Adding an employee brings a number of additional responsibilities, liabilities and legal requirements. Some regulations apply to all employers, while others exempt small employers or various types of employment. The number of different government agencies that enforce laws and regulations makes it difficult to ensure that all have been complied with.”
All employers are required to get both a federal Employer Identification Number and a state Tax Identification Number. They also have to withhold state and federal income taxes, along with Social Security and Medicare taxes, from employee wages. Employees must complete IRS Forms W-4 and state W-4 forms so that withholding amounts can be determined, and in order to meet Federal New Hire Reporting requirements. Annual employer state and federal tax returns are also required.
Employers with 10 or more farm workers, or those who pay $20,000 or more in wages during a quarter, are subject to the Federal Unemployment Tax; they may also be required to advance IRS Earned Income Credit if qualified employees want it. The Occupational Safety and Health Administration is also involved. While only employers with 10 or more workers are subject to OSHA inspections, all are covered by the agency’s safety regulations. Also, the EPA has established Worker Protection Standards that apply to employees who mix, load, apply or otherwise might be exposed to pesticides.
The minimum wage law applies to employers with more than 500 days of agricultural labor in any calendar quarter, while child labor laws restrict the types of jobs that can be performed by employees under the age of 16, Steve Swigert, economist and agricultural consultant with the Samuel R. Noble Foundation, Ardmore, Okla., said in most cases compliance records have to be retained for at least three years. While a written agreement with the employee is not necessary, Swigert told Ozarks Farm & Neighbor, “I would strongly recommend that there be a written job description, and a written description of the compensation for that employee.”
In addition to the tax documents, all employers have to fill out a Department of Homeland Security I-9 form, which verifies employment eligibility, for each employee.
“The Immigration Reform and Control Act created the I-9 form, and it keeps employers from getting into trouble with the federal government over whether they’re hiring a U.S. citizen or not,” Swigert said.
It may also be prudent, he said, to use the federal Social Security matching system, eVerify, and to verify the history of the employee to determine whether there have been legal issues in the past.
The employer may have to decide whether the worker is an employee or an independent contractor. Swigert said there’s a gray area in the law with regards to agricultural workers, but IRS provides guidelines.
“It basically comes down to how much control you have over the employee, and whether the worker is himself a business that makes a profit or loss,” he said. “Also, the duration of the relationship – is it a couple of months’ job building fence, or do they stay on to take care of the cattle – and how much skill it takes.”
To guard against future tax challenges, he recommended the employer keep records of the jobs being done by an independent contractor, whose equipment they used, and whether they moved on immediately to other jobs on the ranch.
Most employees will be covered under the ranch’s liability insurance, but Swigert recommended putting new hires through a training process in order to satisfy the insurance terms in the event an employee is injured on the job.
