- Employee or contractor?
- Write the role down before you post it
To hire your first employee, settle four things in order: whether the role is an employee or a contractor, the paperwork you need on the first day, what the person will cost you beyond their pay, and how you'll run payroll and onboarding. Each federal rule below is a dated quote from the IRS, USCIS or the Department of Labor. State rules add to them, so check your state's labor and tax agencies too, and ask an accountant or an employment lawyer before your first payday.
This page covers a first hire in general. If the person will work from home or another state, see how to build a remote team. For the forms themselves, see what is a W-4 form, what is a W-2 form and what is payroll tax.
Employee or contractor?
Decide this before you post the role, because it changes the paperwork, the taxes and the way you manage the work. In the US, the IRS says (page last reviewed or updated May 19, 2026): "In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered." It groups those facts into behavioral, financial and relationship questions, starting with: "Does the company control or have the right to control what the worker does and how the worker does his or her job?"
If you'll set the hours, the tools and how the work is done, plan for an employee. If you're unsure, ask an accountant or an employment lawyer before you make an offer.
Write the role down before you post it
A one-page role description can save you from hiring for the wrong job. Include:
- the three or four results the person is responsible for in their first six months;
- the hours, the place of work and who they report to;
- the pay, how often it's paid, and whether the role is full time or part time;
- what you'll hand over to them, and what you'll keep doing yourself.
Paperwork for the first day
In the US, the IRS says (page last reviewed or updated February 18, 2026): "If you hire employees, then there is information that you need to secure for your records and forms that you must complete including the following:" Its list covers eligibility to work, the Social Security number and withholding:
- Eligibility to work (Form I-9). USCIS says (last reviewed or updated June 3, 2026): "All U.S. employers must properly complete Form I-9 for every individual they hire for employment in the United States."
- Social Security number. The IRS says: "You are required to get each employee's name and Social Security number (SSN) and to enter them on Form W-2 (this requirement also applies to resident and nonresident alien employees)."
- Withholding (Form W-4). The IRS says: "Ask all new employees to give you a signed Form W-4 when they start work. Make the form effective with the first wage payment."
Your state may require its own new-hire report, withholding form or insurance. Check with your state's labor and tax agencies.
Pay at least the minimum wage, and keep records
In the US, the Department of Labor says (checked October 31, 2026): "The federal minimum wage is $7.25 per hour effective July 24, 2009." It adds: "Many states also have minimum wage laws. Some state laws provide greater employee protections; employers must comply with both." So check your state's rate before you set the pay.
On records, Fact Sheet #21 from the Department of Labor (revised July 2008) says: "Every covered employer must keep certain records for each non-exempt worker." Keep the hours and the pay for each pay period from the first day.
Budget for more than the pay
The pay is only part of what an employee costs. Employers also pay their share of Social Security and Medicare. In the US, the IRS says (page last reviewed or updated September 24, 2026): "The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total." In the US, the IRS's Form 940 topic (page last reviewed or updated September 24, 2026) says: "Most employers pay both a federal (FUTA) and a state unemployment tax." Benefits and equipment add to the cost too. Ask an accountant which other taxes or insurance apply in your state, and what they will cost.
Worked example: the employer share of Social Security and Medicare
Sample figures: you pay your first employee $3,200.00 a month. At the employer rates the IRS quotes above, your share of Social Security is $3,200.00 × 6.2% = $198.40, and your share of Medicare is $3,200.00 × 1.45% = $46.40. Together that's $198.40 + $46.40 = $244.80, so the month costs you at least $3,200.00 + $244.80 = $3,444.80 before unemployment taxes, benefits or equipment.
Set up payroll before the first payday
Decide who will calculate withholding, pay the taxes and file the forms: you, a payroll service or an accountant. Payroll mistakes can be hard to unwind, so set this up before the first payday rather than after it.
Onboard from a checklist
Plan the first two weeks before the person starts:
- Day one: the forms above, access to the tools they need, and an introduction to the people they'll work with.
- Week one: the work they'll own, how you want it done, and the first small task they can finish.
- Week two: a short check-in to answer questions and adjust anything that isn't working.
Write down how the work is done as you explain it. That document can become the training for your next hire.
Where Billed fits
If your new employee's hours are billed to clients, Billed's time tracking page says: "Invite teammates, accountants and contractors to your Billed account and grant them permissions, so the whole team tracks its time in one place." Billed's invoice software page says: "Invite your team, accountant or contractors and give them permissions in your account."
Mistakes to avoid
- Treating someone as a contractor while setting their hours and methods
- Starting work before Form I-9 is completed
- Budgeting only for the wage
- Leaving payroll setup until the week of the first payday
- Skipping your state's own rules because the federal ones are covered
When this guide isn't for you
If you're hiring outside the US, or hiring several people at once, the rules and the setup are different. Ask an accountant or an employment lawyer where you're hiring.
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Frequently Asked Questions
What forms do I need when I hire my first employee?
In the US, at minimum Form I-9 for eligibility to work and Form W-4 for withholding. USCIS says (last reviewed or updated June 3, 2026): "All U.S. employers must properly complete Form I-9 for every individual they hire for employment in the United States." The IRS says (page last reviewed or updated February 18, 2026): "Ask all new employees to give you a signed Form W-4 when they start work." Check your state for its own forms.
How much does an employee cost beyond their pay?
At least your half of Social Security and Medicare tax. In the US, the IRS says (page last reviewed or updated September 24, 2026): "The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total." The IRS also says (page last reviewed or updated September 24, 2026): "Most employers pay both a federal (FUTA) and a state unemployment tax." Benefits and equipment come on top, so ask an accountant to work out the full figure for your state.
Should my first hire be an employee or a contractor?
It depends on how much control you'll have over the work. The IRS says (page last reviewed or updated May 19, 2026) that all information that provides evidence of "the degree of control and independence must be considered." If you're unsure, ask an accountant or an employment lawyer before you make an offer.
Can my employee track billable time in Billed?
Billed's time tracking page says: "Invite teammates, accountants and contractors to your Billed account and grant them permissions, so the whole team tracks its time in one place."