Hiring Your First Employee: The Complete Legal and HR Checklist
Everything a founder needs to do before, during, and after making their first hire, from EIN to offer letter to I-9 compliance.
Making your first hire is exciting and genuinely complex. This checklist covers every legal and HR step you need to take so you get it right the first time.
Before you make an offer
Most first-time employers focus entirely on finding the right person and forget to build the infrastructure needed to actually employ them legally. The time to build that infrastructure is before you make an offer, not after.
- Get your EIN: You need a federal Employer Identification Number from the IRS before you can run payroll. Apply at IRS.gov. It takes minutes to get your EIN online.
- Choose a payroll provider: You must withhold federal income tax, Social Security, and Medicare from every paycheck. Use a payroll service like Gusto, Rippling, or ADP rather than trying to manage this manually.
- Register for state payroll taxes: Every state has its own income tax withholding and unemployment insurance registration process. Register in your state before your first payroll.
- Get workers' compensation insurance: Most states require workers' compensation as soon as you have one employee. Some states (like Texas) allow employers to opt out, but this creates significant liability. Get coverage before day one.
- Create a compliant offer letter: Your offer letter should clearly state compensation, start date, whether the role is at-will, whether the offer is contingent on background check or other conditions, and confirm exempt or non-exempt status.
On or before the first day
Federal law requires you to complete Form I-9 within three business days of the employee's start date. You must physically inspect documents proving identity and work authorization. You cannot complete I-9 remotely unless you use an authorized remote verification agent.
Your payroll provider will require the employee to complete Form W-4, which governs federal income tax withholding. Most states have equivalent state withholding forms.
New hire reporting
Every state requires employers to report new hires to a state agency, typically within 20 days of the hire date. New hire reporting goes into the National Directory of New Hires, which is used primarily to enforce child support obligations. Failure to report can result in fines.
Your payroll provider often handles new hire reporting automatically, but verify this is set up before your first hire.
The employee handbook
You do not need a 50-page employee handbook for your first hire, but you do need written documentation of your key policies. At minimum, your handbook should cover at-will employment status, your anti-harassment and anti-discrimination policy, how and when employees are paid, your PTO and time-off policy, and who to contact with complaints or concerns.
The absence of written policies does not protect you from employee claims. In most cases, it makes you more vulnerable to them.
What comes next
Your compliance obligations grow as you add employees. The 3-employee, 15-employee, 20-employee, 25-employee, and 50-employee thresholds each trigger new federal or state requirements. If you are planning to hire quickly, mapping out your compliance calendar before you hit each threshold is significantly less expensive than discovering the obligations after the fact.
TalentForge360 offers a free HR audit for companies at any stage of growth. If you are making your first hire or scaling quickly, a 30-minute conversation with Riyadh Daud can help you identify exactly what you need to have in place.