Your bottom line has increased and you’re able to hire new employees, or rehire previous workers. Great! Once your employees have filled out all their paperwork, it's important that you, as an employer to keep the ball rolling and comply with state and federal regulations.
All employers must follow the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996. This requires an employer to report all their new hires to the appropriate state agency within a pre-selected period of time. All new hires must be reported within 20 days if your business sends the information by mail, or twice a month if you transmit this information electronically. Non-compliance with this federal regulation could result in monetary penalties being imposed, or non-monetary civil penalties by the state.
Most of this information can be found on the W-4 once an employee is hired, but you should check all paperwork to be sure. Employers should recognize that new hire reporting is an additional requirement. All new hires are reported to their State Database of New Hires (SDNH), while federal employees are reported directly to the National Directory of New Hires (NDNH).
What exactly should an employer report?
Every business with new hires should report the following:
- Employer Name, FEIN and address
- Employee Name, address, social security number (SSN) and most importantly, date of hire (the first day an employee performs work for compensation).
- Eligibility to work in the United States by filing Form I-9, Employment Eligibility Verification.
If you are rehiring a former employee or they were on a leave of absence, check your payroll records. If the employee was never formally terminated or removed from the system, they are still active in the database. If an employee has been separated from the company for over 60 days, they are considered a new hire and human resources should follow the same steps as if they were a brand-new employee.
Be sure to have your Human Resources department check the state reporting requirements, as each state operates differently. You may have to report your independent contractors, even though federal law does not require it. More information can be found in the State New Hire Reporting Contacts and Program Information matrix for requirements specific to your state. Additionally, if the address where employees work is different from your payroll address, report both addresses.
Always report your new employees, even if they terminate their employment prior to the new hire report being sent in. Although this process may be burdensome, it can save you a lot of headache in the long run. Additionally, fraudulent employment and workers’ compensation payments can be reduced or prevented thorough the New Hire cross-match system. Following these guidelines will ensure compliance and keep your business in the black!