Hiring your first employee is a clear sign that a business has moved beyond the solo-founder stage. You do not need a full HR department, but you do need to make sure the person is classified correctly, paid properly, documented, and covered by the federal and state rules that apply to your business.
This hiring your first employee checklist follows the practical sequence: what to set up before the start date, what paperwork to complete when the employee arrives, and what to maintain after payroll begins.
Confirm That You Are Hiring an Employee
Before creating payroll, determine whether the worker is an employee rather than an independent contractor. A contract label does not decide the issue by itself. Federal and state agencies look at the real working relationship, including control, economic dependence, permanence, and how the work fits into the business.
If you direct how and when the work is performed and expect an ongoing relationship, employee status may be more appropriate. Misclassification can create tax and wage liabilities, so settle this question before the first payment.
Get Your Employer Accounts Ready
Obtain an EIN if Needed
An Employer Identification Number is the federal tax ID used for employment tax filings and payroll reporting. If you do not already have one, obtain it from the IRS before setting up payroll. The IRS issues EINs directly at no charge.
Register for State Employer Accounts
Your state may require registrations for income-tax withholding, unemployment insurance, paid-leave programs, disability programs, or other employer obligations. Federal registration does not complete the state process. Check the relevant state revenue and labor agencies before your first payroll date.
Workers’ compensation is another state-level requirement. Rules and exemptions vary, and in some states coverage may be required when the first employee is hired.
Set Up Small Business Payroll
Choose a pay schedule that complies with state payday rules, then set up a payroll system to calculate gross pay, federal and state withholding, Social Security and Medicare taxes, and employer payroll taxes.
Employers generally withhold federal income tax plus the employee share of Social Security and Medicare taxes, while also paying an employer share. Most employers report these taxes on Form 941 quarterly unless the IRS authorizes Form 944 instead. Federal unemployment tax is generally reported on Form 940.
Payroll tax deposit deadlines are separate from your normal payday schedule. A payroll provider or qualified tax professional can automate much of this work, but the business remains responsible for accurate filings and payments.
Prepare the Offer and New Hire Paperwork
A written offer should state the job title, start date, pay rate or salary, expected schedule, work location, and applicable benefits or conditions. Also decide whether the role is exempt or nonexempt from overtime rules based on actual duties and applicable law, not merely the title.
New hire paperwork may also include state-required notices, company policies, direct-deposit authorization, benefit elections, confidentiality agreements where appropriate, and emergency contact information.
Collect Form W-4
Have the employee complete Form W-4 so you can calculate federal income-tax withholding. It should be used for the first wage payment. A separate state withholding form may also be required.
Complete Form I-9 on Time
Employees hired to work for pay in the United States must complete the employment-eligibility verification process. The employee completes Section 1 of Form I-9 no later than the first day of employment. The employer generally completes Section 2 within three business days after the first day of work for pay by reviewing acceptable identity and work-authorization documents.
Do not demand a particular document. The employee generally chooses from the acceptable document combinations listed with Form I-9.
Report the New Hire to the State
Employers must report newly hired employees to the appropriate state new-hire program. Deadlines and required information vary, so make this part of your onboarding workflow. A practical approach is to submit the report as soon as the employee is entered into payroll and save the confirmation.
Check Wage, Hour, and Workplace Notice Rules
Confirm the minimum wage, overtime, meal and rest break, paid leave, recordkeeping, and scheduling rules that apply in your state and city. Federal law is only one layer, and state or local laws can provide additional protections.
You may also need federal and state workplace posters. The U.S. Department of Labor provides required federal posters free, but the exact set depends on which laws apply to your business. State labor agencies publish separate requirements.
Test the First Payroll Before Payday
Run a payroll preview before money moves. Check the pay rate, hours, overtime treatment, withholding elections, benefit deductions, bank details, tax accounts, and payroll dates. Correcting a setup mistake before payday is easier than repairing a tax filing afterward.
For example, imagine a solo design studio hires its first project coordinator on a Monday. Before the start date, the owner has payroll and state employer accounts ready. The employee completes Form W-4 and Form I-9 Section 1 on Monday. The owner completes the employer portion of Form I-9 by Thursday, submits the state new-hire report, and reviews payroll before the first payday. The compliance work becomes a short sequence rather than a last-minute scramble.
Maintain the System After the Hire
Keep accurate payroll and time records, make required tax deposits, file employment tax returns, retain required hiring records, and keep state accounts current. Employers generally provide Form W-2 to employees and file wage reports with the Social Security Administration by January 31, with the deadline moving to the next business day when January 31 falls on a weekend or legal holiday.
Natural next resources for a growing business include small business payroll setup, employee onboarding process, and hiring budget planning. Connecting these topics creates a useful path from making the first hire to managing a small team.
Frequently Asked Questions
What should I do before I hire my first employee?
Confirm worker classification, obtain an EIN if needed, register for applicable state employer accounts, arrange workers’ compensation where required, set up payroll, determine wage and overtime treatment, and prepare required onboarding forms and notices.
What tax forms does a new employee complete?
A typical U.S. employee completes Form W-4 for federal withholding and Section 1 of Form I-9 for employment eligibility. State withholding and company payroll forms may also apply.
Do I need payroll software for one employee?
No law requires payroll software simply because you have one employee, but software can reduce errors by calculating withholding, tracking deadlines, and preparing filings. Manual payroll is possible, but the compliance responsibility is the same.
Do I have to report my first employee to the state?
Yes. Employers generally must report new hires to the appropriate state new-hire program. The deadline and reporting method depend on the state, so use the state’s official employer guidance.
Build the Process Once, Then Reuse It
Your first hire changes the business from a one-person operation into an employer, but the administrative work is manageable when handled in order. Set up registrations and payroll first, complete tax and eligibility paperwork on time, follow state reporting and workplace rules, and test payroll before it runs. Document the process, and your next hire will be easier.