If your goal is to grow your small business in 2024, chances are it’ll involve growing your team too. However, hiring employees in the state of Vermont is a process that involves a fair amount of research, planning, and effort.
Understand your responsibilities as an employer, as well as the laws and regulations you’ll need to follow, by reading this guide to hiring employees in Vermont. Here are the six steps we’ll cover:
Do your research
Due to the many federal, state, and local laws you must take into consideration when implementing your hiring process, first you’ll need to do your research on your responsibilities and obligations as an employer. Keep reading for some of the most important information that first-time employers in Vermont should know.
Determine whether you need employees or independent contractors
Not all small businesses need a team of full-time employees right out of the gate. You might find it more effective to outsource some of your responsibilities to an independent contractor instead.
Whether you decide to hire independent contractors or employees, you’ll need to make sure that you classify workers properly using one of the tests implemented by the federal government. Vermont businesses that misclassify their workers can pay fines of up to $5,000 per employee.
If you’re having trouble classifying one of your workers, file Form SS-8 to request a response from the IRS.
Understand your hiring costs and tax liability as an employer
If you decide to hire employees, it’s essential to understand how much of an investment they’ll be for your business. The Small Business Administration found that the cost of an employee to a business is about 1.25 to 1.4 times their salary, taking into account expenses like recruiting, benefits, and employment taxes.
To give you a better idea of your employer tax liability, below is a breakdown of the key taxes employers in Vermont are responsible for:
- Vermont employers must withhold federal and state income withholding taxes from their employees’ paychecks. The amount they withhold from each worker depends on the employee’s withholding allowances and wages.
- The Federal Insurance Contributions Act (FICA) imposes a Social Security tax and a Medicare tax on both employers and employees. The Social Security tax rate is 6.2% for employers and employees, while the Medicare tax rate is 1.45%.
- Vermont’s state unemployment insurance (SUI) tax rate is 1% for most new employers. The taxable wage base in 2024 is $14,300.
- Employers pay 6% in taxes on the first $7,000 in each employee’s wages under the Federal Unemployment Tax Act (FUTA). However, if they pay their SUI taxes in full and on time, they can get up to a 5.4% tax credit on their FUTA taxes.
You can also use Gusto’s hiring calculator to get a more accurate estimate of your potential hiring costs for salary or hourly workers.
Review Vermont labor laws
Employers in Vermont also need to be aware of the state’s employment and labor laws. We can’t list every single law, but we’ve put together a summary below with a few critical laws to get you started:
- Minimum wage: Vermont’s minimum wage will increase to $13.67 in 2024. The tipped minimum wage will also increase to $6.84.
- Overtime pay: Most employers are required to pay employees 1.5 times their regular rate of pay if they work over 40 hours in a work week.
- At-will employment: Unless they have an agreement stating otherwise, an employee and employer may terminate their relationship at any time and for any reason.
- Leave: Employers must provide employees with paid sick leave. Eligible employees are also entitled to unpaid jury duty, witness, crime victim, town meeting, family, and parental leave.
- Discrimination: The Vermont Fair Employment Practices Act prohibits discrimination based on ancestry, race, color, national origin, religion, sex, sexual orientation, gender identity, age, physical or mental condition, military status, and other factors. Employers are prohibited from retaliating against people who report them for discrimination.
There may be other federal, state, and local regulations you need to know about, depending on your municipality, industry, business activities, and number of employees. Stay updated on all your obligations as well as any changes to these laws by reaching out to the US Department of Labor, the Vermont Department of Labor, and local government agencies.
Take care of logistics
Get a federal employer identification number from the IRS
As a prospective employer, you’ll need to apply for an employer identification number (or EIN for short) from the IRS. An EIN acts like a Social Security number for businesses, allowing the IRS and other government agencies to identify your company on tax forms and other documents.
Businesses that are structured as a partnership, multi-member limited liability company (LLC), C corporation, or S corporation will already have an EIN, so they won’t need to apply for another one. But if you don’t have one yet, apply for one using the online application from the IRS.
You can find more information on federal employer identification numbers on the IRS website as well.
Register with the state of Vermont
New employers in Vermont must register with the Secretary of State to receive an income tax withholding account. Note that some businesses may already have an account if they collect sales, use, or meals and room taxes.
Employers also need to register for an unemployment insurance account with the Vermont Department of Labor. Finally, if you’d like to file your small business taxes online, you should sign up for an account with the state’s myVTax portal.
