Hiring first employee

Hiring your first employee is a major milestone that transforms a solo operation into an employer with significant legal obligations. This checklist covers every step from pre-hiring setup through onboarding, ensuring compliance with federal, state, and local requirements.

51 steps across 12 sections

1. 1. Obtain an Employer Identification Number (EIN)

  • Apply for free at IRS.gov
  • Received immediately online
  • Required for all employers to report taxes and file returns
  • If you already have an EIN for your business, you do not need a new one

2. 2. Register for State Employer Taxes

  • State income tax withholding — register with your state's Department of Revenue (unless in a no-income-tax state)
  • State unemployment insurance (SUI/SUTA) — register with your state's Department of Labor
  • See topic 0172 for detailed state registration guidance

3. 3. Obtain Workers' Compensation Insurance

  • Required in almost every state (Texas is the only state where it is fully optional for private employers)
  • Must be in place before the employee's first day of work
  • See topic 0175 for detailed workers' comp guidance

4. 4. Set Up Payroll

  • Choose a payroll method: DIY, software, or full-service provider
  • Configure tax withholding tables (federal and state)
  • Establish a pay schedule (weekly, biweekly, semi-monthly, or monthly)
  • Set up a business bank account for payroll if not already done
  • See topic 0174 for detailed payroll setup guidance

5. 5. Post Required Labor Law Posters

  • Fair Labor Standards Act (FLSA) — minimum wage
  • OSHA — Job Safety and Health poster
  • FMLA — Family and Medical Leave Act (50+ employees, but good practice for all)
  • EEO — Equal Employment Opportunity (15+ employees)
  • EPPA — Employee Polygraph Protection Act
  • USERRA — Uniformed Services Employment and Reemployment Rights Act

6. 6. Write a Job Description

  • Define the role, responsibilities, and qualifications
  • Classify as exempt or non-exempt under FLSA (affects overtime eligibility)
  • Determine if the position is employee (W-2) or independent contractor (1099)
  • Misclassification carries significant penalties

7. 7. Recruit and Interview

  • Post the job listing
  • Follow non-discrimination laws during interviews (do not ask about age, race, religion, disability, pregnancy, national origin, marital status)
  • AI screening tools: If using AI for resume screening or candidate ranking, comply with local laws (e.g., NYC Local Law 144 requires transparency and annual bias audits)
  • Document interview process for compliance records

8. 8. Run Background Checks (If Applicable)

  • Obtain written authorization from the applicant
  • Comply with the Fair Credit Reporting Act (FCRA)
  • Follow "ban the box" laws if applicable in your state/city (restricts when you can ask about criminal history)
  • Provide required pre-adverse and adverse action notices if declining based on results

9. 9. Form I-9: Employment Eligibility Verification

  • Required for every employee — federal law mandates employers verify identity and work authorization
  • Must be completed within 3 business days of the employee's start date
  • Employee presents acceptable documents from List A (identity + work authorization) or one from List B (identity) + one from List C (work authorization)
  • Employer must physically examine documents (or use authorized virtual verification)
  • Retain Form I-9 for 3 years after hire date or 1 year after termination, whichever is later
  • E-Verify: Required for federal contractors and in some states; optional elsewhere

10. 10. Form W-4: Employee's Withholding Certificate

  • Employee completes to determine federal income tax withholding
  • Must be on file before first payroll
  • Employee can update at any time
  • State W-4 equivalents may also be required

11. 11. State New Hire Reporting

  • Report every new hire to your state's New Hire Reporting agency
  • Federal deadline: within 20 days of hire date
  • Some states require faster reporting (as few as 5 days)
  • Report includes: employee name, address, SSN, date of hire; employer name, address, EIN
  • Purpose: child support enforcement, fraud prevention

12. 12. Direct Deposit Authorization

  • Optional but standard practice
  • Employee provides bank account and routing number
  • Some states require employers to offer direct deposit; a few states require employee consent

Common Mistakes

  • Misclassifying employees as independent contractors
  • Not getting workers' comp before hire date
  • Skipping I-9 verification
  • Missing new hire reporting deadline
  • Not posting required labor law posters

Sources

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