Employer guideRead at source, 9 September 2026
How to Hire Employees for a Small Business: the First-Hire Checklist
Hiring your first employee is four setup tasks and four with a clock attached. Set up: an EIN, state unemployment insurance registration, workers' compensation cover, and the required workplace posters. On the clock: a signed Form W-4 when they start work, Form I-9 completed within three business days of the first day, a new hire report to your state directory within 20 days, and a Form W-2 to the employee and the SSA by 1 February 2027 for wages paid in 2026. The one most first-time employers have never heard of is the new hire report, and it is the one with a per-employee penalty attached.
Before anybody starts: the four setup items
An EIN. The IRS test is a list of yes-or-no questions, and the first one is "do you have employees?" A yes there means you need an Employer Identification Number regardless of your structure — a sole proprietor with one employee needs one just as a corporation does. It is free and applied for directly with the IRS.
State unemployment insurance. Registering with your state's workforce or revenue agency is what makes you an employer of record for UI tax purposes. It is a state process, it has its own deadlines, and no federal page will do it for you.
Workers' compensation. Also state law, and the thresholds differ — some states require cover from the first employee, others from three or five, and a few treat construction differently from everything else. This is the item most likely to be discovered late and the most expensive one to be wrong about.
Posters. Federal and state notices have to be displayed where employees can see them. There is no cost to the federal ones; they are downloadable from the Department of Labor.
One thing this page does not settle: whether the person you are about to hire should be an employee at all, rather than a contractor. That is a legal test about the work itself, not a preference about paperwork, and it is not something to decide from a checklist.
The four with a clock on them
| What | When | Where it comes from |
|---|---|---|
| Signed Form W-4 from the employee | When they start work | IRS — withholding must be based on the filing status and adjustments on the form |
| Form I-9, employment eligibility verification | Within three business days of the first day of work | All U.S. employers, for every individual hired |
| New hire report to the state directory | Not later than 20 days after the hire date | 42 U.S.C. § 653a — states may set a shorter window |
| Form W-2 to the employee and the SSA | 1 February 2027, for wages paid in 2026 | 2026 Instructions for Forms W-2 and W-3 |
The W-2 date is worth pausing on, because the rule of thumb everyone carries is "31 January". For the 2026 tax year that date falls on a Sunday, so the actual deadline for filing with the SSA and for furnishing copies B, C and 2 to employees is 1 February 2027 — on paper or electronically, the same date either way. Extensions are not automatic: one 30-day extension may be requested on Form 8809, and the IRS says it will grant it only in extraordinary circumstances or catastrophe.
On the I-9, the three-business-day rule is about Section 2, the employer's examination of documents. Which documents you may accept, and which of them ever need reverifying, is a separate question we cover in work authorization; the deadlines, editions and penalty structure are in Form I-9 requirements.
New hire reporting, the requirement nobody mentions
Federal law requires every employer to furnish a report to the State Directory of New Hires in the state where a newly hired employee works. The statute names the contents precisely: the employee's name, address and Social Security number, the date services for remuneration were first performed, and the employer's name, address and EIN. To the extent practicable the report is made on a W-4 form or an equivalent, and it may be mailed, or transmitted magnetically or electronically.
The timing is the part to diarise. Each state sets its own window, but the federal floor is that the report be made not later than 20 days after the date the employer hires the employee — or, for employers transmitting electronically, by two monthly transmissions not less than 12 and not more than 16 days apart. An employer with people in two or more states that reports electronically may designate a single state to receive all of its reports, provided it notifies the Secretary in writing.
The penalty is small per head and not small in aggregate
States have the option to set a civil money penalty of up to $25 per failure for each newly hired employee, rising to $500 where, under state law, the failure is the result of a conspiracy between the employer and the employee not to report or to submit a false report. For a business hiring four people a year, $25 is a rounding error. For a franchise group hiring three hundred, it is a line item — and it is entirely avoidable with a recurring calendar entry.
What you keep, and for how long
Two different agencies, two different clocks, and they do not line up.
The IRS says to keep all records of employment taxes for at least four years after filing the fourth quarter for the year — and that list is longer than most people assume: the EIN, employee names, addresses, SSNs and occupations; every wage payment with dates; the W-4s; deposit dates and amounts with EFTPS acknowledgment numbers; copies of returns filed; and any W-2 copies returned as undeliverable. Records relating to qualified sick and family leave wages and to employee retention credits run to at least six years.
