How to Hire Employees: A First-Timer's Guide

Hiring your first employee is the moment a side project starts to feel like a real company. It's also the moment the paperwork gets serious. The good news: the process is more predictable than it looks. If you know how to hire employees the right way - the legal setup, the search, and the onboarding - you can bring someone on in a few weeks without missing a deadline or a filing.

This guide walks through exactly what to do, in order, so you can hire your first person with confidence.

How do I hire my first employee?

Here's the short answer. To hire your first employee you'll need to: get an Employer Identification Number (EIN), register for state payroll and unemployment accounts, write a clear job description, source and interview candidates, make an offer, and complete the required onboarding paperwork (Form W-4, Form I-9, and state new-hire reporting). Then you set up payroll and pay your taxes on schedule.

The rest of this guide breaks each of those steps down.

Step 1: Handle the legal and tax setup first

Before you post a single job ad, get your employer foundation in place. Rushing a hire and scrambling on compliance afterward is how new owners end up with penalties.

Get an EIN. You need an Employer Identification Number from the IRS to report payroll taxes. It's free, and you can apply online in minutes. The IRS's Hiring employees page is the authoritative checklist for the federal side.

Confirm your business structure. Most people hiring their first employee already operate as an LLC or corporation, but if you're still a sole proprietor, it's worth reviewing whether an LLC makes sense before you take on payroll liability. If you haven't formed an entity yet, start with how to start an LLC.

Register for state accounts. You'll typically need a state withholding account and a state unemployment insurance (SUTA) account. These are separate from your federal EIN and vary by state.

Line up workers' compensation insurance. Most states require workers' comp coverage as soon as you have an employee, with only narrow exceptions. Sort this out before day one, not after.

Step 2: Define the role before you write the job post

The biggest first-hire mistake isn't legal - it's hiring for a vague role. Write down, in plain language:

The core outcomes this person owns (not just tasks)
The must-have skills versus the nice-to-haves
Whether the role is full-time, part-time, or contract
Whether it's on-site, hybrid, or fully remote
The salary range you can actually afford, including the roughly 10-15% on top for employer taxes and benefits

Be honest about the budget. Payroll taxes, benefits, and tools add real cost beyond the base wage, so factor them in before you commit to a number.

Step 3: Source and screen candidates

Once the role is clear, put it in front of the right people. For a first hire, you usually don't need an expensive recruiter.

Your network first. Referrals from people you trust are the highest-signal, lowest-cost source.
Job boards. Indeed, LinkedIn, and niche industry boards cover most roles.
A short application. Ask one or two role-specific questions to filter out mass applicants.

Screen with a quick phone or video call before investing in full interviews. You're checking for basic fit, communication, and genuine interest.

How to hire remote employees

If the role is remote, a few things change. Widen your search geographically, but confirm you can legally employ someone in their state (each state adds its own tax registration). Lean harder on written communication in your screening, since that's how remote work actually happens, and add a small paid test project to see how someone works asynchronously. For a deeper walkthrough of tooling, time zones, and contracts, see our full guide on how to hire remote employees.

Step 4: Interview and make the decision

Keep interviews structured. Ask every candidate the same core questions so you can compare fairly, and focus on real scenarios: "Walk me through how you'd handle X." Technical or role-specific skills matter, but for a small team, soft skills like reliability, communication, and adaptability often decide whether a hire works out.

Check references before you extend an offer - and when a former employee asks you for one, a recommendation letter template saves you starting from a blank page. A ten-minute call with a former manager tells you more than another interview round.

Step 5: Make the offer

Put the offer in writing. A simple offer letter should state the title, start date, pay rate, employment type (usually at-will in the U.S.), and any benefits. Being specific here prevents misunderstandings later.

If you're building out compensation beyond salary, our employee benefits guide covers what small employers can realistically offer, from health stipends to retirement plans.

Step 6: Complete the required onboarding paperwork

This is the part first-time employers most often get wrong. Once your new hire accepts, you must complete several forms - most of them on or before their first day.

Form W-4 (Employee's Withholding Certificate). The employee completes this so you know how much federal income tax to withhold. If they don't submit one, the IRS instructs you to withhold as if they're single with no adjustments. See the IRS's Form W-4 topic for details.
Form I-9 (Employment Eligibility Verification). Every U.S. employer must complete this to verify the employee is authorized to work. Keep it on file for three years after hire or one year after employment ends, whichever is later.
State new-hire report. Federal law requires you to report every new or rehired employee to your state within 20 days of their start date (some states require faster - Maine gives you just 7 days). This helps agencies detect unemployment and workers' comp fraud.
Direct deposit and state tax forms, as applicable.

Step 7: Set up payroll and pay your taxes

Now you actually pay the person - correctly and on time. You can run payroll yourself, but for a first hire, payroll software or a service is almost always worth it. It calculates withholdings, files your federal and state returns, and keeps you on schedule.

As an employer you'll be responsible for withholding income and FICA taxes, paying the employer share of FICA, and paying federal unemployment tax (FUTA) via Form 940 - which is entirely employer-paid, with nothing withheld from the employee. To understand the full picture of what comes out of each paycheck, read our explainer on payroll tax, and for the mechanics of running it, see how to do payroll.

Step 8: Onboard well in the first week

Compliance gets someone on payroll; onboarding gets them productive. Give your new hire a clear first-week plan: who they report to, what "good" looks like in 30/60/90 days, the tools they need, and an actual first task. A little structure here dramatically improves whether that first hire sticks.

Hiring for a small business: keep it simple

If you're wondering specifically how to hire employees for a small business, the honest answer is that the steps above are the small-business version. You don't need an HR department. You need an EIN, the right state accounts, clean W-4 and I-9 paperwork, on-time new-hire reporting, and a payroll tool. Get those right and you've cleared the bar that trips up most first-time employers.

Conclusion

Hiring your first employee comes down to two disciplines: doing the legal setup before you post the role, and staying organized once someone says yes. Handle the EIN, state registrations, workers' comp, and the W-4/I-9/new-hire trio, lean on payroll software for the taxes, and invest real thought into onboarding. Do that, and your first hire becomes the start of a team instead of a compliance headache.

Ready to grow beyond a team of one? Line up your payroll and benefits early - future you will be glad you did.

Sources: IRS - Hiring employees, IRS Topic no. 753, Form W-4.