Find workers’ compensation coverage
Workers’ compensation insurance covers an employee’s medical expenses and wages if they get injured or sick on the job. All employers in Vermont are required to have workers’ compensation.
In Vermont, most employers get a workers’ compensation policy through a licensed private insurer. Some companies self-insure themselves instead, if they receive permission from the Department of Labor.
For more information on workers’ compensation in Vermont, visit the state’s Department of Labor website.
All employers must keep their personnel files in a secure location, since these documents often contain sensitive employee information. However, this paperwork should also be accessible in case the government requests it during an audit of your business.
The records you’ll need to keep on file include:
- Tax forms
- Withholding agreements
- Verification of eligibility to work
- Hours worked
- Wages paid
- Pay statements
- Benefits forms
- Performance evaluations
- Disciplinary records
- Other agreements made between the employer and employee
Additional recordkeeping requirements are listed on the Equal Employment Opportunity Commission(EEOC) website.
Before the influx of personnel records and other employee paperwork, take time now to set up your organizational system and prepare the documents you’ll need during the onboarding process. If your new hires will need anything else—like uniforms or equipment—make sure those are ready to go as well.
Prepare your business for hiring
Put together an employee handbook
Vermont employers are not required to have an employee handbook, but it’s a useful document you may want to create anyway.
Employee handbooks, also known as employee manuals, set out the rules and guidelines your employees are expected to follow as a member of your organization. By clearly outlining your policies and procedures, an employee manual can also protect your company in the event of an employee complaint or lawsuit.
Below are some important policies you should consider adding to your employee handbook:
- Code of conduct
- Work hours and overtime
- Dress code
- Meal and rest breaks
- Remote work policy
- Employee benefits
- Disciplinary action policy
- Sexual harassment policy
- Leave policy
Because your employee handbook is a reflection of how your company operates, you should expect it to grow and change as your business does. Make sure to review the policies in your manual every year and update them as needed.
Prepare a compensation package
Before you hire any employees, you’ll also need to put together a compensation package. If this is your first time doing so, you may find Gusto’s guide to compensation plans helpful.
At this point, you’ll also be selecting the benefits you’ll offer, especially if you plan on hiring full-time employees. Make the most of every dollar you put into your benefits program by choosing benefits your employees will actually want and use. This strategy improves your recruitment and retention efforts as well because investing in valuable benefits demonstrates to candidates that you care about your employees.
Consider adding one or more of these top employee benefits to your compensation package:
- Health insurance
- Retirement savings accounts
- Remote work arrangements
- Flexible work hours
- Unlimited paid time off
- Child care assistance
- Professional development opportunities
- Pet insurance
- Student loan assistance
Once you’ve chosen which benefits you’ll offer, use Gusto’s blog post to set up your own employee benefits program.
Advertise the job opening
Now you’re ready to write your first job post. Your listing should include the following basic information:
- Job title and description
- Type of employee (full-time, part-time, seasonal, temporary)
- Job location
- Expected hours of work per week
- Wage or salary range
- Educational requirements, if applicable
- Skills needed for the role
In some circumstances, the basics may not be enough to entice the most in-demand job seekers. So, you’ll need to show them why they’d want to work for you instead of someone else. One way to do this is by describing your benefits and your company culture in an exciting and compelling way. Help prospective applicants imagine what working at your company would be like.
Once you’re done writing your job post, you’ll need to get as many eyes as possible on it. Glassdoor and Indeed are great places to start, but you should consider alternative ways of promoting the job opening too. Taking advantage of offline channels like job fairs and college career centers can help you cut through the noise online and get your job post in front of qualified candidates in your community.
Assess and interview top candidates
As you receive applications, review each one and invite the top candidates to interview with you.
If you plan on having applicants go through a multi-step interview process, think about what that process will look like. How will you know when you’ve found your ideal candidate? What information will you need from each person to determine whether they fit your criteria?
For example, if your ideal candidate should have certain skills to succeed in the role, you might ask applicants who perform well in the initial interview to complete a series of short assessments afterward.
Keep in mind that the candidates have likely spent several hours of their time preparing for and attending each interview. Make sure you get the information you need from each individual while also being considerate of each person’s time and effort.
Hire and onboard your first employee
Follow the steps below as you onboard your new hire, and be attentive to all applicable federal and state laws.
