Growing your team is an exciting milestone and a vital part of scaling your business. With over 30% of small business owners reporting they clock in more than 50 hours a week, hiring new employees can help delegate everyday tasks and free up time for strategic planning. But when a candidate accepts your job offer, that’s just the beginning. You’ll also need to fulfill certain legal responsibilities, like new hire reporting — to stay compliant with federal and state laws.
While the requirements aren’t necessarily difficult, they can vary by location and must be followed carefully to avoid penalties.
Let’s walk through what new hire reporting involves and how to keep your business compliant.
Are employers required to report new hires?
Yes — both federal and state governments require employers to report new hires. Most states also mandate that you report any rehired employees returning to a previous role. Agricultural employers may have different requirements depending on their classification.
New hire reporting is time-sensitive. Typically, you’ll have between 15 and 20 days after an employee’s start date to submit the required information, depending on your state. This process was established under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) and is used to enforce child support and verify employment for various benefit programs.
Failing to report new hires can result in penalties. For example, in Alabama, the fine is $25 per unreported hire, while in Illinois it starts at $15. Intentional noncompliance could trigger even higher fines, up to $500 per employee.
Not sure where to file? The U.S. Department of Health and Human Services has a directory of each state’s new hire reporting site. Or ask your accountant or tax professional for help.
What information needs to be reported?
Employers must report new hires to the state where the employee will work or where payroll taxes are reported. Federal law requires the following information:
- Employer name
- Employer address
- Federal Employer Identification Number (FEIN)
- Employee name
- Employee address
- Social Security Number
- Employee’s start date
Each state may have additional fields or documentation requirements, so be sure to confirm what’s needed in your jurisdiction.
Why is reporting new hires important?
New hire reports help identify individuals who may owe child support, prevent fraudulent claims for unemployment or public assistance, and ensure proper payroll tax withholding. As a business owner, you help support this system by promptly reporting new employees.
What’s the deadline for reporting?
Federally, you’re required to report new or rehired employees within 20 days of their start date. Some states set earlier deadlines, so it’s wise to verify your local timeline. Use the same FEIN for new hire reports as you do when filing payroll tax returns.
Reports are typically filed using a W-4 or similar state-specific form and must include the employee’s identifying details.
Are independent contractors included?
Federal law doesn’t require reporting contractors, but certain states, including California and Connecticut, do. Since contractors operate as independent entities, they generally report their income directly. Check with your state to determine your obligations.
What about employees who leave?
Generally, you don’t need to report a terminated employee, unless they had child support withholdings. In that case, notify the relevant child support agency, court, or attorney who issued the withholding order.
Additional onboarding best practices
The first day for a new employee can be packed: paperwork, introductions, and reviewing company policies. It’s helpful to provide your employee handbook and get a signed acknowledgment form confirming they’ve reviewed your policies.
For a smoother onboarding experience, consider using HR software like Beyond to automate and streamline the process.
What forms should new hires complete?
Depending on the role, here are the standard forms you’ll need:
- Form W-4: For employee tax withholding. Updated in 2020, this form is required for all W-2 employees. Some states also require a separate state tax form.
- Form W-9: Used for independent contractors. Collect this before any work begins.
- Form I-9: Verifies identity and employment eligibility. Must be completed within 3 business days of the hire date. Fines for noncompliance range from $586 to $4,667 per violation.
- Direct deposit form (optional): Helps employees receive their pay faster and simplifies your payroll process.
Don’t forget your workers’ comp insurer
When you hire or terminate an employee, notify your workers’ compensation insurance provider or your state agency. Your premiums are based on your workforce size and roles, so keeping this info updated is essential.
Key points to remember
Before processing your new hire’s first paycheck, you’ll need to:
- Report them to the appropriate state and federal agencies
- Complete the necessary paperwork (W-4, W-9, I-9, etc.)
- Provide access to direct deposit and other company benefits, if applicable
Following these steps helps you avoid costly compliance penalties. Mistakes, even small ones, can add up over time, especially if repeated with multiple hires.
HR solutions like Beyond can help simplify this process by allowing new hires to self-onboard, automating paperwork, and keeping everything organized. By staying compliant from day one, you’re laying the foundation for a smoother and more professional onboarding experience.
