The myriad of responsibilities an employer has to deal with can be quite overwhelming, but unfortunately, government agencies do not look kindly upon mistakes, even those made unknowingly. One such employer responsibility is the act of submitting a New Hire report to the designated agency in your state.
Fortunately for you, New Hire reporting is a fully-automated feature, included in our easy-to-use payroll software, at no extra cost. Translation: we do the employee onboarding process for our customers, so that they never have to worry about it.
However, if you decide to hoof it, we thought a comprehensive post on the topic of New Hire Reporting might help you better understand what is required to stay compliant as an employer.
The Basics of New Hire Reporting
In 1996, the US government introduced the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) to create welfare reform, particularly focusing on improving child support.
Under this act, employers who require employees to provide W-4s are mandated by federal law to report all new hires to a designated agency in each state within 20 days of the hire date. If you are a multi-state employer, you have the option of submitting all your new hires reports to the respective states in which your employees work, or you can pick a single state to submit all your reports.
The majority of information that is included in the New Hire report can be found on an employee’s W-4. Some states might need more information, but for the most part, all new hire reports should include the following information:
Employee details: Full name, Social Security Number (SSN), address and hire date, which is the first date from when he/she starts working for pay.
Employer details: Company name, Federal Employer Identification number (FEIN) and company address.
It is recommended that you check the reporting deadlines that apply to your state, because some states have the option of enforcing a timeline shorter than 20 days.
Defining New Hires
A newly hired employee is someone who is literally a “new hire” - a person who has not been employed by you previously. Yup, it couldn’t be clearer.
But that said, the law also considers an employee a new hire if he / she was employed by you at a time and has since been separated from said employment for a period of 60 continuous days. It is important to note that an employer is required to submit a new hire report even if an employee quits before the reporting deadline.
However, if an employee returns to work after a leave of absence within 60 days and has not been formally terminated, you do not need to submit a New Hire report.
Federal law does not require you to submit a new hire report for independent contractors; however, you should check to make sure that your state follows federal law requirements as it relates to contractors.
Why should you submit New Hire reports?
New Hire reporting is a critical component of PRWORA, the welfare reform legislation.
The information that is included in the New Hire reports are matched against the State’s child support records to find parents as well as to set up or enforce a child support order. The New Hire reports are also submitted to the National Directory of New Hires (NDNH).
New Hire reporting helps state agencies that administer employment security and workers compensation programs identify and stop fraudulent or inaccurate requests for benefit payments. This helps employers as well because it means that any false unemployment insurance or workers compensation claims can be stopped or recovered in time.
Additionally, the information in the New Hire reports can also be used by the state to prevent the misuse of public assistance programs like food stamps and Medicaid payments, for instance.
Do you have to pay a penalty for noncompliance?
The million dollar question! Alright, maybe it’s more like $25.
States can choose to fine employers for noncompliance, but under federal law, the monetary penalty amount should not exceed $25 for each new hire that was not reported.
However, if the employer and employee are found to have conspired not to submit the new hire report, the monetary penalty can be as high as $500 for each new hire.
On that note, we hope you find this post on the topic of New Hire reporting useful, and if you need any more state-specific information, you can contact the designated agency in your state for details.
Disclaimer: The advice we share on our blog is intended to be informational. It does not replace the expertise of accredited business professionals.
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