Growing a business requires making strategic investments—like hiring. Adding an employee to your operation can help you serve more customers and gain back time, but there are a few administrative hoops to jump through first.
If you’re preparing to hire employees for the first time in Indiana, it’s a good idea to review your state’s employer obligations and labor laws first. Lucky for you, our guide has important information you need to know.
Here are six steps to hiring employees in Indiana:
Step 1: Handle new employer logistics
Employers in every state have to register with certain federal and state departments before hiring. Here’s what you need to do:
Apply for a federal employer identification number (EIN) on the IRS website
If you don’t already have a federal employer identification number (EIN) with the Internal Revenue Service (IRS), now is the time to apply for one. You can’t file federal withholding taxes or register as an employer with your state department without an EIN.
Did you register your business as a partnership, multi-member limited liability company (LLC), C corporation, or S corporation? If the answer is yes, you already have an EIN. Do you have a sole proprietorship or a single-member LLC? If the answer is yes, you likely still need to get your EIN.
You can apply for an EIN on the IRS website.
Register with the Indiana Department of Revenue
If you hire employees in the state of Indiana, you have to pay state income withholding taxes on your employees’ wages. To register for state withholding taxes and obtain an Indiana account number, visit INBiz, the state’s one-stop portal for business registration and resources.
You also have to withhold county tax in Indiana. The tax is based on your employee’s county of residence as of January 1 of the tax year. There are 92 counties in Indiana that impose county withholding taxes. See the full list of counties and their rates here.
To learn more about withholding tax, visit the Indiana Department of Revenue website.
Register with the Indiana Department of Workforce Development
The Indiana Department of Workforce Development (DWD) runs the state’s unemployment insurance program, which requires all employers to pay unemployment insurance taxes. Those taxes help the state provide short-term financial assistance to Indiana workers who are temporarily unemployed through no fault of their own.
Make sure you register as a new employer using the Uplink Employer Self-Service System. If you need help or have questions, check out the DWD’s Unemployment Insurance Employer Handbook or read through the DWD’s employer FAQs.
Register for Indiana workers’ compensation insurance
The Workers’ Compensation Board of Indiana (WCB) requires all Indiana employers with at least one part-time or full-time employee to get workers’ compensation insurance. Workers’ compensation coverage gives injured employees wage loss and medical benefits if they’re hurt at work. It also provides some legal protections for you as an employer.
You need to search for a private commercial insurance carrier in Indiana to get workers’ compensation insurance. For more information, visit the WCB’s employer resources page.
Once you get workers’ compensation insurance, learn how to optimize your policy.
Step 2: Understand your hiring costs and tax liability
Hiring employees is an investment. Beyond budgeting for recruiting costs and creating an employee compensation package, you also have to account for federal and state taxes. (To get a better picture of your hiring costs, use Gusto’s handy hiring calculator.)
Here are the employer-specific payroll taxes to plan for in Indiana:
- FICA taxes: Under the Federal Insurance Contributions Act (FICA), employers have to pay a share of their employees’ Social Security and Medicare taxes. Social Security tax rates are 6.2% for the employer and 6.2% for the employee, while Medicare tax rates are 1.45% for the employer and 1.45% for the employee.
- SUI taxes: Employers across the US are also subject to state unemployment insurance (SUI) taxes. Every state has different tax rates, and for new employers in Indiana, the rate is 2.5% on the first $9,500 of an employee’s wages.
- FUTA taxes: The Federal Unemployment Tax Act (FUTA) is a federal unemployment program that operates alongside state unemployment programs. The FUTA tax rate for employers is 6% of the first $7,000 of employee wages. However, if you pay your state unemployment taxes on time and in full, you can get a credit on FUTA taxes of up to 5.4%, lowering your FUTA tax liability to 0.6%.
- Federal income withholding taxes: All employers 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: Indiana employers have to withhold state and county income from employees’ wages and make regular payments. Learn more about Indiana state withholding tax, including filing processes and due dates, and Indiana county tax.
Need help calculating paychecks and withholdings for your employees? Use Gusto’s Indiana hourly paycheck and payroll calculator and Indiana’s salary paycheck and payroll calculator.
Step 3: Check Indiana labor laws
It’s critical to have a strong understanding of both state and federal labor laws when hiring a new employee. Start by reviewing these labor law topics from the Indiana Department of Labor:
- Minimum wage: The Indiana minimum wage is currently the same as the federal minimum wage: $7.25/hour.
