Hiring your first employee in the US: the complete checklist

Hiring the first person is the point where a business takes on the most new paperwork in one go. None of it is hard, but much of it has a deadline measured in days. This guide puts it in order. The mechanics of the payroll itself are in how to run payroll yourself.

Employee or contractor?

First make sure the person really is an employee. The IRS looks at behavioral control (do you direct how the work is done?), financial control (do you supply the tools, set the pay, reimburse expenses?) and the relationship (benefits, permanence, whether the work is a key part of your business). The Department of Labor and your state may apply their own tests for wage-and-hour and unemployment purposes.

If you direct the work, set the hours and supply the equipment, assume an employee. Treating an employee as a contractor can mean back taxes and penalties. Genuine contractors fill in a Form W-9 and may get a 1099-NEC; see 1099 vendors from W-9 to filing.

Before the first day

Get an EIN if the business does not have one. Employers must have one. See how to get an EIN.
Enrol in EFTPS for federal tax deposits. All federal payroll tax deposits are made electronically.
Register with your state: for state income tax withholding if the state has an income tax, and for state unemployment insurance (SUTA). The state assigns your SUTA rate; new employers usually get a standard new-employer rate. Some cities and counties have their own payroll taxes too.
Arrange workers' compensation insurance. Most states require it, often from the first employee; thresholds and exemptions vary by state and industry. Your premium is based on payroll and a class code for the type of work.
Check other state requirements: paid sick leave, state disability or paid family leave insurance in the states that have them, and whether you must use E-Verify.
Decide pay: rate, overtime status, pay frequency and payday. The federal minimum wage is $7.25 an hour, and many states and cities set a higher one; you pay whichever is highest. Most hourly employees must get overtime at 1.5 times their regular rate for hours over 40 in a week.
Choose how you will run payroll: in your accounting software, a payroll service, or your accountant.
Put up the required posters (federal minimum wage, job safety, anti-discrimination and others, plus your state's). The Department of Labor has a free poster advisor.
Write the offer: job title, pay, hours, start date and any probation period, in a short letter both of you sign.

On the first days

Form W-4. The employee completes it on or before the first day, so you know how much federal income tax to withhold. If they do not, withhold as single with no adjustments. The Form W-4 page explains each step. Many states have their own withholding certificate as well.
Form I-9. The employee completes Section 1 by the first day of work for pay. You examine their identity and work-authorization documents and complete Section 2 within 3 business days of the first day. Keep the form; you do not send it to anyone.
New-hire report. Report the new employee to your state's new-hire registry within 20 days of the hire date, or sooner if your state says so.
Direct deposit form, if you will pay by direct deposit: bank routing and account numbers, signed by the employee.
Emergency contact and handbook acknowledgement, if you have a handbook.
Benefits enrolment, if you offer health insurance or a retirement plan.

Payroll taxes you will owe

Tax	Who pays	2026 rate
Federal income tax	Employee (you withhold it)	From the W-4 and IRS Publication 15-T
Social Security	Employee and employer	6.2% each, on wages up to $184,500
Medicare	Employee and employer	1.45% each, no wage limit; employees also pay 0.9% Additional Medicare Tax on wages over $200,000
FUTA (federal unemployment)	Employer only	6.0% on the first $7,000 per employee, usually 0.6% after the state credit
State income tax	Employee (you withhold it)	From the state's tables, in states that have one
SUTA (state unemployment)	Employer (employees too in a few states)	Rate and wage base set by the state

The employer's share is a real cost on top of wages. Add Social Security, Medicare, FUTA, SUTA and workers' compensation, and a $20 hourly wage costs noticeably more than $20 an hour. The employee cost calculator adds it up, and the paycheck calculator shows the employee's take-home pay. Current figures are on the payroll tax rates page, and the glossary explains FICA, FUTA and SUTA.

Each payday, quarter and year

Each payday: work out gross pay, withhold the taxes and deductions, pay net pay, and give a pay stub. Record the payroll in your books.
Deposits: new employers are generally monthly depositors. A month's withheld income tax plus both halves of Social Security and Medicare is due by the 15th of the next month through EFTPS. State withholding and SUTA have their own schedules.
Quarterly: file Form 941 by the last day of the month after each quarter, and your state's withholding and unemployment returns. FUTA is deposited when the amount owed passes $500. See Form 941 vs Form 940.
Each year: file Form 940, give each employee a W-2 and file W-2s with the SSA by January 31 (February 1 in 2027, because January 31 is a Sunday), and complete the workers' compensation audit for your insurer.

Records to keep

Employment tax records (W-4s, pay records, deposits, copies of returns): at least 4 years after the tax is due or paid, whichever is later.
Payroll records under the Fair Labor Standards Act: at least 3 years; time cards and wage-rate tables at least 2 years.
Form I-9: 3 years after the hire date or 1 year after employment ends, whichever is later. Keep I-9s together and apart from personnel files, so you can produce them on request without exposing other records.
State records for the period your state requires, which can be longer.

Checklist

Confirm the worker is an employee, not a contractor
Get an EIN and enrol in EFTPS
Register for state withholding and state unemployment insurance
Buy workers' compensation insurance if your state requires it
Check state paid leave, disability insurance and E-Verify rules
Set the pay rate, overtime status, pay frequency and payday
Put up federal and state workplace posters
Collect Form W-4 (and the state form) by the first day
Complete Form I-9 Section 2 within 3 business days
Report the new hire to the state within 20 days, or sooner if required
Set up the employee in your payroll software and run a test pay
Diary the monthly deposit, quarterly 941 and year-end W-2 dates

In AcboBooks

AcboBooks runs US payroll on your own computer. It works out federal withholding from the employee's W-4 with the IRS Publication 15-T percentage method, Social Security and Medicare for both sides, and FUTA and SUTA at the rates you enter. State income tax withholding is entered from the state's tables; it is not calculated automatically. Each employee record has an HR section with a hire date and a paperwork checklist (W-4 on file, I-9 completed, direct-deposit form, handbook signed), and an optional workers' compensation class code and rate so the premium accrues on every paycheck. At quarter-end and year-end it prepares Form 941, Form 940 and W-2 worksheets and the SSA's W-2 upload file. It does not file returns or make deposits for you, and it does not submit new-hire reports. The Academy lessons on adding an employee and running payroll walk through it.

Sources and official links

Last reviewed October 26, 2026. Government pages change; if a figure here differs from the official page, the official page wins.

Frequently asked questions

How soon do I have to report a new hire to the state?

Federal law requires new-hire reporting within 20 days of the hire date, and some states set a shorter deadline. Report through your state's new-hire reporting website.

When is Form I-9 due?

The employee completes Section 1 by the first day of work for pay. You complete Section 2, after examining their documents, within 3 business days of that first day. For a job lasting less than 3 business days, Section 2 is due by the first day.

Do I need workers' compensation insurance for one employee?

In most states, yes, often from the first employee, though thresholds and exemptions vary by state and industry. Check with your state's workers' compensation agency before the first day of work.

How often do I deposit payroll taxes as a new employer?

New employers are generally monthly depositors: the federal income tax withheld and both halves of Social Security and Medicare for a month are due by the 15th of the following month, by electronic funds transfer.

What happens if an employee doesn't give me a W-4?

Withhold as if they were single with no adjustments, as the IRS instructions say, until they hand one in.

This article is general information, not tax, legal or accounting advice. Rules and dates change; check the official source or ask your accountant before acting.