Legal Documents Required for Employing Your Workers

Successful entrepreneurs recruit the right people in the right manner. Continue reading to understand the best practices for recruiting staff and contractors.

What you’ll discover:

What legal documentation are required when employing employees?
What legal documentation are required when employing contractors?
What legal documentation are needed before an employee or contractor may begin working legally?
What happens if I allow an individual to begin working before establishing their legal right to work in the United States?

Small company owners who are new to recruiting staff and contractors may find the process complicated and scary. Employing employees entails federal, state, and municipal labor regulations, as well as taxes, insurance, and other factors. With the correct paperwork and legal help, company owners can concentrate more on recruiting and attracting top personnel in their field. This article offers small company owners with assistance on the needed legal paperwork for recruiting, including job posting templates, employment applications, employee handbooks, tax forms, and more.

What legal documentation are required when employing employees?

Employers must observe labor and tax rules while employing. Although this may seem to be complicated, companies throughout the nation, from the smallest to the biggest, produce the necessary legal documentation ahead of time to make the procedure considerably easier. You may wish to divide your papers into three categories:

Pre-employment paperwork.
Documents for hiring.
Employee documentation.

Pre-employment paperwork:

A job advertisement and an Employment Application are two essential pre-hiring papers to create. Using a Job Posting Template when you have an open position keeps you focused on the job description and prerequisites.

Asking candidates to submit an Employment Application in addition to a résumé may aid in the evaluation and comparison of applications. Employers, on the other hand, may wish to carefully evaluate their Job Applications to avoid asking questions about family status, sexual orientation, or religion that may offend or violate the law.
Documents for hiring:

There are many more critical documentation to complete before making a formal offer, hiring, or onboarding.

Employers often issue an Employment Offer Letter after interviewing and choosing a candidate to hire. Submitting an Employment Offer Letter that is straightforward and intelligible will help you and your possible employee get off to a good start. You may wish to mention the terms and conditions of your job offer in your Offer Letter to ensure they understand what you are providing, such as the hiring date, pay, perks, and so on.

The terms and conditions of work are outlined in an Employment Contract. This usually contains the start date, pay, benefits, bonuses, supplementary agreements, and the ability to leave the job. Before asking your new worker to sign an employment contract, have a lawyer evaluate it to ensure that it conforms with your state and local legal standards and that you are legally protected if the employee abruptly departs or fails to work out.

Background and reference checks on new recruits are regular aspects of the recruiting process. You may wish to obtain a Permission to Background and Reference Check before presenting an offer, or before doing so. In your state, signed permission or even submitting copies of reports you receive may be legally required.

A Noncompete Agreement, depending on your sector and the individual, might assist safeguard your company when an employee quits. They are often used to prevent former workers from working for a competitor or launching a competitive firm. Noncompete Agreements are permitted in most businesses, however they are prohibited or severely restricted in some positions or areas.
Employee documentation:

There are a few extra legal criteria for workers before their first day. IRS Form W-4 is a necessary paperwork for onboarding new workers. This tax form informs employers about an employee’s tax filing status, credit and deduction amounts, and any other information connected to tax withholding. It is vital that you withhold taxes in accordance with the employee’s instructions on Form W-4.

Moreover, completing a Form I-9 to verify an employee’s authorization to work is a legal obligation that cannot be overlooked. Failure to do so may result in fines and penalties.

Finally, after hiring a new employee, providing them with an Employee Handbook that contains employment expectations, duties, perks, vacation, and other laws will assist new employees learn about your company’s particular policies and do’s and don’ts.

What legal documentation are required when employing contractors?

Independent contractors are not recognized as employees when it comes to hiring, despite the fact that both may execute jobs and services for your firm. When you engage an independent contractor, you usually have little say over how and when they operate. Contractors, unlike workers, are not maintained on the company’s payroll, and no federal, state, or employment taxes are taken from their salary.

When employing contractors, you should make sure that you have the proper legal paperwork in place. Although certain legal papers, such as a Job Posting Template or a Permission to Background Check, may be used for both employees and contractors, others are just for contractors. These are some crucial papers to consider include in your independent contractor recruiting procedures.

Independent Contractor Contract. An Independent Contractor Agreement specifies the scope, expectations, payment amount, timetable, and deadlines of the contractor. But, you may need your contractors to sign a more industry-specific service contract, such as one between your company and a freelance web designer or bookkeeper. These legal papers include employment-related regulations such as job description and scope, payment conditions, legal and insurance requirements, and more.

Non-Disclosure Contract. A Non-Disclosure Agreement may be necessary to safeguard your firm’s information and intellectual property if your contractors deal with sensitive corporate information or may be featured on company correspondence.

Form 1099-NEC issued by the IRS. A tax record, similar to Form W-4 for employees, may be needed when employing independent contractors. Non-employees, such as independent contractors, freelancers, gig workers, and any other non-employee service provider, are reported on Form 1099-NEC.

Contract Termination Notification. When engaging an independent contractor, a Notice of Contract Termination may also be useful to have on hand. This letter may assist prevent an independent contractor from incurring unexpected expenses and invoicing you after the job is completed.

What legal documentation are needed before an employee or contractor may begin working legally?

Employers must complete Form I-9 before an employee may lawfully begin working, as mandated by the Immigration Reform and Control Act (IRCA) of 1986. Form I-9 verifies an employee’s identification and legal right to work in the United States. Employers must have these forms completed and properly preserved.

The employee must provide proof of their identity and legal status in the United States, such as passports, work authorizations, driver’s licenses, Native American identification cards, military identification cards, and Social Security cards.

Since independent contractors are not employees, they do not need to file a Form I-9 unless they are working on a government contract with additional requirements.

Businesses may be able to save time by enrolling in E-Verify, a government-run internet system. Employers may use E-Verify to electronically check workers’ eligibility to work in the United States.

What happens if I allow an individual to begin working before establishing their legal right to work in the United States?

Assume you recruit a new employee who is legally permitted to work in the United States, but you fail to E-Verify, fail to complete the Form I-9, or fail to complete it properly. If you do not remedy the inaccuracy, federal officials may levy penalties and fines against you. In 2022, for example, penalties may vary from $252 to $2,507 per infraction.

You may also be subjected to unannounced inspections by Immigration and Customs Enforcement.

If you recruit an employee who is not legally permitted to work in the United States, you may face penalties and fines ranging from $250 to $3,200 per ineligible employee under the Immigration and Nationality Act. You may also risk criminal prosecution if you hire people who are not legally allowed to work.