Hiring your first employee is a milestone that most contractors approach with a mix of excitement and anxiety. The excitement is obvious — you can take more work, you can stop doing everything yourself, you can actually grow. The anxiety is about all the things you don't know yet.
Here's what you actually need to know, in plain language, before you bring someone on.
First: are you actually ready?
The signal that you're ready to hire is consistent, predictable work that you can't handle alone — not a single busy month. If you're turning down jobs because you can't physically do them all, and that's been happening for two or three months, you're probably ready. If you had one good month and you're thinking about hiring to capitalize on it — wait and see if it holds.
The reason this matters: an employee is a fixed cost that exists whether you have work or not. You can't send them home without pay every time it rains or a job falls through. If your work isn't consistent enough to keep someone busy, hiring will create more stress than it relieves.
The real cost of an employee
If you're paying someone $20/hour, your actual cost is significantly higher. Here's the full picture:
- Wages: $20.00/hr
- Employer payroll taxes (FICA — Social Security and Medicare): $1.53/hr
- Federal unemployment tax (FUTA): ~$0.14/hr
- State unemployment tax (SUTA — varies widely): ~$0.50–1.50/hr
- Workers' comp (varies by trade — let's say 12%): $2.40/hr
- General liability allocated to labor (~4%): $0.80/hr
Your true cost on a $20/hr employee is closer to $25.50–$26.50/hr before any benefits. Build that into your loaded labor rate and bids. Many first-time employers get surprised by these costs at year end and wonder why the margins were worse than expected.
The paperwork you can't skip
EIN. If you don't have an Employer Identification Number, get one first. It's free on the IRS website and takes 10 minutes. You need it before you can set up payroll.
Register with your state. Most states require you to register as an employer with the state workforce agency before your first hire. This is what sets up your state unemployment tax account. It varies by state — look up "[your state] employer registration" and follow the process.
I-9. Every new employee must complete an I-9 form verifying their eligibility to work in the US within their first three days of employment. You keep this on file — you don't send it anywhere, but you must have it if you're ever audited.
W-4. Your employee fills this out so you know how much federal income tax to withhold from each paycheck.
Workers' comp. Must be in place before the first day. Not after. Before.
Payroll setup. Use a payroll service. QuickBooks Payroll, Gusto, or similar. Running payroll manually is complicated, error-prone, and not worth the cost savings at one employee. A basic payroll service runs $40–60/month and handles withholding, deposits, and year-end W-2s automatically.
Where to find good people
The best hires in the trades come through people you already know. Ask your current network — suppliers, other contractors you have a relationship with, past employees of people you trust. A referral from someone whose judgment you trust is worth more than ten applications from strangers.
If you're posting online, Indeed and Facebook Marketplace both get results for trade labor. Be specific in the posting about the physical demands and type of work — vague job posts attract vague applicants.
Pay at or above market. Good people have options. If you're trying to hire at below-market wages, you're competing with everyone else doing the same thing and you'll get the candidates nobody else wanted.
Making the first 90 days work
The most common way first hires fail is unclear expectations. Tell them what the job is, what you expect from them, what your standards are, and how you evaluate performance — before the first week is out. You don't need an HR handbook. You need a direct conversation.
Work alongside them at first. You can't assess someone's skill or attitude from a distance. The first few weeks on a job site together will tell you more about whether this person will work out than any interview did.
Pay on time, every time. Seems obvious. But if you're still sorting out cash flow issues, make sure payroll is protected. An employee who gets a late check once will quietly start looking elsewhere. Two late checks and they're gone.
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This isn't legal or HR advice. Employment law varies significantly by state. Consult an employment attorney or HR professional for guidance specific to your situation.