The FLSA has its own list of fourteen items for every nonexempt employee, and two retention periods: three years for payroll records, collective bargaining agreements and sales and purchase records, and two years for the records the wage computations rest on — time cards, wage rate tables, work schedules and records of additions to or deductions from wages. The Department of Labor is explicit that no particular form or timekeeping device is required: any timekeeping plan is acceptable as long as it is complete and accurate.
Pay rules that apply from the first hour
The federal minimum wage for covered nonexempt employees is $7.25 an hour. Where an employee is subject to both state and federal minimum wage law, the Department of Labor's rule is simply that the employee is entitled to the higher of the two — which in most states means the federal figure is irrelevant to you in practice, and in a handful it is the operative number.
The other pay rule to internalise before the first payroll rather than after it is that overtime is owed on hours over forty in a workweek for nonexempt employees, and that a workweek is a fixed, recurring period you define and record. Item five on the FLSA's list is the time and day the workweek begins, which is a question a first-time employer has usually never been asked.
Work out your dates
Enter a start date and this puts the federal deadlines on the calendar. State windows can be shorter than the federal floor for new hire reporting, so treat the date below as the outside limit rather than the target.
First-hire deadline calculator
When to hire, and what finding the person costs
The administrative half is knowable. The judgment half is whether the work is there. A useful test for a first hire is whether the work is recurring and predictable rather than merely urgent — a backlog clears with overtime or a contractor, but a permanent stream of work does not, and paying overtime rates against a permanent stream is how small employers quietly lose margin for a year before hiring anyway.
The cost of finding the person is more measurable than most first-time employers expect. Across the 891 Boostpoint-managed Meta campaigns in our 2026 Social Job Advertising Benchmark, the median campaign cost $13.88 per applicant and the volume-weighted average was $8.02, with the middle half of campaigns between $6.48 and $29.74. Customer service and administrative roles were the cheapest family we measured at a $2.71 median; the frontline trades and technician roles most small employers hire for ran between $13 and $14. Those are advertising costs with the management fee inside them, and an applicant is not a hire. What that person then costs to employ — wage plus payroll taxes, workers' compensation and benefits — is a separate stack, and the employee cost calculator works it through line by line.
If the hiring process itself is the unfamiliar part rather than the paperwork, our hiring process steps guide walks the sequence from requisition to offer, and what makes a good job ad covers the posting.
Frequently asked questions
What do I need to hire my first employee?
Four things set up in advance — an Employer Identification Number, state unemployment insurance registration, workers' compensation cover where your state requires it, and the required federal and state workplace posters. Then four with deadlines: a signed Form W-4 when the employee starts work, Form I-9 completed within three business days of the first day, a new hire report to your state directory within 20 days of hire, and a Form W-2 to the employee and the Social Security Administration after year end.
Do I need an EIN to hire employees?
Yes. The IRS lists having employees as the first circumstance requiring an Employer Identification Number, alongside operating as a corporation or partnership and filing employment, excise or alcohol, tobacco and firearms returns. A sole proprietor who hires an employee needs an EIN even though they did not need one before.
What is new hire reporting and when is it due?
Under 42 U.S.C. section 653a, every employer must report each newly hired employee to the State Directory of New Hires in the state where the employee works, giving the employee's name, address and Social Security number, the date services for remuneration were first performed, and the employer's name, address and EIN. The report must be made not later than 20 days after the hire date, or by two monthly electronic transmissions between 12 and 16 days apart. States may set a shorter window and may impose a penalty of up to $25 per unreported employee, or $500 where the failure results from a conspiracy between employer and employee.
When are W-2s due for wages paid in 2026?
1 February 2027, both for filing with the Social Security Administration and for furnishing copies B, C and 2 to employees, whether filed on paper or electronically. The customary 31 January date falls on a Sunday for the 2026 tax year. One 30-day extension may be requested on Form 8809, but the IRS states it will grant it only in extraordinary circumstances or catastrophe.
How long do I have to keep payroll records?
Two clocks apply. The IRS requires employment tax records to be kept for at least four years after filing the fourth quarter for the year, extending to at least six years for records relating to qualified sick and family leave wages and to employee retention credits. The FLSA requires payroll records to be kept three years, and the records that wage computations rest on — time cards, wage rate tables and work schedules — two years.
What is the minimum wage I have to pay?
The federal minimum wage for covered nonexempt employees is $7.25 per hour. Where an employee is subject to both state and federal minimum wage law, the Department of Labor states the employee is entitled to the higher of the two, so in states with a higher rate that state figure is the one that applies.
The checklist is the easy half. Finding the person is the other one.
We put employer job ads in front of people who are working rather than searching, on Facebook and Instagram, and report what each applicant cost with the management fee inside it.
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