How to Hire Your First Employee

Hiring someone is a legal, financial, and operational commitment — not just a scheduling decision. A little prep work before you post the job saves you from scrambling once you have a start date on the calendar.

The checklist below tells you what to do. The next section explains why each rule exists — not as trivia, but because understanding the reasoning is what lets you make the right call on situations this checklist doesn't explicitly cover.

Why an EIN and state registration, specifically for employment: Your EIN is how the IRS tracks your business's payroll tax filings (Form 941 each quarter, W-2s each year) as one account, separate from your personal Social Security number — that separation is what lets the IRS match what you withheld against what you remitted, for a business that might have any number of owners or change hands entirely. State registration does the same thing for state income tax withholding, and it also opens your account in the state's unemployment insurance system — the fund that pays benefits if you ever have to lay someone off. You're not registering to satisfy a bureaucracy; you're opening the specific accounts that the withholding and unemployment systems are keyed to.

Why workers' compensation is mandatory almost everywhere, not just recommended: This one has a real origin story worth knowing, because it explains why it's non-negotiable. Before workers' comp existed (in the early 1900s), an injured worker's only option was to sue their employer and prove the employer was at fault — which was slow, expensive, and employers usually won under old legal defenses (the injured worker could be found partly at fault, or the injury blamed on a coworker instead). States responded with what's now called the "grand bargain": workers gave up the right to sue their employer over a workplace injury, in exchange for guaranteed, no-fault coverage — you get paid regardless of whose fault the injury was. Employers gave up their old legal defenses, in exchange for predictable, capped costs instead of the risk of a catastrophic lawsuit. That trade is why it's mandatory rather than optional insurance you can decide to skip: both sides gave something up to get a more predictable system, and letting employers opt out unilaterally would break the trade.

Why payroll tax is withheld from every paycheck instead of paid once a year: The federal and state tax systems are built to collect tax close to when the income is actually earned ("pay-as-you-go"), not as one lump sum owed the following spring — this reduces the risk that tax simply doesn't get paid, and it's dramatically easier for both the employee and the government to manage smaller amounts spread across the year. This is also why Social Security and Medicare (FICA) specifically are split between employer and employee: the whole system is designed as a shared contribution, with the "employer half" being one of the reasons self-employment tax is a flat 15.3% instead of the smaller employee-only share — as a sole owner, you're both halves of that shared contribution at once (see Module 2 for the full mechanics).

Why the I-9 exists at all: It comes from a specific 1986 federal law (the Immigration Reform and Control Act) that made it illegal for employers to knowingly hire someone not authorized to work in the U.S., with real penalties for violating it. The I-9 is your documented, good-faith proof that you checked — which is also what protects you if a new hire later turns out to have presented fraudulent documents you had no reasonable way to detect. It's a compliance form, but it exists because Congress specifically decided employer verification (not just border enforcement) should be part of how the law is enforced.

A good job description attracts the right people and filters out the wrong ones before you ever have to interview anyone.

Be specific about the role. List 3–5 core responsibilities, not a generic "other duties as assigned" catch-all.

Describe who thrives here. What does a great day actually look like? What skills matter most? What's the work environment really like?

Be honest about compensation. Listing a salary range gets meaningfully more applications in most categories — hiding it mostly wastes everyone's time, including yours.

State the logistics up front. Full-time or part-time? Remote, hybrid, or in-person? Location? Hours?

Post the job. Indeed, LinkedIn, and local job boards work for most roles; industry-specific boards if relevant; your own network for senior or specialized hires.

Screen resumes. Look for demonstrated experience in the core responsibilities, not just keyword matches. Reject anyone who clearly didn't read the job description.

Phone screen first. A 15–20 minute call to confirm basic fit before investing time in a full interview. Ask about salary expectations, availability, and why they're looking.

Run structured interviews. Ask every candidate the same core questions so you can compare fairly. Behavioral questions ("Tell me about a time you had to handle X") reveal more than hypotheticals.

Actually check references. Call them. Ask specific questions about the candidate's work quality, reliability, and how they handled a difficult situation.

Put it in writing. An offer letter should include: job title, start date, salary or hourly rate, schedule, a benefits summary, and any contingencies (background check, etc.).

Get required forms signed before day one. Every new hire must complete an I-9 (employment eligibility verification), a W-4 (federal withholding), and your state's equivalent withholding form.