Are you getting ready to hire your first employee in Ohio? If so, preparation is key. Take some time to set yourself up for success with our complete guide to hiring in the Buckeye State.
Keep reading and we’ll walk you through six steps for hiring employees in Ohio.
Step 1: Take care of logistics
Before you can hire an employee in Ohio, you need to register with a couple of different state departments and gather the appropriate business IDs. Make sure you take the below steps:
Apply for an employer identification number (EIN) on the IRS website
If you’re registered as a partnership, multi-member limited liability company (LLC), C corporation, or S corporation, you likely already have an EIN, also known as your federal tax ID. However, if you run a sole proprietorship or single-member LLC and haven’t yet obtained an EIN, you need to get one before hiring employees.
You can apply for an EIN on the IRS website by completing an application.
Register with the Ohio Department of Taxation
If you haven’t done it already, register your business entity with the Ohio Department of Taxation using the Ohio Business Gateway. Once you complete the required information, you’ll receive an employer withholding tax account number so you can pay state withholding taxes.
Employers who do business in the state of Ohio have to withhold Ohio individual income tax from their employee’s pay. Ohio employers also have to withhold school district income tax from employees who live in certain school districts. Learn more about Ohio’s withholding tax obligations on the Ohio Department of Taxation’s website.
Register to pay unemployment insurance taxes
To hire new employees in Ohio, you also need to register to pay unemployment taxes with the Ohio Department of Job and Family Services. Ohio law requires most employers to pay unemployment taxes and report wages paid to their employees on a quarterly basis.
You can register online with The SOURCE: Ohio’s New Unemployment Insurance Tax System, then search for private insurance providers within the state. For more information on unemployment insurance, read the FAQs in the Employer’s Guide to Ohio Unemployment Insurance.
Get workers’ compensation insurance
Ohio requires all employers with one or more part-time or full-time employees to obtain workers’ compensation insurance. Workers’ compensation insurance has two purposes: 1) it gives your employees medical and financial support in the event of an illness or injury that occurs during their employment and 2) it provides liability protection for the employer.
Step 2: Understand your hiring costs and tax liability
Hiring a new employee is a financial investment, so it’s critical to understand your hiring costs and tax liabilities as an employer. On top of paying Medicare and Social Security taxes, you also have to pay a few different Ohio state taxes.
Here are the Ohio hiring and tax costs to know about:
- Under the Federal Insurance Contributions Act (FICA), the Social Security tax rate is 6.2% for an employer and 6.2% for an employee. The rate for Medicare taxes is 1.45% for an employer and 1.45% for an employee.
- The annual state unemployment insurance (SUI) tax rate for new employers in Ohio is 2.7% on a wage base of $9,000.
- The Federal Unemployment Tax Act (FUTA) works alongside state unemployment insurance programs. The FUTA tax rate is 6% on the first $7,000 of employee wages. However, if you pay SUI taxes on time and in full, you can get a credit on FUTA taxes of up to 5.4%, potentially dropping your FUTA tax liability to 0.6%.
- Employers in Ohio have to withhold school district income tax from the pay of employees who live in taxing school districts. Whether or not you withhold school district income tax is based on your employees’ addresses, not where your business is located. Learn more about the school district tax by reading the Ohio Department of Taxation’s 2023 Ohio Employer and School District Withholding Tax Filing Guidelines and review the 2023 tax rates.
Don’t forget to account for general hiring costs when creating a hiring budget. Those include recruiting expenses (like job site subscriptions and services for background checks) as well as everything that goes into an employee compensation package, such as employees’ salaries, health insurance, paid time off, and other benefits.
Do you have enough money to hire an employee in Ohio? Use this calculator to find out.
Step 3: Check Ohio labor laws and employee classifications
Part of your responsibility as an Ohio employer is abiding by federal labor laws and state employment laws. That includes state laws around pay transparency and reporting, minimum wage, overtime, and classification differences between employees and independent contractors.
Here are a handful of notable Ohio labor laws:
- The 2023 minimum wage for employees in Ohio is $10/hour. You can see more wage and hourly laws on the Ohio Department of Commerce’s website.
- Non-exempt employees in Ohio who work overtime (over 40 hours a week) must be paid overtime pay at 1.5 times their regular rate of pay.
- Ohio is an at-will state, so employers have the right to terminate the employment of their Ohio workers without reason or cause.
- The state of Ohio doesn’t require employers to provide paid sick leave, vacation time, jury duty, or severance—that’s up to the employer.
- Ohio’s equal pay law makes it illegal to discriminate with wage payment based on an employee’s race, religion, sex, age, national origin, or ancestry.
- The cities of Toledo and Cincinnati prohibit employers from asking job candidates about their salary histories when hiring. The city of Columbus recently adopted the same law, which will go into effect in March 2024.
Step 4: Fill out the Ohio new hire reporting form and furnish forms to new employees
When you hire a new employee in Ohio, you need to report information about that employee to the Ohio New Hire Reporting Center within 20 days of their official hiring date. The hiring date is generally considered to be the first date an employee performs services you’ll pay them for, or the first day an employee on commission is eligible to earn commission.
You can register at the Ohio Directory of New Hires to begin the new hire reporting process (or check out these registration instructions). You’ll provide your employee’s name, address, Social Security number, date of birth, and work start date.
From there, you need to complete a number of other important hiring documents, including:
- Employment contract: It’s a good idea to write an employment contract detailing the job responsibilities your employee will have, the wages you’ll pay, and a summary of the workplace policies that are covered in detail in your employee handbook.
- Form I-9: The United States Citizenship and Immigration Services (USCIS) uses Form I-9, the Employment Eligibility Verification Form, to verify that employees are able to work in the US. As an employer, you have to complete Form I-9 for every employee you hire, and each employee must attest to their employment authorization. You don’t have to file Form I-9 with the USCIS or Immigration and Customs Enforcement (ICE). Instead, you hold onto the form as a record for at least three years from the date of hire or from one year after employment ends (whichever is later). Download Form I-9 and read the complete instructions here.
- Form W-4: Each new employee you hire needs to complete IRS Form W-4, The Employee’s Withholding Certificate, on or before the date of their employment. Form W-4 is used to determine how much federal income tax will be withheld from the employee’s paychecks. Download the form here.
- Form IT-4: Have employees fill out Form IT-4, the Ohio Employee’s Withholding Exemption Certificate.
- Form SD-100: Each new employee also has to fill out Form SD-100, the school district income tax form, in order to withhold the correct school district taxes. Read SD-100 instructions if you need additional guidance.
Make sure you keep copies of all the above documents as part of your business’s records.
Step 5: Set up your payroll system
Now that you have your administrative ducks in a row, it’s time to set up or update your payroll system. If you want to save time on payroll calculations and prepare for future hires, consider upgrading your small business payroll software.
When you set up payroll, account for the following taxes:
- Federal income withholding taxes: You’ll use Form W-2 to file federal income tax withholding reports to the IRS. You’ll also file Form 941 on a quarterly basis and Form 940 annually.
- State income withholding taxes: Ohio employers need to file the correct withholding forms and submit them to the state on a regular basis. See more Ohio employer withholding resources.
- Social Security and Medicare taxes
- Unemployment taxes
Step 6: Display labor law posters and required notices
As an employer in Ohio, you’re required to post several different labor law signs and notices in your workplace, so employees understand their rights.
Check out the Ohio Department of Administrative Services’ posting requirements to find out which notices you’re obligated to post and how to download them. Here are all the required federal law labor posters as well.
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