What do I need to do to hire my first employee in the US?

GuideUSChecked 30 October 202627 primary sources8 min readUK version

The short answer

To hire your first employee in the US, get an EIN, register for state unemployment insurance and any state withholding, buy workers' comp where your state requires it, complete Forms I-9 and W-4, report the hire to your state within 20 days, and pay at least the higher of federal and state minimum wage, with overtime over 40 hours.

Is this person an employee or a contractor?

How the work happens decides it, not the label. One worker can be tested four ways, and you must pass the strictest test that applies. As of Oct 2026:

  • Federal tax: the IRS common-law test of behavioral control, financial control and the type of relationship (IRC sec. 3121(d)(2); IRS Publication 15-A). Form SS-8 asks the IRS to decide.
  • Federal wage law: the Department of Labor's economic reality test, under a 2024 rule it proposed in February 2026 to rescind (91 FR 9932; not final).
  • California: a worker is an employee unless you prove all three prongs of the ABC test (Lab. Code sec. 2775). Willful misclassification costs $5,000 to $15,000 per violation, or $10,000 to $25,000 for a pattern (sec. 226.8).
  • Your state also has its own tests for unemployment insurance, wage law and workers' comp.

If the worker really is a contractor, get Form W-9 before the first payment and file Form 1099-NEC if you pay $2,000 or more in 2026 (As of Oct 2026). If not, hire them as an employee. See paying a crew as 1099 subs when they work like employees.

What do I set up before the first payday?

Accounts, insurance and a pay schedule, in this order:

  1. An EIN, free from the IRS online.
  2. State payroll accounts for state unemployment insurance and, if your state has an income tax, state withholding, separate from your federal registration.
  3. Workers' compensation, where your state requires it (below).
  4. A pay schedule your state allows: New York requires weekly pay for manual workers unless the state authorizes otherwise (Lab. Law sec. 191); Texas requires at least twice a month for nonexempt staff (Lab. Code sec. 61.011), and California twice a month (Lab. Code sec. 204). As of Oct 2026.

What paperwork does the new employee fill in?

Form I-9 and Form W-4, with strict timing on the I-9. As of Oct 2026:

  • Form I-9: the employee completes Section 1 no later than the first day of work, and you complete Section 2 within 3 business days after that day, or by the first day if the job lasts fewer than 3 business days (8 CFR 274a.2(b)(1)). Keep it for 3 years after hire or 1 year after the job ends, whichever is later (8 CFR 274a.2(b)(2)).
  • E-Verify where your state requires it: Florida private employers with 25 or more employees must verify each new employee within 3 business days after work for pay begins (Fla. Stat. sec. 448.095(2)).
  • Form W-4 for federal income tax withholding (IRS Publication 15). Check whether your state uses its own withholding form.
  • New hire report to your state within 20 days of hire, or sooner where state law requires (42 U.S.C. 653a(b)(2)).

What do I have to pay?

At least the highest minimum wage that applies, federal, state or city, and overtime at 1.5 times the regular rate for hours over 40 in a workweek (29 U.S.C. 206(a)(1) and 207(a)(1)). The federal minimum is $7.25 an hour, unchanged since July 24, 2009. State examples, As of Oct 2026:

StateMinimum wageLaw
California$16.90 from January 1, 2026; $17.40 from January 1, 2027. Overtime also after 8 hours in a day, and double time after 12Lab. Code secs. 1182.12 and 510
New York$17.00 in New York City, Long Island and Westchester; $16.00 elsewhere; unchanged on January 1, 2027Lab. Law sec. 652
Florida$15.00 from September 30, 2026Fla. Const. art. X, sec. 24
Texas$7.25, tied to the federal rateLab. Code sec. 62.051

Many cities set higher rates. A salaried employee is exempt from overtime only if the duties test is met and the salary is at least $684 a week federally (29 CFR 541.600); California and New York set higher thresholds. As of Oct 2026.

What payroll taxes do I withhold and pay?

You withhold the employee's share and pay your own on top. For 2026, As of Oct 2026: Social Security is 6.2% each on wages up to $184,500; Medicare is 1.45% each with no cap, plus 0.9% withheld from the employee on wages over $200,000, which you do not match. Federal unemployment tax (FUTA) is 6.0% on the first $7,000 of each employee's wages, less a credit of up to 5.4% for state unemployment tax paid on time (less in a credit reduction state), and state unemployment comes on top at the rate your state assigns.

A $58,000 first hire in 2026 (indicative, As of Oct 2026)Amount
Wages$58,000
Employer Social Security: $58,000 x 6.2%$3,596
Employer Medicare: $58,000 x 1.45%$841
FUTA after the full state credit: $7,000 x 0.6%$42
Cost before state unemployment, workers' comp and benefits$62,479

Deposit withheld and employer taxes monthly or semiweekly, file Form 941 each quarter, and file Form 940 and Forms W-2 by January 31 (February 1, 2027 for the 2026 forms). Withheld taxes are trust funds: if they go unpaid, the IRS can assess 100% against any responsible person who willfully failed to pay them (IRC sec. 6672). As of Oct 2026. A CPA or payroll provider is worth it from the first payroll.

Do I need workers' comp from the first hire?

In many states, yes. Rules vary by state. California and New York require it from the first employee (Cal. Lab. Code sec. 3700; N.Y. Workers' Comp. Law sec. 10). Florida requires it from 1 employee in construction and 4 in other industries (Fla. Stat. sec. 440.02), with a stop-work order for an uninsured employer (sec. 440.107). Texas lets private employers opt out as nonsubscribers, who lose their common-law defenses in an injury suit (Tex. Lab. Code sec. 406.033), though coverage is required on public construction contracts (sec. 406.096). As of Oct 2026.

Before you classify anyone or sign your first employment contract, have an employment attorney licensed in your state check it. Cleaning companies: see paying cleaners right for drive time and overtime.

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Questions owners ask

How long do I have to complete Form I-9?

The employee completes Section 1 by the first day of work; you complete Section 2 within 3 business days after that day, or on the first day if the job lasts fewer than 3 business days (8 CFR 274a.2(b)(1)). As of Oct 2026.

When must I report a new hire to my state?

Within 20 days of hire under federal law, or sooner where your state requires it (42 U.S.C. 653a(b)(2)). As of Oct 2026.

What is the minimum wage in California, New York, Florida and Texas?

California $16.90 in 2026. New York $17.00 in New York City, Long Island and Westchester and $16.00 elsewhere. Florida $15.00 from September 30, 2026. Texas $7.25, the federal rate. Cities can be higher. As of Oct 2026.

Can I pay my first worker as a 1099 contractor instead?

Only if they really are one under every test that applies. California presumes an employee unless all three ABC prongs are proved, and willful misclassification there costs $5,000 to $15,000 per violation. As of Oct 2026.

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