- Overtime: The Fair Labor Standards Act (FLSA), which is federal law, says that non-exempt Indiana employees who work more than 40 hours in a workweek must be paid overtime pay at a rate of 1.5 times. Learn more about Indiana’s wage and hour laws.
- Pay frequency: Indiana employers are required to pay employees at least semi-monthly on regularly scheduled paydays. If your employees quit or you lay them off, you have to pay them their owed wages on the next regularly scheduled payday.
- Breaks at work: Indiana requires employers to provide breaks and limit the work hours of teenage employees who are minors.
- At-will employment: The state of Indiana is an at-will employment state. As an employer, you can fire employees at any time without reason or cause, and your employees can leave their jobs at any time without reason or warning.
- Right to work: Indiana is a right-to-work state, which means Indiana employees can’t be forced to join a union or pay union dues. Indiana employers can’t discriminate against job candidates and employees based on whether or not they’re part of a union.
- Leave: There’s no law in Indiana that requires employers to provide paid sick days, paid jury duty leave, voting time leave, personal days, or holidays. But here’s a pro tip: offering employee benefits like paid time off and health insurance can help improve employee satisfaction at work and reduce turnover.
- Paid leave: There’s no Indiana law that requires employers to provide paid leave. However, as an Indiana employe, you’re still subject to the federal Family and Medical Leave Act (FMLA), which requires you to offer up to 12 weeks of unpaid job-protected leave to employees for certain qualifying conditions, like bonding after the birth or adoption of a child.
- Family military leave: Indiana has a family military leave law that applies to employers with 50 or more employees. Under the law, Indiana employees whose family members serve in the military can take up to 10 days of unpaid leave in a calendar year for certain events.
- Discrimination laws: Under the Indiana Civil Rights Act, employers with six or more employees cannot discriminate against employees on the basis of race, color, religion, sex, national origin, ancestry, disability, or military veteran status.
- Pay equity: Indiana law says employers cannot pay an employee less than another employee of the opposite sex for equal work.
Check out Gusto’s state-by-state guide to pay equity laws and state-by-state guide to salary history laws.
Step 4: Fill out the Indiana new hire reporting form
Indiana follows new hire reporting requirements, which are used primarily to locate parents who have child support arrears.
As an employer in Indiana, you have to report newly hired employees and rehired employees (whether they’re part-time, full-time, or seasonal workers) to the Indiana New Hire Reporting Center within 20 days of the employee’s official date of hire. The hiring date is the first day an employee performs payable services or is able to earn a commission.
Start by registering your business for the Indiana New Hire Program services. Once you do that, you can log in to report new hires. Make sure you have your employee’s name, address, Social Security number, date of birth, and work start date on hand.
For more information, read Indiana’s new hire reporting FAQs or explore Indiana’s new hire employer resources.
Step 5: Complete other hiring documents
There are a handful of other key hiring documents you need to complete as a new employer. Make sure you download, distribute, and fill out the following:
- Employment contract: Employment contracts tell employees about their job responsibilities, pay, and the workplace policies they must abide by. It’s a good idea to write up an employment contract before you hire someone new, and provide your new hire with an employee handbook once they start working.
- Form I-9: Form I-9, the Employment Eligibility Verification Form, verifies that employees are able to work in the US. You have to complete the I-9 form for every new hire, and each employee has to attest to their employment authorization. You don’t have to file Form I-9 with the US Citizenship and Immigration Services (USCIS) or Immigration and Customs Enforcement (ICE). Instead, hold on to the form as a record for at least three years from the date of hire or from one year after employment ends. You can download Form I-9 and read completion instructions here.
- Form W-4: New employees need to complete IRS Form W-4, The Employee’s Withholding Certificate, on or before the first day of their employment. You use the W-4 form to determine how much federal income tax to withhold from your employees’ paychecks. Download the form.
- Form WH-4: You also need to give new employees Form WH-4, the Indiana Employee’s Withholding Exemption and County Status Certificate, to fill out.
After you fill out and distribute these forms, take time to save easily accessible, digital copies of everything for your business’s internal records (and for tax purposes).
Step 6: Display labor law posters and required notices
The Indiana DWD requires employers to post labor law signs in the workplace that summarize employees’ rights. Most labor law posters cover everything from minimum wage and overtime to workplace discrimination and pay equity.
Check out Indiana’s required labor law postings here. After you download those, review the required federal labor law posters from the US Department of Labor.
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