Ways to hire a new employee in California
Quick insights
- California uses the ABC test to sort workers as employees or contractors.
- Registering with the state and getting workers' compensation coverage are among the steps employers may review before hiring.
- California requires specific new hire paperwork and reporting to the state.
Growing a small business in the Golden State often means bringing new workers on board. The hiring process in California has state rules that differ from other states.
Maybe your bakery needs extra hands during the holiday rush. Or your consulting firm is ready to add a second team member. Whatever the reason, hiring a new employee in California comes with state-specific steps.
Researching California employment rules
Before you start hiring, it may help to look into California's employment rules. Knowing what the state asks for could help you reduce common mistakes.
One of the first things to consider is whether you want an employee or a contractor. California uses the ABC test to sort workers. A worker is generally an employee unless three rules are met:
- Not under your control: The worker is not directed by you in how they do the job.
- Outside your usual business: The work is different from what your company typically does.
- Has their own trade: The worker has an independent business in the same field.
Sorting a worker the wrong way could lead to fines. Checking with the California Employment Development Department (EDD)Opens overlay or an employment attorney could help you confirm how the ABC test applies to your situation. Reviewing the differences between 1099 contractors vs. W-2 employees may also be helpful.
Taking care of logistics
Before you can pay an employee, you may consider handling a few registration steps. These steps may help you get ready to pay and report wages.
Getting a federal tax ID is typically one of the first steps. This is also called an employer ID number or EIN. It's a nine-digit number from the Internal Revenue Service (IRS).
You may also consider registering with the EDD. The EDD handles payroll and employment reporting. Checking with the EDD could help you understand the current registration timeline for your business.
Workers' compensation is another consideration. California generally requires this coverage, and the thresholds can depend on your business type. It helps pay for medical costs and lost wages if an employee gets hurt on the job. Checking with the California Department of Industrial RelationsOpens overlay could help you understand what may be required for your business and when coverage might need to be in place.
Preparing your business for hiring
A clear plan could help you attract a qualified candidate and set expectations from the start. This phase may involve creating an employee handbook, preparing a pay package and advertising the job opening.
An employee handbook outlines your company policies. This includes work hours, time off and workplace rules. Having these policies in writing could help prevent confusion later. If you're new to managing human resources, starting with a basic handbook may be a helpful approach.
Preparing a pay package involves deciding on wages, benefits and any other perks. California has its own minimum wage rules. Some local areas may have higher rates. Looking at what similar businesses pay could help you put together a competitive package.
When you're ready to advertise the job opening, consider using more than one channel. Job boards, local groups and professional networks may be worth exploring.
Hiring and onboarding your first employee
Once you find a suitable candidate, the next phase involves making an offer and completing paperwork. A structured onboarding process could help your new hire feel welcome.
Sending an offer letter is typically one of the first steps. The letter may include the job title, pay, start date and any conditions of employment.
California new hire paperwork includes several forms. Form I-9 verifies that your new hire can work in the United States. The employee fills out Section 1 by their first day. You fill out Section 2 within three business days. Checking with the U.S. Citizenship and Immigration Services (USCIS) could help you confirm the current requirements. Form W-4 relates to federal withholding. Form DE 4 is California's state version. These are among the employee onboarding forms you may complete for a new hire.
You may also consider reporting your new hire to the California New Employee Registry. This program helps enforce child support orders. Checking with the registry could help you confirm the current reporting timeline.
Getting payroll started
Paying employees accurately and on time is a key part of being an employer. Getting payroll started involves choosing a pay schedule, figuring out withholdings and issuing payments.
A payroll schedule sets how often your employees get paid. Common options include weekly, biweekly and monthly. California has specific payday rules. Reviewing the state's rules could help you stay on track.
Posting labor law posters and notices in the workplace
California requires employers to display certain labor law posters where employees can see them. These posters tell employees about their rights under state and federal law.
Common posters cover topics such as minimum wage, workers' compensation and paid sick leave. Some posters may vary based on your industry or the size of your staff. Checking with the California Department of Industrial Relations could help you find the current rules.
In summary
Hiring a new employee in California involves several steps, from researching labor laws to posting workplace notices. Taking it one step at a time may help the process feel more manageable. Whether you're adding a part-time helper or a full-time team member, knowing the rules ahead of time could help you feel prepared. Each business's hiring journey looks a little different.
JPMorgan Chase and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting professionals for information specific to your financial situation.
