Steps to Hiring your First Employee in Utah

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 the cash flow needs of your business, but there is also a lot of paperwork and laws to comply with.

Here are 8 steps a business will need to make when hiring their first employee in Utah.

Step 1 – Register as an Employer

Employers will need to first get an Employer Identification Number (EIN) – Form SS-4 from the Internal Revenue Service (IRS) in addition to the Employer Registration on the Utah Department of Workforce Services website.

Step 2 – Employee Eligibility Verification

Each new employee will need to fill out the I-9, Employment Eligibility Verification Form from U.S. Citizenship and Immigration Services. The I-9 Form is used to confirm 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 – New Hire Reporting

Employers are required to report newly hired employees and re-hired employees with the Utah Department of Workforce Services within 20 days of their hire or rehire date.

This information is recorded in the National Directory of New Hires (NDNH) and is matched against state and federal child support databases to locate parents who owe child support.

Step 5 – Payroll Taxes

After hiring employees, payroll taxes will need to be paid.  Payroll taxes include:

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 the federal income tax withholding, taxes are withheld from an employee’s paycheck for state income taxes.

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. This tax is known as State Unemployment Taxes (SUTA) and Federal Unemployment Taxes (FUTA). 

Step 6 – Workers’ Compensation Insurance

All businesses with employees (even a single part-time employee) are required to carry workers’ compensation insurance coverage to cover medical costs if employees are injured on the job.   Worker’s Compensation Insurance is administered through the Utah Labor Commission.

Step 7 – Labor Law Posters and Required Notices

Utah businesses must display Federal and State of Utah labor law posters where they can be easily viewed by employees.  These posters inform employees of their rights and employer responsibilities under labor laws.

Utah labor law posters can be individually printed from the Utah Labor Commission’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.

There is a lot to keep up with when hiring employees for your business, but your obligations and responsibilities as an employer don’t end there.  Labor laws are complex and ever-changing.  Be sure to keep up-to-date with the Utah Labor Commission and the U.S. Department of Labor.