Hiring your first employee is an exciting endeavor, but there are a lot of logistics to consider. That’s especially true if you own a business in New York, where labor laws and small business taxes can be more complex. Fortunately, we’ve got you covered. Check out these six steps to hiring employees in New York:
Step 1: Take care of logistics
Before you write a job description or search for candidates, take the time to get your administrative ducks in a row. That means completing paperwork and registering your business with the appropriate departments. Here are four steps to take:
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 New York State Department of Taxation and Finance
Before hiring employees in New York, you need to fill out a New York State (NYS) Employer Registration Form and get unemployment insurance. The NYS Unemployment Insurance Law requires employers to make contributions on the wages paid to their employees. You can register online here.
Once you register, create an NY.gov account, then sign in to check your registration status. The average processing time is five days. For more information on registering for unemployment insurance, read New York State’s guide.
Get workers’ compensation insurance
New York requires employers with one or more employees to have workers’ compensation insurance. Workers’ compensation insurance gives you liability protection as an employer while also ensuring your employees have legal representation and financial support in the event of a medical emergency.
You can get workers’ compensation insurance through a private insurance carrier, by applying for self-insurance, or using a public provider like the New York State Insurance Fund. Learn more about getting insurance on the New York State Workers’ Compensation Board website.
Get disability benefits and paid family leave insurance
New York is one of several states that require employers to provide disability benefits coverage to employees for injuries, illnesses, and medical conditions that occur off the clock. New York also has a paid family leave policy that requires most private employers with one or more employees to obtain paid family leave insurance.
Review your options for New York disability insurance here and research insurance providers for paid family leave here.
Step 2: Understand your hiring costs and tax liability
Hiring employees in New York can be expensive, so it’s crucial to review your finances, make sure you understand the expenses and tax responsibilities that come with being an employer, and create a hiring budget. In addition to paying Medicare and Social Security taxes, you also have to pay a few different state taxes.
Here are the New York 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 2023 annual state unemployment insurance (SUI) tax rate for new employers in New York is 3.4% on a wage base of $12,300.
- 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%, dropping your FUTA tax liability to 0.6%.
- The New York Metropolitan Commuter Transportation Mobility Tax (MCTMT) applies to employers that do business in the following counties: New York, Bronx, Kings, Queens, Richmond, Rockland, Nassau, Suffolk, Orange, Dutchess, and Westchester. If your payroll expenses are over $312,500 per calendar quarter, you have to pay the MCTMT. Your tax rate varies (from 0.11% to 0.60%) depending on the exact amount of payroll expenses you pay each quarter.
- New York employers also pay a reemployment tax to the New York reemployment service fund (RSF). The tax is 0.075% of the quarterly wages reported on your Quarterly Combined Withholding, Wage Reporting and Unemployment Insurance Return (NYS-45).
Other hiring expenses include recruiting costs, like job site subscriptions and conference fees, as well as everything that goes into an employee compensation package. Think: employees’ salaries, health insurance, paid time off, and other benefits.
Not sure how to start budgeting? Check out this handy infographic on hiring in New York State so you know what’s realistic.
Step 3: Check New York state labor laws
It’s important to stay up to date on federal labor laws and state labor laws before hiring employees in New York. That includes pay transparency and reporting laws, minimum wage requirements, overtime laws, and classification differences between employees and independent contractors.
Here’s a handful of notable New York labor laws:
- The minimum wage in New York City, Long Island, and Westchester is $15/hour. The minimum wage across the rest of the state is $14.20/hour. You can learn more about New York State wage laws here.
- New York bans salary history inquiries, which means employers can’t ask job candidates to provide their wage or salary history as a condition of employment. (See which other states have similar salary history laws.)
- New York has a pay equity law that makes it illegal to pay an employee less than the opposite sex for the same work.
- New York requires employers to provide sick leave to employees. If you have fewer than five employees and a net income of $1 million or less, you have to provide 40 hours of unpaid sick leave per year. If your net income is over $1 million, you need to provide 40 hours of paid sick leave.
- New York’s pay transparency law requires employers to disclose compensation (or reasonable compensation ranges) to both job applicants and current employees.
Learn more about the difference between an independent contractor and an employee, or check out Gusto’s state-by-state guide to pay equity laws.
Step 4: Fill out the New York new hire reporting form and distribute forms to the employee
When you hire an employee in New York, you need to report information about that employee to the state within 20 days of their official hiring date. The hiring date is considered the first date the employee performs services you’ll pay them for, or the first day an employee on commission is eligible to earn a commission.
Start by creating an account at the New York Department of Taxation and Finance’s New Hire Online Reporting Center. From there, you’ll fill out a new hire reporting form and provide the required information, which typically includes the employee’s name, address, Social Security number, date of birth, and work start date.
You’ll also have 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 the employee will have, the wages you’ll pay, and your workplace policies.
- 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 United States. 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 for one year after employment ends. You can 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 determines how much federal income tax will be withheld from the employee’s paychecks. Download the form here.
- Form IT-2104: You also need to give employees Form IT-2104, the New York State Employee’s Withholding Allowance Certificate, to fill out. See completion instructions here.
Make sure you keep copies of all the above documents as part of your business’s records.
Step 5: Set up your payroll system
Hiring an employee for the first time is a good opportunity to set up or update your payroll system. Small business payroll software makes it easier to pay employees on time and maintain compliance. 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: New York employers use Form NYS-45 to file the Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return.
- Social Security and Medicare taxes
- Unemployment taxes
Step 6: Display New York labor law posters and required notices
New York requires employers to post certain employment law signs and notices in their workplaces so employees have an understanding of their rights and resources. Check out the NYS Department of Labor’s posting requirements to find out which notices you’re obligated to post and how to download them.
And don’t forget about the required federal labor law posters as well.
Streamline payroll with Gusto
Congratulations on hiring your first employee in New York! Now, set yourself up for success with a simpler, more efficient payroll system. Gusto’s full-service payroll platform makes paying employees easy—and filing business taxes stress-free. Create an account today to get started.
