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Learn the basics of labor requirements for business
There are many laws to protect workers and potential hires. They require that you treat your workers fairly, provide them with benefits and a safe workplace, and contribute to California’s unemployment insurance.
Be sure you have a Federal Employer Identification Number before hiring your first employee. The number is necessary for reporting and filing employment taxes. Apply online for free to get an EIN. Learn more about applying for an EIN.
Follow San Francisco labor laws
Review local labor laws before you hire. There are laws about the hiring process, during employment, along with layoffs or ending employment.
Are they employees or independent contractors?
There are different rules for employees than independent contractors. Differences include payroll taxes, minimum wage, overtime, and more.
If you aren't if someone should be hired as an employee or independent contractor, you can use this "test" to help.
Some questions are off limits
During the hiring process, it is unlawful to ask about a job applicant’s age, sexual orientation, marital status, religious affiliation or race.
You can only ask questions about a physical, emotional or mental disability if an applicant will need special accommodations for performing a specific job.
The US Department of Labor and the Equal Employment Opportunity Commission explains these rules in more detail.
Set up a payroll system to withhold taxes
The IRS requires that you keep records of employment taxes for at least four years.
Federal Income Tax Withholding
Every employee must provide their employer with a signed W-4 withholding exemption form so that you can withhold the correct amount from their paychecks.
On the W-4 form, employees tell you how many allowances they are claiming for tax purposes.
You should ask employees to fill out a new W-4 form each year if they want to change their allowances.
For more specific information, read the IRS Employer’s Tax Guide.
Verify employee eligibility
Federal law requires employers to verify an employee’s eligibility to work in the United States:
- Within three days of hire, complete the Form I-9, employment eligibility verification, to confirm the employee’s citizenship or eligibility to work in the U.S.
- Keep each employee's I-9 on file for three years. This starts from their hire date or one year after the date of the employee’s termination, whichever is later.
You can verify employment eligibility using I-9 information at E-Verify.
Set up employee benefits
If your business has established employee benefit programs like health insurance or a 401(k) plan, you’ll need a sign-up procedure so employees can enroll, name their dependents, and select options.
Provide workers’ compensation insurance
In California, if you have any employee, you must have workers’ compensation insurance. This is insurance to protect workers who might suffer on-the-job injuries.
If your employees get hurt or sick because of work, you are required to pay for workers' compensation benefits.
Workers’ comp insurance provides six basic benefits: medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits or vocational rehabilitation and death benefits.
You may obtain workers’ compensation insurance in California with a broker or directly from an insurance carrier.
NOTE: If you are a roofer and don’t have any employees, you are still required to carry workers’ comp insurance.
Learn more about workers' compensation insurance requirements at the CA Department of Industrial Relations.
Register with the state
Once you have any employees, you must pay California unemployment insurance taxes.
First, register with the CA Department of Industrial Relations.
Later, at tax time, your payments will go to the state’s unemployment compensation fund, which provides short-term relief to workers who lose their jobs.
Unemployment Insurance (UI) Tax is paid by every employer in California. Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year.
The UI rate schedule and amount of taxable wages are updated annually.
Deduct temporary disability insurance
Employers are required by law to withhold and remit State Disability Insurance (SDI) contributions and to inform their employees of SDI benefits.
To inform employees, you must provide them with the publications listed below. You can find these publications through the CA Employment Development Department.
- Notice to Employees: Unemployment Insurance/Disability Insurance Benefits (DE 1857A) – Advises employees of their right to claim Unemployment Insurance (UI), DI, and PFL benefits.
- State Disability Insurance Provisions (DE 2515) – For new hires and again when the employee notifies the employer they need to take time off from work due to their non-industrial medical condition.
- Paid Family Leave Benefits (DE 2511) – For new hires and again when the employee notifies the employer they need to take time off from work to care for a seriously ill family member or to bond with a new child.
Adopt workplace safety measures
Almost every employer must comply with the requirements of the Occupational Safety and Health Act (OSHA) by, among other things, providing a workplace free of hazards, training employees to do their jobs safely, notifying government administrators about serious workplace accidents, and keeping detailed safety records.
Post required notices
Employers are required to display certain posters in the workplace that inform employees of both their rights and employer responsibilities under labor laws. California employers must post all state and federal required posters, but San Francisco has some additional notices that must be displayed.
City-Required Posters
State and Federal Required Posters
- Download the posters for state and federal labor laws
- Posters required by the US Department of Labor (DOL) and other federal agencies can also be found using the DOL FirstStep Poster Advisor search tool.
File your taxes
Every year, employers must report the amount of wages paid and taxes withheld for each employee on a federal wage and tax statement.
This report is filed using Form W-2, wage and tax statement which employers must complete for each employee.
By the last day of February, employers must send Copy A of their employees W-2 forms to the Social Security Administration to report wages and taxes of your employees for the previous calendar year.
In addition, employers should send copies of W-2 forms to their employees by January 31 of the year following the reporting period.
Featured resources
Hire your first employee
The US Small Business Administration (SBA) explains how to start the hiring process and ensure you are compliant with key federal and state regulations.
Nolo
Nolo, formerly known as Nolo Press, is a Bay Area publisher that produces do-it-yourself legal books and software that reduce the need for people to hire lawyers for simple legal matters.
Hiring Your First Employee: 13 Things You Must Do
A to-do list for new employers produced by Nolo, a Berkeley-based legal advice publisher.
Tax credits and incentives
Certain employers can be eligible for thousands of dollars in Local, State, and Federal tax credits and incentives based on hiring and other business expenses.
Layoff response assistance
The Office of Economic and Workforce Development can provide services through the Rapid Response Program that will assist you in easing the transition of your workforce when a downsizing event cannot be averted. Staff will conduct on-site or virtual orientations and inform your employees about resources and services that can assist them with applying for unemployment, access to career coaching, and healthcare options.