Hire your first W-2 employee without a compliance gap
A first employee legally on payroll – state employer tax accounts registered, federal EIN confirmed for payroll, Form W-4 and I-9 collected and stored correctly, workers’ comp bound, new-hire reporting filed, a payroll system running with the right deposit schedule, and mandatory postings and policies in place.
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Who it's for
This guide is for U.S. small business owners or sole proprietors who have only worked with independent contractors or paid themselves and are now hiring their first W-2 employee. It assumes you have no existing payroll tax accounts, no workers’ compensation policy, and no payroll system in place. It is written for a general audience across all states; where state rules vary, the step tells you how to look up your specific requirements.
About this playbook
This playbook walks you through every administrative step required to put your first W-2 employee on payroll without missing a compliance deadline or exposing your business to penalties. You will register for state withholding and unemployment accounts, secure workers’ compensation coverage, collect the right tax and identity forms, set up a payroll system, run the first pay cycle, and file the new-hire report. It does not cover employee recruiting, offer letters, salary negotiation, benefit plan design, or ongoing payroll processing beyond the first cycle. The steps are ordered so that waiting periods for policy binding and account approvals happen as early as possible.
What you'll do, step by step
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Phase 1: Register your business for employer tax accounts
0/4Before you can withhold taxes or pay an employee, your business needs federal and state tax accounts that are specifically configured for payroll. These registrations have processing delays, so complete them first.
- 0/515 min
- 0/630 min
- 0/530 min
- 0/515 min
Phase 2: Bind workers’ compensation insurance
3 stepsPhase 3: Collect employee tax and identity documents
4 stepsPhase 4: Set up payroll processing and determine deposit schedules
4 stepsPhase 5: Run first payroll and file the new-hire report
3 stepsPhase 6: Finalize compliance and establish the ongoing rhythm
3 stepsDetails
What you need first
You must have a registered business entity (LLC, corporation, or sole proprietorship) with a physical address in the state where the employee will work. You need a business bank account capable of making ACH or check payments for tax deposits. You should already have a Federal Employer Identification Number (EIN) for the business, or be ready to apply for one online. You need the employee’s full legal name, address, Social Security number, and start date before beginning Phase 3.
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About the creator
Playbooks about running and growing a business, written to be ticked off: what to prepare, what to do, in what order.
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