Hiring your first employee is a milestone. It also brings new responsibilities, including payroll, taxes, paperwork and compliance. Getting organized before your first hire makes the process smoother.
Important: This checklist is general information for U.S. businesses. It is not legal, tax or HR advice. Requirements vary by state and locality and change over time. Use official government resources and consult qualified professionals.
Before You Hire
Define the Role
Write a clear job description, including responsibilities, schedule, location and compensation. Consider whether the role is full-time, part-time or temporary.
Confirm Worker Classification
Determine whether the worker is an employee or an independent contractor. Classification depends on factors defined by law, not on what you call the role. Misclassification can lead to penalties. See our guide to paying contractors and consult a professional if unsure.
Budget for Total Cost
The cost of an employee includes wages plus employer taxes, any benefits, insurance, equipment and payroll software. Plan your budget accordingly.
Registrations and Accounts
Employer Identification Number
Employers typically need an EIN from the IRS. If you formed an LLC, you may already have one. See how to start an LLC.
State Registrations
Many states require employers to register for state payroll tax accounts, such as withholding and unemployment insurance. Check your state’s official resources.
Workers’ Compensation Insurance
Most states require workers’ compensation insurance for employees, with rules varying by state. Check requirements.
Local Requirements
Some cities and counties have additional requirements.
Payroll Setup
Choose a Payroll Solution
Payroll software calculates pay and withholding, pays employees and often files payroll taxes. See Gusto vs. ADP.
Set a Pay Schedule
States may have rules about pay frequency. Check your state’s requirements.
Understand Withholding
Payroll involves withholding certain taxes from employee pay and paying employer taxes. Payroll providers handle calculations, but understand the basics.
Hiring Paperwork
Common paperwork for new U.S. employees includes:
- Form W-4 for federal income tax withholding
- Form I-9 for employment eligibility verification
- State withholding forms where applicable
- New hire reporting to the state, typically required within a set time
- Direct deposit authorization
Check official sources for current forms and deadlines.
Workplace Posters and Notices
Employers are often required to display certain federal and state labor law notices. Check official resources for requirements, including options for remote employees.
Policies and Documentation
- Offer letter outlining role, pay and start date
- Employee handbook or written policies
- Time tracking for non-exempt employees
- Confidentiality agreements where appropriate
An employment attorney can help with documents.
Benefits
Consider whether to offer benefits such as health insurance, retirement plans and paid time off. Some benefits may be required in certain states or cities. Payroll providers often offer benefits administration.
Onboarding
A good onboarding process helps your new employee succeed:
- Prepare equipment and accounts before day one
- Provide training and introductions
- Set clear expectations and goals
- Schedule regular check-ins
Tools can help. See project management tools compared and small-business collaboration tools.
Record Keeping
Employers must keep certain payroll and employment records for set periods. Store records securely and check requirements.
Ongoing Responsibilities
- Run payroll accurately and on time
- File and pay payroll taxes
- Provide year-end forms
- Keep records
- Stay informed about changes in laws
Common Mistakes
- Misclassifying workers
- Missing state registrations
- Forgetting new hire reporting
- Not completing Form I-9 on time
- Skipping workers’ compensation insurance
Planning the First Weeks
A simple plan for the first few weeks helps new employees settle in:
Before Day One
- Send a welcome message with start time, location and what to bring
- Set up email, software accounts and equipment
- Prepare required paperwork
Day One
- Complete paperwork
- Provide a tour or virtual introduction
- Review the role, goals and schedule
First Week
- Provide training on tools and processes
- Assign a first project
- Schedule check-ins
First Month
- Review progress and gather feedback
- Adjust training as needed
Protecting Employee Data
Employee records contain sensitive information such as Social Security numbers and bank details. Store records securely, limit access and use payroll and HR tools with strong security features. Avoid sending sensitive information by unsecured email.
Budgeting Time for Administration
Payroll, HR and compliance take time each pay period and each year. Payroll software reduces this work, but plan for time to review payroll, answer questions and keep records current.
First Hire Checklist
- Role defined and job description written
- Worker classification confirmed
- Budget for total cost prepared
- EIN obtained
- State payroll tax accounts registered
- Workers’ compensation insurance in place where required
- Payroll solution chosen and set up
- Pay schedule set
- Offer letter prepared
- Form W-4, Form I-9 and state forms ready
- New hire reporting completed
- Required notices posted or provided
- Onboarding plan ready
- Record keeping system set up
Where to Find Official Information
The IRS, the U.S. Department of Labor, U.S. Citizenship and Immigration Services and your state labor and tax agencies publish resources for employers. The U.S. Small Business Administration also offers guidance for new employers. Use these official sources to confirm current requirements.
Getting Help
Many first-time employers work with a payroll provider, an accountant and, where needed, an employment attorney. These professionals can help you set up correctly from the start, which is usually easier than fixing problems later. Ask them which registrations and filings apply to your state and city, and keep a written list of recurring deadlines.
Frequently Asked Questions
What do I need before hiring my first employee?
Typically an EIN, state registrations, workers’ compensation insurance where required and a payroll solution.
How do I know if someone is an employee or contractor?
Classification depends on legal factors. Consult official guidance or a professional.
Do I need payroll software?
It simplifies payroll and tax filing significantly.
What forms do new employees fill out?
Commonly Form W-4, Form I-9 and state forms.
Do I need an employee handbook?
Not always required, but helpful.
The Bottom Line
Hiring your first employee involves classification, registrations, insurance, payroll setup, paperwork and onboarding. Use official resources and qualified professionals to confirm requirements for your state.
Editorial note: Biz Benchly is independent and reader-supported. This guide is based on research into manufacturer documentation, published specifications and widely accepted best practices; we have not been paid to mention any product. If we add affiliate links in the future, they will be clearly disclosed per our Affiliate Disclosure.