Seven-step checklist for hiring your first employee for your small business

Written by: Gabrielle Smith
Published on June 16, 2021.

Is your small business growing faster than you can handle? If so, it may be time to start hiring your first full-time employee. This is an exciting milestone, but one that comes with a lot of legal regulations and required steps.

If you’re new to the hiring process, this article is for you. We’ll go over seven steps to hiring your first employee so you’ll be ready to grow your business even further.

Want tips on recruiting the right employee? Get 11 simple strategies in our guide!

1. Get an employer identification number (EIN)

Before you can go hunting for your first employee, you’ll need to register yourself as an employer. This involves getting an employer identification number (EIN), also known as an employer tax ID, by filling out IRS Form SS-4.

Consider your EIN like a Social Security number for your business. You’ll use your EIN on your tax returns and other legal documents that you submit to the IRS.

2. Register with your state’s employment agencies

Next, you’ll need to register as an employer on the state-level. This is mostly for tax purposes, so you can report and pay your income taxes if your state requires them.

If your state does have an income tax, you’ll deduct those taxes from your employees’ paycheck and then send the withheld taxes to your state’s agency.

You’ll also need to register your new employees with their state’s new hire notification system. By registering with the state, this allows the state to collect taxes and child support payments from your employees.

All employers need to report newly hired employees to a state directory within 20 days of their hire date. You can see the process for each state through the U.S. Department of Health and Human Services.

3. Verify your new employee’s eligibility to work in the U.S.

Once you’re all registered at the federal- and state-level, you’ll need to verify that the employee you’re looking to hire is eligible to work in the U.S.

This can be done by having them fill out section one of the Employee Eligibility Verification Form, also known as Form I-9. They’ll also need to show you valid documentation with their ID and employment authorization, like a driver’s license or Social Security card.

For most states, this is all that you’ll need to do to verify employees’ eligibility. However, in some cases, you’ll also need to enroll in the E-Verify program. This usually only applies to larger employers, so it’s likely you’ll be all set after the I-9.

4. Get workers’ compensation insurance

Next, depending on the state you’re in, you may be required to obtain worker’s compensation insurance. This will protect you from workers who are injured or get sick due to a workplace exposure.

You can get workers’ compensation insurance coverage in a few ways:

5. Set up payroll

The next step is to set up a payroll method to make sure you’re getting your new employee their paycheck on a regular basis, as well as taking care of payroll taxes.

Most employers choose to do payroll through a payroll service provider. You’ll want to choose one that covers everything from tracking your employee’s hours, calculating tax withholdings, and sending checks.

Depending on the size of your business, things like taking care of payroll taxes and filings may only need to be completed on a monthly or quarterly basis.

6. Post workplace notices

As an employer, you’re legally required to display posters in your office or workplace that educate your employees about their rights and your responsibilities under labor laws. You can get more details about which posters are required in your area from the U.S. Department of Labor.

7. Plan to offer employee benefits

Finally, you’ll want to make a plan for offering employee benefits. Research from the Society for Human Resource Management has consistently found that the top most requested employee benefit is healthcare.

As a small employer, you may not think you have the budget to offer a competitive benefits package. Thankfully, there’s a health benefits plan that’s specifically made for small employers—the qualified small employer health reimbursement arrangement (QSEHRA), also known as the small business HRA.

Through a QSEHRA, you simply set a monthly allowance for your employees to get reimbursed for qualified medical expenses and individual insurance premiums. You only reimburse employees for the expenses they incur, so any unused funds at the end of the year stay with you.

Get our full guide to see how a QSEHRA can work for your small business


As you look forward to growing your small business with new employees, following these seven steps will get you started in the right direction. What’s more, establishing a health benefits plan now will set you apart from other small businesses that may not be investing in their employees’ benefits, allowing you to recruit and retain top talent.

Originally published on June 16, 2021. Last updated June 16, 2021.


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