Laws You Need to Follow When Hiring Employees

March 26, 2022

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As your business grows, you will need to hire employees. When it comes to hiring, you want to find the best talent, encourage longevity, and stay within legal parameters to avoid any trouble down the road. It is important for you to understand the law when it comes to hiring. Here are three areas to be aware of.

Laws Against Discrimination

Discrimination of any kind is strictly prohibited within each stage of the hiring process. This includes your job advertisements, recruitment, the application, referrals, interviews, and selection. The United States Equal Employment Opportunity Commission (EEOC) defines discrimination as treating someone differently or less favorably because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age, disability, or genetic information. It is also illegal to retaliate against a person for submitting a discrimination complaint against you.

Payroll Regulations

The EEOC also has payroll regulations. You are obligated to act in compliance with all federal, state, and local regulations for how employees are paid. These include minimum wage rates, overtime rates, payroll taxes, and the equal pay act. The equal pay act exists to prevent wage discrimination based on sex. It states that people of both genders must be paid equal salaries for equal work. There will also likely be regulations regarding pay frequency. There may be federal or state laws outlining common pay schedules.

Employee and Contractor Designation

It is important to understand the differences between an independent contractor and an employee. This distinction matters because of differing tax laws for each. Employers are required to withhold various taxes for each employee. Independent contractors, on the other hand, are required to pay self-employment taxes. You can distinguish between the two by looking at the behavioral control, the financial control, and the relationship between the parties. With an employee, there is much more behavioral control involved, such as how, when, and where to work. Employees receive more training and are evaluated based on how the work is done, rather than just the end result. With an independent contractor, there is less financial control. They work on their own equipment, their expenses are not reimbursed, and they are generally paid by the job. Finally, your relationship with an employee is generally considered indefinite, and they will perform key functions for the business. You can get into trouble with the IRS if you hire someone as a contractor when they would be legally designated as an employee.

Be certain that you understand and comply with all the regulations surrounding the hiring process. You don’t want to find yourself in legal trouble down the road.

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