Hiring your first employee: the payroll checklist

Your first hire is a milestone. Getting the paperwork wrong is a different kind of milestone. Here's what to set up first.

Hiring your first employee is a big deal. It also comes with a pile of registrations and forms that nobody warns you about until a penalty notice shows up. Here’s the list.

Before their first day

Get an EIN if you don’t have one. You need it to run payroll.
Register with your state for payroll taxes. Most states have two agencies: one for income tax withholding and one for unemployment insurance. In Utah, that’s the Utah State Tax Commission (withholding) and the Department of Workforce Services (unemployment).
Get workers’ compensation insurance. Most states require it as soon as you have employees.
Pick a payroll provider. Gusto, ADP, and others handle the calculations, deposits, and filings for you. Doing payroll by hand is how small mistakes become expensive.

On their first day

Form I-9. Verifies they can work in the US. It has to be completed within 3 business days of their start date. Keep it on file; you don’t send it to anyone.
Form W-4. Tells you how much federal tax to withhold. Many states have their own version too.
Report the new hire to your state. Every state requires new-hire reporting, usually within 20 days. Most payroll providers do this for you, but check.

Every payday and after

Withhold and deposit taxes on time. Federal income tax, Social Security, and Medicare get withheld from pay, and you pay the employer share of Social Security and Medicare on top. Deposits have strict deadlines.
File quarterly and annual returns. Form 941 every quarter, Form 940 for federal unemployment each year, and W-2s by January 31.

Employee or contractor?

Before any of this, make sure they’re actually an employee. If you control how, when, and where they work, they probably are, even if you’d rather call them a contractor. Misclassification is one of the more common (and expensive) startup mistakes.

The short version

Set up payroll with a real provider before day one, get the state registrations done, and keep the I-9. If you’re a TEO client, we track payroll in your books and can help you get set up.