12 Vital Steps to Follow When Hiring a New Employee in Massachusetts

Barbara C. Neff

When you bring on a new employee in Massachusetts, you must also comply with requirements imposed by federal law and state law. The laws touch on a number of issues, ranging from employment eligibility, unemployment insurance, and workers’ compensation to payday schedules and tax withholding—and even tracking down employees who owe child support. They generally apply to all of your new employees and sometimes even independent contractors.

Keep reading to learn about the steps you should take to stay on the right side of the law.

1. Register with the tax authorities

If you haven’t already done so, you must register as an employer with the IRS and the Massachusetts Department of Revenue (DOR).

First, apply for a federal employer identification number (FEIN) with IRS Form SS-4, “Application for Employer Identification Number.” Once you’ve obtained your FEIN, you can register your business with Massachusetts on the MassTaxConnect website, where you will also file and pay various taxes (keep reading for details).

2. Check employment eligibility

Every new employee must complete the U.S. Citizenship and Immigration Services Form I-9, “Employment Eligibility Verification.” The new hire is required to fill out Section 1 of the form by their first day of employment. You’ll need to complete Section 2 by the end of the third business day after the new employee begins work. Keep it on file for three years after the date of hire or one year after the employment ends, whichever is later.

Massachusetts doesn’t currently require private employers to use the federal E-Verify system.

3. Report new hires

Under the federal Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) and Massachusetts state law, all employers must report certain information on their new hires (including some independent contractors), new retirees, and workers’ compensation claimants to the Massachusetts Child Support Enforcement Division. The information is used to locate parents who owe child support. Massachusetts also uses the information as a check against unemployment insurance fraud.

Specifically, you must report the required information for: 

  • All new hires who work in Massachusetts (even if the employee works only a day or less)
  • Employees who are returning to work after being off the payroll for 30 or more days
  • Employees who retire and will get retirement payments
  • Employees who file workers’ compensation claims

You must also report all newly hired independent contractors who are paid $600 or more during the year.

The deadlines for reporting are as follows:

  • New hires: within 14 days of the start of, or return to, their employment
  • Retired employees: within 14 days of the date of retirement
  • Employees who file workers’ compensation claims: within 14 days of the date the claim is filed
  • Independent contractors: within 14 days of the start of employment

You can report online through MassTaxConnect (this method is required for employers with 25 or more employees) or download the new hire report form. You can fax the form to (617) 376-3262 or mail it to:

Massachusetts Department of Revenue
P.O. Box 55141
Boston, Massachusetts 02205-5141

If you fail to report, the penalty is up to $25 for each new employee, independent contractor, or other recipient of periodic payments who isn’t reported or is inaccurately reported.

The penalty is $500 for each employee or independent contractor if the failure to follow reporting requirements or the report of inaccurate information is the result of a conspiracy or agreement between the employer and the employee or independent contractor.

4. Provide required notices

Massachusetts dictates that employers provide new employees with a variety of notices about their rights under Massachusetts employment laws, including:

5. Comply with the state-mandated payday schedule

Every employer in Massachusetts must pay nonexempt (or hourly) employees weekly or biweekly. The deadline to pay depends on how many days an employee worked during one calendar week.

If the number of days worked is five to six days then workers must be paid within six days after the pay period ends. If the number of days worked is one to four days or seven days, then the worker must be paid within seven days after the pay period ends. 

Workers who quit their jobs must be paid in full on the next regular payday or by the first Saturday after they quit (if there is no regular payday). Workers who are fired or laid off must be paid in full on their last day of work.

Exempt employees may be paid biweekly or semi-monthly.

6. Prepare for your Massachusetts withholding duties

Massachusetts employers must withhold state personal income taxes from all Massachusetts residents’ wages for services performed either in or outside the state and from nonresidents’ wages for services performed in the state. New employers must file returns and pay withholding taxes electronically on MassTaxConnect.

If you’re the owner of a business that is a sole proprietorship, you’re generally not considered an employee for withholding purposes even if you’re the only worker—so you wouldn’t need to register for withholding solely to pay your own taxes. But, if you expect to owe more than $400 in Massachusetts state income tax on the income you receive from the business, you must make individual estimated income tax payments.

