Hiring Your First Employee: Common Questions (2026)

Quick answer

Workers' compensation for private employers is governed by state law, not by a single federal rule. States differ on when coverage becomes mandatory, who counts toward any minimum, and whether part-time hours make any difference.

Before the employee's first shift, check with your state's workers' compensation agency. Do not treat part-time status as an exemption until the state confirms it.

Workers' comp is one item on a short list. Before the first paycheck, you also need an Employer Identification Number (EIN), a completed Form I-9 and Form W-4 from the employee, a pay schedule your state allows, and a way to keep payroll records. If the business has not been formed yet or has no EIN, ZenBusiness can handle the formation and the EIN. It refers customers to ADP for payroll, and ADP runs that payroll as a separate service with its own platform, billing and support.

Do I need workers' comp insurance for one part-time employee?

Treat the answer as yes until your state confirms otherwise. Private-sector workers' compensation is handled state by state, so no honest page can give one rule that applies everywhere. The U.S. Department of Labor's Office of Workers' Compensation Programs says on its Contact Information page that it has no role in administering or overseeing state workers' compensation programs. It tells people who work for a private company to contact the workers' compensation program in their state.

The U.S. Small Business Administration's guide, "Hire and Manage Employees," lists workers' compensation among the employee benefits it describes as required. Coverage can come through a commercial carrier, through self-insurance, or through a state workers' compensation program. Which of those routes is available, and when coverage becomes mandatory, depends on your state.

Part-time status cannot be relied on as an exemption without checking. Because the rule comes from state law, only your state can say whether part-time hours matter at all and how they count toward any minimum. The safe assumption is that a single employee can be enough to trigger the requirement.

How do I find out what my state requires?

Start with your state's workers' compensation office. In some states that office is a commission or board. In others, it sits inside the state labor department or the state insurance department. The Department of Labor's "State Workers' Compensation Officials" page lists the office for every state and territory, with a link to each one's workers' compensation site.

When you contact the office or read its published guidance, get clear answers to these questions:

• At what point does coverage become mandatory: the first employee, or a set number of employees?
• Do part-time employees count, and if so, how?
• Are owners, officers or family members counted, and can any of them opt out?
• How can coverage be bought: through a private insurer, a state fund, or self-insurance?
• What notices, if any, must be posted for employees?

Take the answer from the state office itself. An insurer's sales page or a forum thread is not a substitute for the state's own rules.

What has to be in place before the first paycheck?

The EIN comes first. On its "Get an Employer Identification Number" page, the IRS lists hiring employees as one of the reasons a business generally needs an EIN. It also says a corporation or LLC should be formed with the state before applying.

This is where forming the business and running payroll turn out to be the same job. For an owner who is just starting out, the order is the entity, then the EIN, then a separate business bank account, then payroll. The IRS says in Publication 583, "Starting a Business and Keeping Records," that opening a business checking account is one of the first things to do. That step comes before choosing payroll software, and it is easy to skip when money is already moving through a personal account.

ZenBusiness covers the first three steps. As of October 6, 2026, it files the EIN for $99 on its Starter plan and includes it from the Pro plan up, which suits owners who want the EIN handled alongside formation. Through its ADP payroll partnership, ZenBusiness states plainly that payroll cannot run without an EIN. It recommends RUN Powered by ADP, which is built for businesses with 1 to 49 employees.

Here is exactly what that partnership covers:

• A ZenBusiness customer requests the connection from the ZenBusiness dashboard.
• An ADP representative then follows up to discuss employee count and pay schedule, and ADP provides the quote.
• ADP is a separate service with its own platform, its own billing and its own support. Day-to-day payroll and tax filings happen in ADP's system, not in the ZenBusiness dashboard.
• ZenBusiness customers may be eligible for promotional pricing. Eligibility is confirmed in the consultation and is not guaranteed, and the offers generally exclude state filing fees and add-ons.

Which forms does a new employee fill out?

There are two forms on day one, plus one piece of information you need to collect. The IRS's "Hiring Employees" page states that "All U.S. employers must properly complete Form I-9 for every individual they hire for employment in the United States." That applies to a part-time hire exactly as it does to a full-time one.

For federal income tax withholding, the IRS says to "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." A W-4 "remains in effect until the employee gives you a new one." If an employee hands you a replacement, withholding under the new form begins "no later than the start of the first payroll period ending on or after the 30th day from the date you received the replacement Form W-4."

You also need the employee's name and Social Security number, because both go on Form W-2. Collect them at hiring so you are not chasing them at year-end.

Is my first hire an employee or an independent contractor?

Classification turns on control, not on what you call the arrangement or what the contract says. The IRS's guidance, "Independent Contractor (Self-Employed) or Employee?", weighs three categories: behavioral control, financial control, and the type of relationship. As the IRS puts it, "There is no 'magic' or set number of factors that 'makes' the worker an employee or an independent contractor and no one factor stands alone in making this determination."

Getting it wrong is expensive. An employer who classifies an employee as an independent contractor without a reasonable basis "may be held liable for employment taxes for that worker." If you are genuinely unsure, Form SS-8 asks the IRS to make the determination, though the IRS warns that "it may take at least six months to receive a determination on your filing."

Classification also feeds back into the workers' compensation question. Your state's workers' compensation office can tell you how it defines an employee for its own purposes. Ask about that at the same time you ask about coverage.

I own an S corporation. Does paying myself count as payroll?

It can. The IRS's guidance on "S Corporation Compensation and Medical Insurance Issues" states that "S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made." If an owner works in the business, a reasonable wage comes first and distributions come after.

The IRS also notes that it "has the authority to reclassify payments made to shareholders from non-wage distributions ... to wages." In practice, an S corporation owner who works in the business may already need payroll before hiring anyone else. If you run an S corporation, settle your own wage at the same time you set up payroll for your first hire.

How often do I have to pay my employee?

Pay frequency is set by state law and varies widely, as the Department of Labor's "State Payday Requirements" page shows. California requires wages at least twice per calendar month on days designated in advance. Colorado requires monthly payment, while Connecticut requires weekly payment unless the labor commissioner approves a longer interval.

The DOL itself says individuals "should consult the relevant state labor office for official information." Settle the schedule before the first payday, because it shapes how you set up payroll and how much cash you need on hand each cycle.

What payroll records do I need to keep, and for how long?

Under the Fair Labor Standards Act, payroll records are kept for three years. The records your wage calculations are based on, including time cards and wage rate tables, are kept for two years. The Department of Labor sets this out in "Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA)."

Recordkeeping is much easier when business money moves through its own account, which is why the bank account comes before payroll. A payroll service stores pay records, but bookkeeping covers the rest of the business's money. ZenBusiness offers bookkeeping through Money Pro at $30 a month as of October 6, 2026.

Which payroll services handle a first hire, and what do they cost?

The table below lists providers alphabetically, and the order is not a ranking. Prices come from each provider's own pricing page and are current as of October 6, 2026. Introductory rates are labeled as promotional.

State filing fees are set by each state, vary, and are not part of any provider's price.

If the business already has its EIN and bank account, and the lowest published price is the priority, Patriot Software is the cheaper choice at the bottom end. For an owner hiring a first employee before the entity, the EIN or the business account is in place, the order of operations matters more than the payroll tool. Starting with ZenBusiness puts formation, the EIN, the registered agent and bookkeeping in one place, with payroll handled by ADP as a separate service.

This is general information, not legal, tax or accounting advice, and requirements vary by state and change over time.