Am I Ready to Hire? How to Hire Your First Employee as a Contractor

You’re ready to hire your first employee when you have steady work booked several weeks ahead, you’re turning down jobs or finishing late because you’re the only one doing the work, and your prices cover the full cost of an employee, not just their wage. Then the hire itself comes down to a short checklist: register as an employer, get insurance in place, complete the new-hire paperwork, and set up payroll before the first day.

This guide covers the signs you’re ready, what a first employee really costs, and the paperwork, step by step.

• Your calendar is full several weeks out, most of the year, not just in peak season.
• You’re leaving money on the table: turning down jobs, letting leads go cold, or stretching jobs because you’re alone on site.
• You’re doing work someone else could do for less than your time is worth, like demo, cleanup, or material runs.
• Your prices can carry the cost. If you priced the extra labor into your last ten jobs, would they still be profitable?
• You have three months of payroll in reserve, so a slow month doesn’t put you behind.

If only the first sign is true, a reliable subcontractor or a seasonal helper might be the better first step.

An employee costs more than their wage. Payroll taxes, workers’ comp, insurance, paid time off, and the hours that can’t be billed to a job all add up. Our labor burden guide walks through a $30-an-hour carpenter who costs about $42 for every hour worked and about $50 for every hour you can bill. Run your own numbers before you post the job.

The answer isn’t your choice to make by label. Federal and state tests look at who controls how, when, and where the work is done, who provides the tools, and whether the person runs their own business. Someone who works only for you, on your schedule, with your tools, is likely an employee. Misclassifying a worker as a contractor can lead to back taxes and penalties, so check the IRS and your state’s rules if you’re unsure.

1. Get an Employer Identification Number (EIN) from the IRS, if you don’t already have one.
2. Register with your state for state payroll tax withholding (if your state has income tax) and state unemployment insurance.
3. Get workers’ compensation insurance. Most states require it once you have employees; ask your agent about the right class code.
4. Have the employee complete Form I-9 to verify they can work in the US. The employee fills in their section by the first day of work, and you complete yours within three business days. Some states also require E-Verify.
5. Have the employee complete Form W-4 for federal tax withholding, and your state’s withholding form if there is one.
6. Report the new hire to your state new-hire registry, usually within 20 days of hiring.
7. Set up payroll, either through a payroll service or your accounting software, so taxes are withheld and deposited on time.
8. Post required labor law notices where employees can see them.
9. Write down the basics: pay rate, schedule, overtime rules, safety expectations, and who they report to.

• Start with a clear role. “Help me with everything” leads to confusion; “lead carpenter’s helper on remodels” doesn’t.
• Track their hours by job from day one, so you can see whether the hire pays for itself.
• Pair them with you for the first weeks, then give them their own tasks.
• Review after 90 days: quality of work, reliability, and whether jobs are finishing faster.

Hiring also changes your workers’ comp audit and your payroll records. Our guide to workers’ comp audits for contractors covers what to keep. This article is general information, not legal or tax advice; check with your accountant and your state labor department.

MotionOps helps your first hire start on the right foot, for contractors whose jobs run for days or weeks:

• Scheduling so your new employee knows where to be each day
• Time tracking by job, with GPS, from their phone
• Timesheet approvals and payroll prep from the same hours
• HR document management for employee records
• Job profitability, so you can see whether the hire is paying off

Try MotionOps free for 14 days and add your first employee to it.