If you’re hiring your first employee in North Carolina, it’s critical to know the hiring process and state regulations in place. Our guide to hiring in the Tar Heel State covers everything from hiring documentation to employer taxes. Read on for six steps to hiring employees in North Carolina:
Step 1: Take care of logistics
Before you begin looking for job candidates, handle these key administrative tasks and register with the correct state agencies:
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 North Carolina Department of Revenue
To hire employees in the state of North Carolina, you need to pay state income withholding taxes, which means you have to register your business with the North Carolina Department of Revenue (NCDOR).
Once you provide your Social Security number, EIN, business details, and personal information, you’ll receive a North Carolina tax account ID number. Start the registration process.
Register for North Carolina’s unemployment insurance program
To become an employer in North Carolina, you need to create a business account with the North Carolina Department of Commerce and Employment Security to pay unemployment insurance taxes. The state of North Carolina requires most employers to contribute to the state’s unemployment insurance fund, which provides qualified unemployed people with certain financial benefits.
As a North Carolina employer, you’re required to pay unemployment insurance taxes if:
- You have a gross payroll of at least $1,500 in any calendar quarter or
- You have at least one employee who works 20 weeks in a calendar year.
Get workers’ compensation insurance
The North Carolina Department of Insurance requires all employers with three or more employees to obtain workers’ compensation insurance. Workers’ compensation insurance ensures that employees who get injured during the course of their job receive medical and wage-loss benefits—and also that you receive liability protection as an employer.
To get workers’ compensation insurance in North Carolina, check out the North Carolina Industrial Commission’s resources or search for a private insurance carrier within the state.
Step 2: Understand your hiring costs and tax liability
Hiring employees in North Carolina isn’t a small investment. Beyond general recruiting costs and the cost of your employee’s compensation package—which usually includes a salary, health insurance, paid time off, and other worthwhile employee benefits—you also have to budget for payroll taxes.
In addition to Medicare and Social Security taxes, you’ll have to pay a couple of state taxes. Here are the key North Carolina employer 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 North Carolina is 1.9% on a wage base of $29,600.
- 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%.
- If you have employees, you have to withhold state income tax from their pay. As a North Carolina employer, you’ll pay withholding tax on a monthly, quarterly, or semi-weekly basis. Learn more about NC withholding tax.
Do you have enough money to hire an employee in North Carolina? Use this calculator to find out.
Step 3: Check North Carolina employment laws
It’s important to understand state and federal labor laws before hiring employees in North Carolina. That includes minimum wage laws, overtime laws, pay transparency and reporting laws, pay equity laws, and classification differences between employees and independent contractors.
Here are a handful of notable North Carolina labor laws from the North Carolina Department of Labor (NCDOL):
- The minimum wage for employees in North Carolina is the same as the federal minimum wage: $7.25/hour. See additional information about North Carolina wage and hour laws.
- Non-exempt North Carolina employees who work more than 40 hours in a week must be paid overtime pay, which is 1.5 times their regular rate of pay.
- North Carolina is an at-will employment state, meaning employers have the right to terminate a person’s employment without reason or cause.
- The state of North Carolina doesn’t require employers to provide paid sick leave, vacation time, jury duty pay, or severance—that’s up to the individual employer.
- Under the Equal Employment Opportunity Commission’s Equal Pay Act, it’s illegal for North Carolina employers to pay an employee less than the opposite sex for the same work.
Step 4: Fill out the North Carolina new hire reporting form and furnish forms to employee
When you hire an employee in North Carolina, you need to report information about that employee to the North Carolina Hiring Directory within 20 days of the employee’s 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.
Create an online account with the North Carolina New Hire Program Services to start the new hire reporting process and report newly hired employees and re-hired employees. You’ll provide your employee’s name, address, Social Security number, date of birth, and work start date.
Next, carve out some time to complete these 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 the workplace policies detailed in your employee handbook.
- Form I-9: The US 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. Download Form I-9 and read the completion 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.
- Form NC-4: You also need to give employees Form NC-4, the North Carolina Employee’s Withholding Allowance Certificate, to fill out.
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. An all-in-one payroll platform simplifies the payment process and keeps you organized with federal and state taxes. Regardless of which payroll method you use, don’t forget to 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: North Carolina employers use Form NC-3, the Annual Withholding Reconciliation, to file withholding tax returns. For information on filing deadlines and form instructions, check out North Carolina’s employer withholding FAQs.
- Social Security and Medicare taxes
- Unemployment taxes
Need help determining withholdings for your employees? Check out Gusto’s North Carolina hourly paycheck and payroll calculator and North Carolina’s salary paycheck and payroll calculator.
Step 6: Display labor law posters and required notices
North Carolina requires employers to post specific labor law signs and notices in your workplace, so your employees know their rights on the job. Read the NCDOL’s posting requirements to see which notices you’re obligated to post and how to download them. While you’re at it, gather and download all the required federal labor law posters from the US Department of Labor as well.
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