Important: please read
This is general information, not legal advice. It covers federal rules only, unless we say otherwise. State and local law may be different or stricter: check our state employment law hub. Always check the official source before you act. Rules can change. Resources disclaimer
In short
- Get an Employer Identification Number (EIN) from the IRS. It is free.
- Have the employee fill in Form W-4 so you can withhold federal income tax.
- Complete Form I-9: the employee does Section 1 by day one; you do Section 2 within 3 business days.
- Report the new hire to your state's new hire directory within 20 days of hire (some states set a shorter deadline).
- Keep time and pay records, and pay at least the federal minimum wage of $7.25 an hour, or your state's rate if higher.
Before you hire: check the worker is really an employee
If you control what work is done and how it is done, the person is probably an employee, not a contractor. The IRS looks at behavioral control, financial control and the relationship of the parties. [IRS Topic 762] (opens in a new tab) Read our employee or independent contractor guide if you are unsure.
Step-by-step federal checklist
| Step | What to do | When |
|---|---|---|
| 1. EIN | Apply for an Employer Identification Number on irs.gov. The IRS says you never have to pay a fee for an EIN. [IRS] (opens in a new tab) | Before your first payday |
| 2. Form W-4 | The employee completes Form W-4 so you can withhold the right federal income tax. The current version is the 2026 Form W-4. [IRS] (opens in a new tab) | Before the first paycheck |
| 3. Form I-9 | Employee completes Section 1 no later than the first day of work for pay. You complete Section 2 no later than the 3rd business day after they start. [USCIS] (opens in a new tab) | Day 1 and within 3 business days |
| 4. New hire report | Report the employee's name, address, Social Security number and start date, plus your business name, address and EIN, to your state's new hire directory. [HHS] (opens in a new tab) | Within 20 days of hire (federal deadline; your state may require sooner) |
| 5. Pay and records | Pay at least $7.25 an hour federally, or your state's higher rate. [US DOL] (opens in a new tab) Record hours worked each day and each workweek. [US DOL Fact Sheet 21] (opens in a new tab) | Every pay period |
| 6. Employment taxes | Withhold and deposit federal employment taxes and file the returns the IRS lists for employers. [IRS] (opens in a new tab) | Each payday and each filing period |
State steps you should not skip
Most states also need you to register for state unemployment insurance and, in many states, state income tax withholding. Most states also require workers' compensation insurance. The rules and deadlines differ, so check with your state labor and revenue agencies. Our 50-state employment law hub links to each state's rules.
Keep these records
- Payroll records for at least 3 years. [US DOL Fact Sheet 21] (opens in a new tab)
- Time cards and other records used to work out wages for at least 2 years. [US DOL Fact Sheet 21] (opens in a new tab)
- Form I-9 for 3 years after the hire date or 1 year after employment ends, whichever is later. See our Form I-9 guide.
Which anti-discrimination laws apply to you?
The EEOC says the equal pay law applies once you have at least one employee. Laws against discrimination based on race, color, religion, sex, national origin, disability and genetic information apply at 15 employees. Age discrimination law applies at 20 employees. [EEOC] (opens in a new tab) State laws often apply to smaller employers.
Work out the real cost first
Pay is only part of the cost. Use our free cost of hiring calculator to estimate employer taxes, and the hourly to salary calculator to compare offers. Ready-made offer letters and checklists are in our free templates.
Common mistakes
- Paying for an EIN through a third-party website. The IRS issues EINs free.
- Letting Section 2 of Form I-9 slip past the 3rd business day.
- Forgetting the state new hire report. Many states set a deadline shorter than 20 days.
- Treating a full-time, closely managed worker as a contractor to save on taxes.
- Not keeping daily hours records for hourly staff.
Related free tools
Official sources
- IRS: Hiring employees (opens in a new tab)
- IRS: Get an employer identification number (opens in a new tab)
- IRS: About Form W-4 (opens in a new tab)
- USCIS I-9 Central: Complete and correct Form I-9 (opens in a new tab)
- USCIS: Form I-9 (opens in a new tab)
- HHS Office of Child Support: New hire reporting (infographic) (opens in a new tab)
- US DOL Fact Sheet #21: Recordkeeping (opens in a new tab)
- US DOL: Minimum wage (opens in a new tab)
- EEOC: Do federal discrimination laws apply to my business? (opens in a new tab)
- IRS Topic 762: Independent contractor vs. employee (opens in a new tab)
Checked . If a source has changed since then, the official source wins.
Frequently asked questions
Do I need an EIN to hire one employee?
Generally yes. The IRS says you generally need an EIN to hire employees, and it is free to get online.
When must Form I-9 be completed?
The employee completes Section 1 no later than the first day of work for pay. The employer completes Section 2 no later than the 3rd business day after the employee starts work for pay (USCIS).
How fast must I report a new hire?
The federal rule is within 20 days of the date of hire. Some states set a shorter deadline, so check your state's new hire directory.
Is E-Verify required?
E-Verify is voluntary for most employers, but some federal contractors and employers in some states must use it. Check our E-Verify checker for your state.
What minimum wage do I have to pay?
The federal minimum wage is $7.25 an hour. If your state or city sets a higher rate, you must pay the higher rate.
More free guides
- HIRINGEmployee or independent contractor?
- HIRINGForm I-9 basics
- PAYOvertime basics
- PAYExempt vs. non-exempt employees
- PAYMinimum wage: federal and state
- TIME OFFWriting a simple PTO policy
- TIME OFFFamily and medical leave (FMLA)
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