Hiring & Crew
How to Hire Your First Employee (Service Business)
Short answer
Register for an EIN and state employer accounts, buy workers' comp, pick a payroll service ($40–$80/mo), collect I-9 and W-4 on day one, and set a probation period so you can course-correct fast.
Your first hire either doubles your revenue or halves your profit — nothing in between. The difference is not luck; it's what you do in the first two weeks.
The legal setup, in order
- Get an EIN from the IRS (free, 5 minutes at irs.gov). You cannot run payroll without one.
- Register as an employer with your state's department of revenue and labor department.
- Buy workers' comp before day one. Required in every state except Texas.
- Pick a payroll provider — Gusto, OnPay, or QuickBooks Payroll handle federal, state, and local tax filings automatically.
- Post required state and federal labor law posters where employees can see them (free downloads at dol.gov).
Day-one paperwork
- Form I-9 (identity + work authorization) — must be signed by day 3 of work
- Form W-4 (federal withholding)
- State withholding form (if your state has income tax)
- Direct deposit authorization
- Employee handbook or short offer letter with at-will language
- Emergency contact + copy of driver's license (if driving)
W-2 vs 1099 — pick the right one
If you control when, where, and how someone works, the IRS treats them as an employee — regardless of what your contract says. Misclassifying a full-time helper as a 1099 to save on taxes is one of the most audited small-business mistakes.
Rule of thumb: if you supply the tools, set the schedule, and they work for you full-time, they're a W-2.
What to actually pay
Look up wages on the Bureau of Labor Statistics site (bls.gov/oes) — filter by state and occupation. Pay at the 50th–75th percentile for your area. Below the median and you'll churn constantly; above the 75th and you can't scale.
Budget the fully-loaded cost: wage × 1.25 covers FICA, workers' comp, and unemployment. A $25/hr helper costs you ~$31/hr all-in.
Frequently asked questions
Can I start with a 1099 and switch to W-2 later?
You can, but you're taking a risk during the 1099 phase. If the state audits and reclassifies, you'll owe back FICA, unemployment, and workers' comp penalties. If you know the role is full-time, start as W-2.
How much does payroll cost?
Gusto starts at $40/mo + $6/employee. OnPay is $40 + $6. QuickBooks Payroll bundles with QBO. All three file taxes and issue W-2s automatically.
Do I need an employee handbook for one person?
A one-pager with at-will language, PTO policy, and expectations is enough. Skip the 40-page corporate handbook until you have 10+ employees.
Run the whole job in one app.
Signed estimates, invoices, payments, and customer records — Glo Invoice keeps the paperwork side of the business quiet so you can work.