The amount to withhold from an employee’s pay is based on:

  • The employee’s taxable wages,
  • The number of exemptions claimed, and
  • Any additional withholding amounts requested on Form M-4, “Massachusetts Employee’s Withholding Exemption Certificate”

You can calculate withholding by using either the withholding tables provided in Circular M or using the percentage method described in Circular M. The methods may be applied on a daily, weekly, biweekly, semi-monthly, or monthly basis.

The frequency of your return (Form M-941, “Employer’s Return of Income Tax Withheld”) filing and payments depends on your projected annual withholding tax collected from all employees:

  • $100 or less: Your return and payment are annually due by January 31 of the following year
  • $101–$1,200: Your return and payment are due quarterly, on or before the last day of the month following the close of the calendar quarter (April 30, July 31, Oct. 31, and Jan. 31)
  • $1,201–$25,000: Your return and payment are due monthly, on or before the 15th day of the following month except for the payments for March, June, September, and December, which are due on the last day of the following month
  • More than $25,000: Your return is due quarterly, on or before the last day of the month following the close of the calendar quarter. When Massachusetts income tax withheld is $500 or more by the 7th, 15th, 22nd, and last day of a month, then you must pay within three business days after those listed dates (the 7th, 15th, 22nd, and last day of a month).

7. Understand your federal payroll tax obligations

Employers generally must withhold federal income tax from their employees’ pay, too. You should collect IRS Form W-4, “Employee’s Withholding Certificate,” from each new hire, on or before the day they start work. The form is used to determine how much of their pay should be withheld for federal income taxes. Make sure your employees complete it properly.

You aren’t required to submit Form W-4 to the IRS, but you must keep a copy on file for at least four years. The form provides proof that you’re withholding federal income tax according to the employee’s instructions and needs to be available for inspection if the IRS ever requests it. 

You also must withhold employees’ share of Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA).

FICA is a federal tax that both employers and employees pay. It includes two taxes: Medicare tax and Social Security tax. The 2023 tax rates for both employees and employers are 6.2% of the first $160,200 of an employee’s earnings for Social Security (for a total of 12.4%) and 1.45% of all wages for Medicare (for a total of 2.9%).

You may be required to withhold the Additional Medicare Tax. Employers must withhold the 0.9% tax from an individual’s wages paid in excess of $200,000 in a calendar year.

You must deposit federal income tax withheld and both the employer and employee Social Security and Medicare taxes. The IRS deposit schedules are either monthly or weekly. Determine which schedule you’re required to use before the beginning of each calendar year.

In addition, you are required to pay federal unemployment taxes (FUTA) if you:

  • Paid wages of $1,500 or more to employees in any calendar quarter during the current or previous tax year, or
  • Had one or more employees for at least some part of a day in any 20 or more different weeks in the previous year or 20 or more different weeks in the current tax year, counting all full-time, part-time, and temporary employees.

The amount due is 6% of the first $7,000 of an employee’s wages during the year.

You must keep up with your IRS Form 941, “Employer’s Quarterly Federal Tax Return,” and IRS Form 940, “Employer’s Annual Federal Unemployment Tax Return” obligations. Deposits for the federal unemployment tax (Form 940) are required for the quarter within which the tax due exceeds $500. The tax must be deposited by the end of the month following the end of the quarter. Form 940 is due by January 31, but, if you deposited all FUTA tax timely, then you have until February 10 to file.

File your initial Form 941 for the quarter in which you first paid wages that are subject to Social Security and Medicare taxes or subject to federal income tax withholding. The form is due by the last day of the month that follows the end of the quarter. If you deposited all taxes by the deadline, then you have 10 additional calendar days to file the return. 

After the first filing, you must file Form 941 for every quarter, regardless of whether you have any taxes to report—unless you’re a seasonal employer or are filing your final return.

Employers are required to furnish a completed wage and tax statement (Form W-2, “Wage and Tax Statement,” or Form 1099-NEC, “Nonemployee Compensation”) to each employee by the last day of January each year. You’ll also provide a copy to the Massachusetts DOR.

