Employment and Hiring Terms, Explained (2026)

Quick answer

For a first employee, the core federal forms are Form I-9 and Form W-4. You'll also need the employee's name and Social Security number for Form W-2. The IRS says every U.S. employer must complete Form I-9 for each person it hires, and it asks employers to collect a signed Form W-4 when the employee starts work.

Before any of that, the business needs an Employer Identification Number (EIN), because payroll runs under the employer's tax ID. After that, plan on reporting the new hire to your state, following your state's payday and workers' compensation rules, classifying the worker correctly, and keeping payroll records for at least three years.

What this glossary covers

The terms below follow the order a first-time employer usually runs into them. Each entry says what the term means, what the official source says about it, and where the rules depend on your state. Providers are covered near the end and listed alphabetically.

Employer Identification Number (EIN)

An EIN is the federal tax ID the IRS uses to identify a business, including as an employer. You need it before the first payroll, because the employer on every payroll filing is the business, not the owner personally.

If you've formed an LLC or corporation but never got an EIN, that's the gap to close first. Formation services will also get an EIN for you as part of a package, which is covered below.

Form I-9 (Employment Eligibility Verification)

Form I-9 confirms that a new hire is authorized to work in the United States. In the IRS's words, "All U.S. employers must properly complete Form I-9 for every individual they hire for employment in the United States." There's no exemption for a first hire, a part-timer, or a family member on the payroll.

The form has a section for the employee and a section for the employer, and each has its own timing rule. U.S. Citizenship and Immigration Services (USCIS) publishes those rules and the list of acceptable documents on its I-9 Central site. Check its current guidance before the employee's first day, not after.

Form W-4 (Employee's Withholding Certificate)

Form W-4 tells you how much federal income tax to withhold from each paycheck. The IRS tells employers 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." When an employee hands in a replacement, the IRS says the new withholding must begin "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." Some states also have their own withholding rules, so check with your state's revenue department.

Form W-2 (Wage and Tax Statement)

Form W-2 reports an employee's annual wages and the taxes withheld from them. The IRS notes that you need the employee's name and Social Security number to complete it. Collect both during onboarding so you aren't chasing them at year-end, and enter them exactly as they appear on the employee's Social Security card.

New hire reporting

Employers must report each new employee to the State Directory of New Hires in the state where the employee works. Child support agencies use those reports to locate parents who owe support. The federal program is run by the Office of Child Support Services at the U.S. Department of Health and Human Services, which directs employers to their state contact for where and how to report. Check your state's program for its deadline and accepted reporting methods.

Employment tax filings

Once wages are paid, the employer withholds federal income tax and the employee's share of Social Security and Medicare, pays the employer's share, and files periodic employment tax returns. The IRS sets out the specific returns and deposit schedules on its Hiring Employees page. This is the ongoing work that payroll providers usually take on, and it's the main reason most first-time employers use one.

State payday requirements

How often you must pay employees is a state question, and the answers differ widely. The U.S. Department of Labor's summary of state payday rules gives examples:

• California requires wages at least twice per calendar month, on days set in advance.
• Colorado requires monthly pay.
• Connecticut requires weekly pay unless the labor commissioner approves a longer interval.

The DOL itself says individuals "should consult the relevant state labor office for official information," so treat any summary as a starting point.

Workers' compensation

Workers' compensation insurance covers employees injured on the job. It's governed by state law, and the rules differ sharply on who must carry it, which employees count, and how coverage is bought. The U.S. Small Business Administration's hiring guide treats it as one of the state-level steps in setting up as an employer. Check with your state's workers' compensation agency before the first day of work rather than relying on a general rule.

Employee vs. independent contractor (worker classification)

Classification decides whether you withhold and pay employment taxes for someone at all. It turns on control, not on a label or a signed contract. The IRS weighs three categories of evidence:

• Behavioral control: whether the business directs how the work is done.
• Financial control: whether the business controls the economic side of the job.
• Type of relationship: how the parties see the arrangement, including benefits and permanence.

The IRS is explicit that this isn't a checklist: "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."

Form SS-8

If you genuinely can't tell how a worker should be classified, Form SS-8 asks the IRS to decide. It's slow. The IRS warns that "it may take at least six months to receive a determination on your filing." For a first hire, that usually means making a well-reasoned call under the three categories above and documenting why.

Misclassification

Misclassification means treating an employee as an independent contractor. The cost lands on the business. According to the IRS, an employer who does this without a reasonable basis "may be held liable for employment taxes for that worker." Calling someone a contractor in an agreement doesn't change the outcome if the working relationship looks like employment.

Reasonable compensation (S corporations)

If you run an S corporation and work in it yourself, you may already be an employee of your own company. The IRS 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." It also has the authority to reclassify distributions as wages.

In practice, some S corporation owners are running payroll for themselves before they ever hire anyone else. If that applies to you, a first hire adds an employee to a payroll that already exists.

Payroll records

Under the Fair Labor Standards Act (FLSA), employers keep payroll records for three years. The Department of Labor's recordkeeping fact sheet says the records that wage calculations are based on, such as time cards and wage rate tables, must be kept for two years. Store them somewhere you can reach them years from now, not in an inbox.

What has to be in place before the first paycheck?

Most guides to hiring forms assume the business is already set up. Often it isn't. The order that works is: form the entity, get the EIN, open a business bank account, and then pick a payroll provider. The IRS lists opening a separate business checking account among the first steps in Publication 583, and payroll should run from that account, not a personal one.

This is where ZenBusiness fits for a first-time employer. It handles LLC formation, a registered agent, the EIN, Money Pro bookkeeping, and a business website from one account. The EIN is included from the Pro plan up and costs $99 on its own (as of October 6, 2026).

ZenBusiness doesn't run payroll itself. Through its ADP payroll partnership, a customer can request a connection to RUN Powered by ADP from the dashboard. An ADP representative then follows up about employee count and pay schedule and gives a quote. Some customers may be eligible for promotional pricing, which is confirmed in that consultation and isn't guaranteed.

Know the scope before you sign up. ADP is a separate service with its own platform, billing, and support. Payroll, tax filings, and day-to-day management happen in ADP's system, not in the ZenBusiness dashboard, which is only where you request the connection.

Which payroll providers handle these forms?

The providers below are listed alphabetically, not ranked. Prices come from each provider's own pricing page as of October 6, 2026, and may have changed since.

State filing fees are set by each state and aren't part of any provider's price.

Which option fits which first-time employer?

If the business is already formed, has an EIN, and has its own bank account, the decision is simply which payroll tool to use. On published price alone, Patriot Software has the lowest entry point here.

If you're hiring your first employee and don't yet have an EIN, or are still running business money through a personal account, the payroll tool isn't the first problem to solve. ZenBusiness covers the setup steps in order and connects you with ADP for payroll, which keeps the whole sequence with one company until payroll begins.

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