Send the offer letter
Once you’ve found your ideal candidate and extended a job offer to them over the phone, confirm their acceptance and your employment terms. Then, send them an official offer letter to get it in writing.
The offer letter should include the following details:
- Job title
- Duties and responsibilities of the position
- Start date
- Wage or salary details
- Expected work hours
- Outline of employee benefits, if applicable
- Conditions of employment, if applicable
- Onboarding requirements
Give them a few days to review the terms of employment and sign the letter. Make sure to keep a copy of the letter for your records.
Conduct a background check
Background checks aren’t required in Vermont, but they’re something you may want to do as part of your due diligence as an employer. If so, here are some guidelines to keep in mind:
- Employers must notify applicants and receive written permission from them before conducting a background check.
- Companies can’t ask applicants to submit to a pre-employment drug test until they receive a conditional offer of employment.
- Employers can’t ask applicants to pay for background checks or pre-employment medical exams as a condition of their employment.
- Companies can’t ask applicants about their salary history or make hiring decisions based on an applicant’s past salary. They also can’t ask employees and applicants for their social media account information.
- If an employer decides not to move forward with a candidate because of a negative background check report, they must notify the candidate, provide them with a copy of the report, and give them a deadline to respond to the notice.
Other information on the state’s fair employment practices can be found on the Vermont General Assembly website.
Collect new hire forms from your employee
The federal and Vermont government requires employers to collect new hire paperwork from their employees by their first day of employment. These documents include:
- IRS Form W-4: Determines how much employers must withhold in federal income taxes from an employee’s paycheck
- Form W-4VT: Calculates an employee’s Vermont withholding taxes
- Form I-9: Verifies that a new hire is eligible to work in the US (keep this form in your records for at least three years after your employee’s start date or a year after termination)
- Voluntary Self-Identification of Disability form: Allows employees to voluntarily disclose whether they have a disability (required for federal contractors and subcontractors)
The following documents aren’t a requirement, but you may ask employees to fill out these forms so you can keep them on file:
- Employment contract
- Employee personal data form, including the employee’s contact information, emergency contact information, and Social Security number
- Benefit enrollment forms, if applicable
- Direct deposit form, if applicable
Report the new hire to the Vermont Department of Labor
Employers in the state of Vermont must report new hires through the Department of Labor’s Employer Web Application Portal within 10 days of their start date. Make sure to have the following information on hand when you file a new hire report:
- Employer’s name and address
- Employer’s EIN
- Employee’s name and address
- Employee’s Social Security number
- Employee’s first day of employment
Learn more about Vermont’s new hire reporting system by going to the Department of Labor website.
Set up payroll
As a first-time employer, you’ll need to choose a payroll system and set it up so your new employees can get paid on time. Because running payroll manually is time-consuming, we recommend using payroll software or working with a payroll provider.
Once you’ve chosen your payroll method, Gusto’s blog post on setting up payroll for the first time can walk you through the setup process. If you’ve hired remote workers, Gusto’s guide to paying out-of-state employees will also be helpful.
For more personalized guidance, ask your accountant for help. They’ll also be able to answer any questions you might have and provide you with payroll best practices.
Put up labor law posters and notices in the workplace
Last but not least, make sure to hang up any required labor law posters and notices in a visible area of your workplace, like your break room or kitchen. The federal and state government requires businesses to display these posters so employees are aware of their rights and their employer’s responsibilities to them.
Notices mandated by federal law include:
- Know Your Rights: Workplace Discrimination is Illegal poster
- Federal Minimum Wage poster
- Job Safety and Health: It’s the Law poster
- Family and Medical Leave Act poster
- Notice: Employee Polygraph Protection Act
- Your Rights Under USERRA poster
The state of Vermont also requires employers to post the following signage in their workplace:
- Minimum Wage poster
- Unemployment Insurance poster
- Earned Sick Time poster
- Notice to Employees: Employer’s Liability and Workers’ Compensation
- Workers’ Compensation Reinstatement Rights poster
- Safety Records Notice poster
- Parental and Family Leave poster
- Accommodations for Pregnant Employees poster
- Child Labor poster
- Crime Victims Rights poster
- Sexual Harassment poster
Keep in mind that this isn’t an exhaustive list—you may have additional posting requirements depending on your industry, municipality, or number of employees. To determine your company’s notice requirements, check the US Department of Labor website, the state Department of Labor website, and the websites of your local government agencies as well.
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