8. Maintain proper payroll records

As a Massachusetts employer, you should keep withholding records that include:

  • The name, address, occupation, and Social Security number of each employee
  • The amount and date of all wage payments, the period of services covered by such payments, and the amounts of tax withheld
  • Employees’ statements of tips received
  • Employees’ withholding exemption certificates (Forms W-4 and M-4)
  • Employer’s copies of employees’ Wage and Tax Statements (Form W-2)
  • Copies of all withholding returns filed with the DOR

You’re required to keep all withholding records for at least three years after the date the return was filed or the date it was required to be filed, whichever is later. If you don’t file a return or file a false or fraudulent return, the DOR may request records at any time. 

9. Make your Massachusetts unemployment insurance contributions

Generally, the Massachusetts unemployment insurance law requires you to contribute to the Unemployment Insurance (UI) Trust Fund if you:

  • Have one or more employees working on a permanent, temporary, or part-time basis, on one or more days in 13 weeks during a calendar year, or
  • You pay wages of $1,500 or more in any calendar quarter.

The weeks of employment don’t need to be consecutive, nor must the employees remain the same.

You must register online to report quarterly wage data to UI Online. (You are required to file even if you have no employees and no wages to report for a quarter). Once you submit your quarterly employment and wage detail report, UI Online will calculate your balance due. Contributions are due by 3:00pm on or before the quarterly due dates:

  • Quarter 1: April 30 
  • Quarter 2: July 31 
  • Quarter 3: Oct. 31 
  • Quarter 4: Jan. 31 

New employers contribute at an assigned rate for the first three calendar years. In the fourth year, you’ll receive a true experience rating using the formula prescribed by law. The current new employer rate for employers in a non-construction industry is 1.45%, under UI Tax Rate Schedule A. The rate is 5.55% for new employers in construction.

The experience rating is based on the two-step reserve ratio method:

  1. A reserve percentage is calculated by dividing your account balance by the three-year wage average.
  2. The reserve percentage is applied to the annual rate schedule currently in effect, and the experience rate is determined for the coming year.

Once an experience rate is assigned, that rate is applied to the applicable wage base. The current taxable wage base is $15,000 in wages, so you’ll apply the rate just to the first $15,000 in wages for each employee.

Interest will accrue on any unpaid principal balance at the rate of 12% per year from the applicable quarter due date until the balance is fully paid. If you have outstanding debt and can’t pay the full amount due, you can request a payment plan. This will allow you to pay the outstanding debt in installments (interest will continue to accrue).

10. Line up workers’ compensation coverage

All employers operating in Massachusetts are required to carry workers’ compensation insurance for their employees, as well as themselves if they’re also a company employee. The requirement applies regardless of the number of hours worked or the number of employees.

Some exemptions are available. For example, members of a limited liability company (LLC), partners of a limited liability partnership (LLP), or sole proprietors of an unincorporated business aren’t required to carry workers’ compensation insurance for themselves. Corporate officers who own at least a 25% interest in the corporation can request an exemption from workers’ compensation coverage.

The Massachusetts Department of Industrial Accidents (DIA) Office of Investigations will issue a stop work order (SWO) to employers that don’t have workers’ compensation insurance. Minimum fines are $100 per day, including weekends and holidays, beginning on the date the order was issued. Fines accrue daily until insurance coverage begins.

To purchase workers’ compensation coverage, you should contact an insurance agent, broker, or company. A license for self-insurance may be an option for qualified employers—but you must have at least 300 employees and an annual standard premium of $750,000, so this option usually isn’t available for new employers.

Note that the DIA doesn’t set insurance rates or issue workers’ compensation policies. 

11. Display the required posters

Federal law may require you to post some or all of the following posters in a conspicuous location in your workplace:

The U.S. Department of Labor has an online “poster advisor” to help employers determine which posters they need to display.

Massachusetts also requires you to hang certain posters, including: 

12. Familiarize yourself with the relevant labor laws

Massachusetts employers are subject to a wide range of federal and state employment laws, including the following federal laws:

Massachusetts also provides numerous additional protections and requirements related to the conditions of employment under its labor laws, including a $15 minimum wage. Other potentially relevant state laws include:

Massachusetts has numerous leave laws that could require to you provide time off, too:

Keeping up with the legal obligations associated with being a Massachusetts employer can seem overwhelming. Automated platforms like those offered by Gusto can help.

Barbara C. Neff has been writing about a variety of legal and other topics since 2001. She has a law degree and a master's degree in journalism.
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