding a new employee now step number 11 is to remember important dates here are the important irs related dates and tags that i want you to remember by january 31st you will need to send the irs a w-2 form for each employee by the end of february you must inform w-2 to the social security administration within three days of hiring a new employee complete form i-9 and then keep a copy for your records for three years at a minimum within 20 days of hiring a new employee report your new hire to the state's reporting agency and sometime during the calendar year you must also file an irs form 940. if you paid wages of 1500 or more in any quarter or if an employee worked for you in any 20 or more different weeks of the year i'm gonna place a few videos on the screen i think you should watch next be sure to check them out and if you found this video helpful do me a favor hit that like button for me it helps others to find this video on youtube and subscribe to the channel for more financial information that helps you save on taxes and increase your wealth i'm quran from life accounting and i'll see you in the next video