If you’re an employer in Texas, you’re probably already familiar with the federal requirements for new hire reporting. You’ve given your new hire their I9 and W-2, and now you have to turn around and report all that information somewhere else. It takes time, effort, and paperwork, and sometimes you put off as long as possible because it doesn’t seem important or relevant to your day-to-day operations. Not that it isn’t important, you reason, but it’s just not a priority to you, even though the State seeks that information immediately.
As a small business owner—yes, a law practice is a small business too—I understand where you’re coming from. However, there is a really good reason that does impact you, even if indirectly.
Here’s what you need to know about new hire reporting and why it benefits your business:
What Is New Hire Reporting?
Both state and federal laws mandate that you, as an employer in Texas, report information about your newly hired employee to the Texas Workforce Commission (TWC) within 20 days of you hiring them. This information is used to match New Hire reports against child support records, unemployment insurance records, and worker’s compensation records to ensure that individuals still qualify for certain governmental benefits.
How Does Reporting Benefit Me, the Employer?
Timely reporting new hires helps employers reduce costs because it reduces fraudulent unemployment and workers’ compensation claims and payments. Reducing fraud in these two areas helps keep the rates employers pay low, which helps boost your bottom line. By reporting your new hires in a timely manner, well before the 20-day mandate, you help the State keep their records up-to-date and prevent fraud throughout the system. According to Texas Workforce Commission (TWC), if an employer does not report correctly, the TWC cannot identify potential instances of fraud until the quarterly tax mark, a delay which increases the average overpayment from $411 to $924 per claim. That’s over $500 in unnecessary benefit payments per claim that employers end up footing through the assessment of higher tax rates under the benefit programs.
What Information Should I Report?
In order to keep the process of reporting a new hire as simple as possible, I like to keep a checklist of the necessary elements for each report. According federal law, each new hire report must contain the following pieces of information about the employee:
- Social Security number
- Date of hire (or rehire)
- Name of employer
- Address of employer
- Employer identification number
Most states require only these elements, however if your business is located outside the state of Texas make sure to check that your state does not require any further documentation.
FAQ: How do you know if you should report a new hire? Employers these days deal with part-timers, contractors, and remote workers frequently. A simple rule of thumb: if your new hire must fill out a W-4, you must also report that information to the State.
Texas is considered an employer-friendly state, so there’s definitely less red tape to deal with here than you might encounter elsewhere, but there’s still basic rules and regulations all businesses large and small must comply with—and new hire reporting is just one of those things. But we hope that with this breakdown, we’ve been able to share just a few of the ways that the reporting process isn’t just one of those mandatory hoops you have to jump through to run a business, but is instead designed to benefit you, the business owner. Remember this the next time you hire a new employee, and before you put off that paperwork until the last possible moment.
For more information on how and where to report your new hires, visit the website of the Attorney General of Texas.