Your business is growing, and you’re adding new employees to your team regularly. Congratulations!
Oh, wait. The Federal government has some additional homework for you now that you are hiring new team members. It’s called new hire reporting, and it’s a federal law that applies to every new employee.
One of the scarier parts of hiring new employees is all the compliance that comes along with them. Federal and state laws regulate wages, overtime, payroll taxes, and new hire reporting.
Considering how many laws and regulations the government requires businesses to follow, the least they could do is publish a checklist of every hoop you have to jump through upon hiring one employee.
Alas, no such checklist exists. It seems like only those who graduated from law school can understand federal websites filled with legal lingo. But this is why we’ve written this article! As a company that provides employee work cycle management and payroll processing, we at Whirks understand the layers of compliance required to run a business and the frustration felt attempting to find and meet all those requirements.
We want to share our expertise with you so you can stop worrying about failing to comply and can start celebrating your business’ success! At the end of this article, you will understand new hire reporting, how to do it.
New Hire origin story
Congress created the Personal Responsibility and Work Opportunity Act of 1996 (PRWORA). This law created the National Directory of New Hires to track delinquent parents across state lines to force them to pay their court-ordered child support. While this law expanded and streamlined procedures for garnishing child support from employee wages, it placed the onus of reporting newly hired employees on employers.
In 2010 Congress amended PRWORA by approving the Claims Resolution Act. This law added another requirement for employers to report new hires to the State Directory of New Hires.
What is New Hire Reporting?
Federal law requires businesses to report when they hire new employees to their state workforce agency within a specific time frame. Most states require it within 20 days of hire, but this does vary state by state. You can check your state’s reporting time frame here.
Employers must know three things to meet New Hire Reporting requirements:
- What information must be reported
- Where employers report New Hire information
- What multi-state employers must complete
What information must be reported
Fortunately, the information required to comply with new hire reporting is the exact information on an employee’s W4 form.
- Employer Name + Employer Identification Number (EIN)
- Business’ Physical Address
- Employee Name
- Employee Address
- Employee Social Security Number
- Date of hire
- If you have a payroll partner, their office address
Where employers report New Hire information
Employers are required to report newly hired employees’ information to their state’s workforce agency. If you aren’t sure which state government department to send this report to, the Federal Department of Health and Human Services created this link for you.
Those reports are then matched against child support records at the state and national levels. When a match is made between a newly hired employee and a child due child support, the system sends this information to the appropriate state agency, allowing the parent’s wages to be garnished.
State agencies report this information to the National Directory of new hires, enabling child support agencies to locate parents, who may owe child support or need to issue a withholding order, across the country.
If it’s discovered that one of your new employees owes child support, the state will notify you (the employer) that funds must be withheld from the employee’s wages. Depending on how your pay periods work, employers must withhold the exact amounts listed from their employee’s paycheck on a weekly, bi-weekly, or semi-monthly process. The withheld income for the child must be sent directly to the state.
Reporting employees living outside of the state where your business is headquartered
If you employ workers in multiple states, you must report those employees. Let’s say you run a home health care agency in Memphis, Tennessee. Memphis is near both the Mississippi and Arkansas state lines, so it’s entirely likely you will have both clients and employees who reside and work in other states.
In this case, you would need to report those out-of-state caregivers when you initially hire them. The federal government has created two options for you to do so:
- Report each newly hired employee to the state workforce agency where they live
- Electronically report all newly hired employees to the state workforce agency where you are based. Follow the reporting requirements of whichever state you’re reporting to.
So in the above example, you, as the employer, could report employees who work in Mississippi to the Mississippi State Directory of New Hires and those who work in Arkansas to the Arkansas New Hire Reporting Center.
Or, as a business based in Tennessee, you could electronically send your new hire reports to the Tennessee New Hire Reporting Program.
If you choose to report all new employees to one state (Option 2), you must:
- Register with the Federal Department of Health and Human Services as a multistate employer
- Designate the state that you will report to
- Submit your new hires electronically or by magnetic tape, to the state you have chosen, no more than twice a month (12 to 16 days apart)
Check New Hire Reporting off your List
You’ve slogged through the hiring process and are now onboarding and training your new employees. You can see your business growing and are setting bigger goals for the future.
As Spiderman’s Uncle Ben so aptly said, “With great power comes great responsibility.” And with a growing business comes increased government requirements. There’s always a catch!
Make sure to set aside some time to report your new hires to the appropriate state agencies within 20 days of employment (deadlines vary by state). Take solace in the knowledge that the employee’s W4 form will contain everything you need to report. Then add this process to your onboarding checklist, so you never miss a reporting deadline.
Or hand overall new hire reporting, employee document collecting, and onboarding to a payroll partner. You’ll likely save time and money and reduce your stress levels by outsourcing business tasks that don’t directly support your core business. We’ve written an article to help you determine whether outsourcing is right for you.
At Whirks, one of our core services is maintaining government compliance for small businesses. We’ve made it our business to be aware and knowledgeable of all compliance requirements, so business owners can focus on growing their business.
We have both compliance experts on staff and high-tech software to manage and meet deadlines. Let us take this task off your list. You have more valuable ways to spend your time.