What Compliance Do You Need When Hiring Your First Employee?

Hiring a first employee is one of the most compliance-dense events in a company's lifecycle. The obligations begin before the first paycheck is issued and accumulate on a quarterly, annual, and event-driven basis from that point forward. Missing any of the initial registrations creates immediate liability — payroll taxes accrue from the first payroll day whether or not you've registered to pay them.

Step 1: Obtain an EIN (If You Don't Have One)

An Employer Identification Number (EIN) is required to open a payroll account, withhold federal taxes, and file employment tax returns. If you already have an EIN from formation, you can use it. If you don't, apply via IRS Form SS-4 online — approval is immediate. No payroll can be run without an EIN.

Step 2: Register for Federal Employer Taxes

Federal employment taxes — Social Security, Medicare (FICA), and federal income tax withholding — are governed by 26 U.S.C. Chapter 24. You must withhold FICA (6.2% Social Security + 1.45% Medicare from employee; same from employer) and federal income tax from each paycheck. Federal employment tax deposits are made via EFTPS. First-time employers are typically monthly depositors.

Step 3: Register for State Payroll Tax Withholding

Every state with an individual income tax requires employer registration before withholding begins. Register with the state's Department of Revenue or Department of Taxation — most states have online registration available. Most states require registration before the first payroll is run. Nine states have no income tax and no withholding registration requirement.

Step 4: Register for State Unemployment Insurance (SUI)

Every state requires SUI registration regardless of income tax status. Register with the state workforce agency. New employer SUI rates apply until you have enough employment history to receive an experience-rated rate. Most states require registration before the first payroll or within 30 days of the first hire.

Step 5: Complete Form I-9

Employee completes Section 1 of Form I-9 on or before the start date. Employer completes Section 2 within 3 business days of the start date by reviewing original identity and work authorization documents. Do not collect photocopies of documents — you may note document type, number, and expiration date on the I-9 form, but document retention beyond the I-9 itself requires careful EEOC discrimination analysis.

Step 6: New Hire Reporting

Report the new hire to the state's new hire reporting program within 20 days of the hire date. This is required under 42 U.S.C. § 653a (federal) and equivalent state laws. New hire information is used by child support enforcement agencies. Most states accept reporting via their payroll tax portal. Some states require reporting to the National Directory of New Hires separately.

Step 7: Obtain Workers' Compensation Insurance

Most states require workers' compensation coverage from the first employee. Requirements vary: some states allow private insurance, some have exclusive state funds (Ohio, Washington, North Dakota). Obtain coverage before the employee's first day. Failure to carry workers' comp creates direct personal liability for workplace injuries.

Step 8: Post Required Workplace Notices

Federal law requires posting of: FLSA minimum wage poster, FMLA notice (50+ employees), OSHA Job Safety and Health poster, EEO "Know Your Rights" poster, and USERRA (uniformed services) poster. State laws require additional state-specific posters. Most states update poster requirements periodically; check annually.

Step 9: Set Up Payroll Tax Deposits and Returns

Federal: monthly deposits of withheld income tax + FICA via EFTPS; Form 941 (quarterly) or Form 944 (annual for very small employers). State: varies — most states require quarterly withholding returns and quarterly SUI wage reports. First payroll runs create the first deposit obligation.

How Compliance Singularity Handles the First Hire

When you add your first employee in Compliance Singularity's HRIS integration or company profile, the system automatically identifies every registration and filing obligation triggered by that hire — federal employer registration, state withholding registration, SUI registration, new hire reporting, workers' comp requirements, and poster obligations — and queues each action. You get a prioritized onboarding checklist specific to the employee's state and your company's situation, with deadlines and direct links to each registration portal.