How to Hire Your First Employee

A step-by-step guide for small business owners.

How To Hire Your First Employee

September 9th, 2020

If you are thinking of taking your business to the next level by hiring your first employee, congratulations. While this is an exciting time, being an employer means taking on additional responsibilities and legal obligations. Follow our step-by-step guide to ensure you have covered all your bases.

First Hire Checklist

Use our PDF checklist as a guide when hiring your first employee.

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How to Hire Your First Employee:

1. Get an Employer Identification Number.

If you've registered your business as a partnership or a corporation, you should already have an EIN and you can skip this step. If not, start by obtaining an Employer Identification Number (EIN). This will allow you to pay state and federal taxes for your business and your employee.

2. Set up a filing system for employment tax records and personnel files.

Create a filing system for your employment tax records including amounts paid, filed returns, and employment dates. These must be kept for a period of 4 years and should be readily available for review by the IRS.

Next, create a personnel file for your new employee. This should house job-related documents such as applications, resumes, signed employment contracts, performance evaluation forms, benefits sign-up forms, W-4 forms, and a separate folder for I-9 Employment Eligibility Verification forms.

3. Set up a payroll system.

You will need to set up a payroll system to pay your employee and withhold a portion of their income for tax, medicare, benefits, and social security. You can do your own payroll using free payroll software or you can outsource your payroll to ensure that you comply with government regulations.

4. Define your employee benefits.

Define which supplemental benefits, if any, you will be willing to offer your employee as part of their compensation package. Remember that your employee is also entitled to state and federal benefits such as social security, workers' compensation, unemployment insurance, leave benefits, and possibly temporary disability insurance depending on the state you are registered in.

5. Create a compensation plan.

If you haven't already done so, put together a detailed compensation plan for your employee. This should include information about starting salary, terms of payment, benefits, bonuses, wage increases, hours of work, and overtime.

6. Obtain workers' compensation insurance.

As an employer, you are required to obtain workers' compensation insurance to protect employees who may suffer injuries or illnesses while at work. The requirements for workers' comp vary by state and may not be required for smaller businesses.

7. Start the recruitment process.

The scale and duration of the recruitment process will depend on the type of position you are trying to fill. Some of the steps below may not be required if you are filling an entry-level position. To complete the hiring process, you will need to:

8. Report your new hire to the state.

Once the hiring process is complete, you are responsible for reporting your new hire to the state for the purposes of locating parents who owe child support.

9. Display workplace posters.

The department of labor requires that all U.S. employers display notices in the workplace informing employees of their rights. Before your employee arrives for their first day of work, make sure you have your workplace posters printed and displayed. You can download posters for free from the department of labor website.

10. Verify employment eligibility.

Before your employee arrives, or on their first day of work, make sure you fill out an I-9 employment eligibility verification form. This should be kept in a folder and made available for inspection by government officers.


How do I recruit employees for free?

  • Advertise on free job boards.
  • Post your ad on social media.
  • Post your ad on your company website.

When should I hire my first employee?

You should hire your first employee when you have too much work to get through each day. Also ensure there is enough work for your employee to stay busy during their defined working hours.

How do you attract good employees?

  • Write a great job description.
  • Market your company as great place to work.
  • Show candidates around your workplace when they arrive for interviews.
  • Offer competitive salaries and benefits.

How long does the hiring process take?

It depends on your industry and the position you are looking to fill. Entry level positions are filled faster but more experienced positions may take up to 25 days to fill.