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First hires and HR setupWhat HR do you need before your first hire?
Before your first employee's first day, you need six things in place: employer registrations with the state, workers' compensation coverage, a payroll platform, a written offer letter, a completed I-9, and your required notices and core policies. Most companies have two or three of the six. Done in order, the rest is usually a short project, not a big one.
Answered by Steve Taylor, founder of Thinq HR & Insurance Services. 15 years across benefits, HR, payroll, PEOs and insurance.
The six, in order
State employer registrations
Withholding and unemployment insurance accounts in each state where an employee works. Do this first; payroll needs the account numbers.
Workers' compensation
Required in most states once you have employees, and in California from the first. Coverage should be in force before the start date.
Payroll platform
Pay schedule, tax filings and direct deposit set up before the offer goes out.
Offer letter and classification
Compensation, start date, and exempt or non-exempt classification. A classification mistake on hire one tends to get copied onto the next hires.
I-9 and required notices
The employee completes their part of the I-9 by the first day and the employer finishes it within three business days. States add their own notices at hire.
Handbook and PTO policy
A short one is fine. Without one, your policy is whatever someone remembers you saying.
What can wait, and when it stops waiting
- Benefits: usually when recruiting starts to demand it.
- EPLI: around the first layer of managers or the first difficult termination.
- A written performance process: before the first hard conversation, not after it.
The mistakes we clean up most
- Paying the first hire as a contractor "to keep it simple."
- Workers' comp bound after the start date.
- An exempt classification for a role that doesn't qualify.
- Missing state notices, discovered during the first termination.
Common questions
Do I need workers' comp before hiring my first employee?
In California, yes, from the first employee, including part-time. Most other states require it at one to a few employees. The policy should be in force on the start date.
Can my first hire be a contractor instead?
Only if the work genuinely meets your state's independent-contractor test. California's ABC test is strict: a full-time person doing core work under your direction is usually an employee.
Do I need a handbook for one employee?
Not always legally, but practically yes. A short handbook with required policies and a signed acknowledgment is inexpensive protection.
When do I have to offer health benefits?
The ACA employer requirement starts at 50 full-time-equivalent employees. Most companies offer benefits well before that because candidates expect them.
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