Register with the labor department in your state. Once you hire an employee, you must pay the state unemployment compensation tax. These payments will go to your state’s unemployment compensation fund, which provides short-term relief to unemployed workers. Please visit the Department of Labor website for a list of state unemployment insurance tax agencies. Obtain work injury insurance. You should have workers’ compensation insurance to protect workers who may suffer work-related injuries. Most states require workers’ compensation insurance, although some states have exceptions for very small employers. For more information on workers’ compensation laws, see the Manager’s Law Handbook by Lisa Guerin and Amy DelPo (Nolo).
Create an employee handbook. Although it is not required, it is best to have a manual to describe your company’s employee policies and make it clear that unless the employee signs a written employment contract, employment is arbitrary. A great resource is to create your own employee handbook: A Guide to Law and Practice, authored by Lisa Guerin and Amy DelPo (Nolo). Establish personnel files. For each employee you hire, create a file to save work-related documents, such as job applications, job opportunities, IRS Form W-4, performance evaluations, and employee benefit registration forms. Medical records should be kept in a separate confidential file in a locked cabinet. You should also store the I-9 form (recording the employee’s immigration status) in a separate file. More information about the development of a system for storing and maintaining personnel records, including state rules regarding employees’ access to their personal records