Sometimes, you lose great employees. An employee could accept a new job offer, retire, be laid off, or move away. Whatever the case may be, there might come a time when you consider rehiring former employees.
Read on to learn about the pros and cons of rehiring former employees. And, if you decide to rehire a former employee, there are some procedures you should know about, such as what forms you need to fill out.
Rehiring former employees: pros and cons
Hiring new employees costs you significant time and money. The median time employees stay at one job is only 4.1 years.
Rehiring former employees can save the time and money needed for recruiting and training a new employee. But, carefully weigh the pros and cons before you decide that rehiring a former employee is the smart move for your small business.
The pros of rehiring former employees
Rehiring employees can be beneficial to your small business, especially if they were a strong contributor the first time around.
Here are some pros to rehiring former employees:
- There might be a higher retention rate when rehiring a previous employee since they spent time away and want to return.
- You could save time and money since they are familiar with your business. You do not need to provide them with the in-depth training required for onboarding new employees.
- When rehiring a terminated employee, you show that you value your workers, which could boost overall employee morale.
- A former employee might have had a job since first working for your business, bringing new skills, work experience, and fresh ideas to your small business.
The cons of rehiring former employees
Rehiring employees can also pose some challenges, especially if their termination resulted from being laid off.
Here are some cons to rehiring a terminated employee:
- The employee might have clashed with your company’s culture. If they quit because of the way your business is run or had a conflict with another employee, they may have the same conflict.
- If your employee was laid-off, they might harbor some hard feelings toward you and your business.
- Current employees might be threatened if the rehired employee has a higher-level job than them.
- Sometimes, a brand new employee could do the job better than a former employee.
Onboarding process for rehired employees
If you decide to rehire a former employee, the paperwork you and the employee need to complete depends on when they are hired.
When you first hire an employee, you and the employee fill out Form I-9. Form I-9, Employment Eligibility Verification, verifies that your employee is eligible to work in the United States.
A new employee also completes Form W-4. Form W-4 is what your employee fills out so you know the amount of federal income tax to withhold from paychecks. Whether your worker is a new hire or a rehire, you may wish to provide Form W-4 help if they are confused about filling out this form.
Form I-9 for rehired employees
You will need to fill out a new Form I-9 if you hire an employee after three years of first filling out their original Form I-9.
If you rehire a former employee within three years of first filling out Form I-9, you have two options:
- Fill out a new Form I-9
- Fill out Section 3 on the employee’s original Form I-9
Filling out Section 3 of Form I-9
If the employee has a name different than when they originally filled out Form I-9, record the name change in Block A of Section 3, Reverification and Rehires. Include the date of rehire in Block B of Section 3.
Fill out Block C if the employee’s employment authorization document has expired, like a U.S. passport. This will require you to examine a document from List A (documents that prove identity and work eligibility) or List C (documents that prove work eligibility only) and make a new copy of the document to keep in your records.
Finally, you will sign and date the last box in Section 3.
Keep the updated Form I-9 in your payroll records even after your employee no longer works for you. If your employee leaves, keep Form I-9 three years after you rehired them or one year after the employee’s termination, whichever is later. Store both the new and old Forms I-9 in your records.
Form W-4 for former employees who are being rehired
The IRS requires you to hang onto your employee’s Form W-4 for at least four years after an employee is hired.
However, the IRS does not have rules for rehired employees filling out Form W-4. It is a good idea to have the rehired employee fill out a new Form W-4 to verify their current information.
The new Form W-4 should be stored in your records for at least four years from the date your rehired employee fills it out.
Rehiring former employees: miscellaneous documents
The paperwork portion of the onboarding process for a rehired employee should be similar to new-hires. Here are some documents that you might include for your rehired employees:
- Welcome letter
- Employee handbook
- Job description
- Document noting compensation
- Enrollment forms for benefits
- Documents regarding time off
- Emergency contact form
- Your business’s contact information
- Enrollment form for direct deposit of payroll
Even though your employee previously worked for you, you should have them sign and date paperwork verifying they understand and agree to the information in their onboarding packet. Using employee self-service software is a great way to provide convenient, online access to some or all of the above files for your workers.
Need to add a new employee to payroll? Patriot Software’s online payroll makes entering employee information quick and easy. And, we offer free support if you have questions. Try it for free today!
This article has been updated from its original publication date of January 25, 2017.
This is not intended as legal advice; for more information, please click here.