Your employee’s first day is an exciting one. They finally get to meet the team, join the company’s niche Slack channels, and maybe even enjoy a team lunch.
But there are also some key legal and regulatory items you’ll need to square away early on in the onboarding process. Use this article as your new hire onboarding checklist to help make sure you stay compliant and start on the right foot when a new employee joins your team.
1. Classify your new hire correctly
Before any paperwork, confirm that your new hire is an employee (W-2) and not an independent contractor (1099). Then decide whether they're exempt or non-exempt from overtime. That one decision determines which forms you need, how you pay them, and which taxes you withhold. If you're not sure, check the IRS and Department of Labor guidelines or ask an employment attorney.
2. Fill out all essential new hire paperwork
Take care of new hire paperwork right away, including:
Federal and state forms
Form W-4: Your employee uses this to tell you how much federal income tax to withhold from each paycheck. Have them complete it on or before their first day so it's ready for their first payroll.
Form I-9: This verifies your employee is authorized to work in the US. They complete Section 1 no later than their first day. You complete Section 2 within three business days of their start date by reviewing their identity and work authorization documents. Let your employee choose which acceptable documents to show you. Some states also require E-Verify.
New hire report: Report each new employee to your state, usually within 20 days of their hire date (some states have shorter deadlines). States use these reports to enforce child support orders and spot unemployment fraud. Most states let you file online.
State tax withholding form: Many states have their own version of the W-4. If you're a multi-state employer, or your new hire works remotely from another state, you may need to withhold for the state where they work, and sometimes the state where they live.
Local tax forms: Some cities, counties, and school districts levy their own income taxes, as in parts of Ohio and Pennsylvania. Check whether your employee's work or home location triggers one.
State-required notices: Some states require you to give new hires written notices at the start of employment, such as paid sick leave, workers' comp, or unemployment insurance information.
Payroll setup
Direct deposit authorization: Collect the bank name, routing number, and account number (a voided check works, too). Many states don't let you require direct deposit, so offer a direct deposit form as an option and have an alternative, like a paper check, ready.
Personal information: Collect your new employee's legal name, address, Social Security Number (SSN), date of birth, and emergency contact information, then store it all securely.
Company agreements and enrollment
Offer letter, employment agreement, or employment contract: An offer letter confirms the basics: job title, pay, start date, and whether employment is at-will. It isn't a contract unless it says so. If you want to promise specific terms, like a fixed length of employment, use a formal employment agreement and have an attorney review it.
Employee handbook acknowledgment: Keep this on file to show that your employee agreed to follow your company policies like dress code, time off, and anti-harassment rules.
Confidentiality, IP, or non-disclosure agreement: If your employee will handle trade secrets, client lists, or original work, this protects your business and spells out who owns what they create. Have an attorney review it, since some states limit how broad these agreements can be.
Benefits enrollment: Enrollment windows for health insurance, retirement plans, and other perks are often 30 days from hire, so share the details on day one. If you have 50 or more full-time equivalent employees, you must offer eligible full-time employees health coverage within 90 days under the Affordable Care Act (ACA).
Wage notice: Some states, including California and New York, require a written notice at hire with the employee's pay rate, pay day, and employer details. Have your employee sign it, and keep a copy.
3. Make sure you have a job application on file
Federal law doesn't require that every employee fills out a job application, but having one makes everything that follows easier. If your employee was hired without a paper or digital application, you won't have a record of their qualifications, employment history, and educational background.
Keep in mind that the application isn't where you get permission for everything else:
Background checks: Under the Fair Credit Reporting Act (FCRA), you need to give a standalone disclosure and get written authorization before running a check through a third party. It can't be buried in the application.
Drug tests: Get a separate signed consent, since state rules differ.
Criminal history questions: Many states and cities limit when you can ask (often called "ban-the-box" laws).
Rules vary by state, so check your state's labor website. If someone on the team skipped this step, just have your employee fill out the application and sign the authorizations before you do any reviews.
4. Post required notices and schedule required training
Display the federal and state labor law posters where employees can see them, covering topics like minimum wage, workplace safety, and equal employment opportunity. If you have remote employees, make the posters available electronically via their remote onboarding package.
Some states also require training soon after hire. California, New York, and Illinois, for example, require harassment prevention training within a set time frame. Check your state's deadline and put it on the calendar.
5. Get workers' compensation insurance
Workers' comp is required in nearly every state once you have employees, so confirm your new hire is covered by your policy. It protects your business in case of an on-the-job injury and covers your employee's medical costs and lost wages.
It’s important to follow your state’s rules. In California, for example, all employees need to be covered on their first day of employment, while other states exempt very small employers.
6. Keep your records in order
Good records make audits and questions a non-event. Keep the I-9 in a separate file from your employee's personnel file. Hold on to it for three years after the hire date or one year after employment ends, whichever is later. Keep payroll records for at least three years (some states require longer). Store everything securely, since it includes sensitive personal information.
Hiring your first employee? Don’t leave out these one-time steps
If this is your first hire, you'll also need to set up your business as an employer. Thankfully, you only do this once, but don’t forget to:
Get an Employer Identification Number (EIN) from the IRS.
Register for state payroll tax accounts: Typically, this includes state income tax withholding and unemployment insurance.
Choose a payroll schedule. Every business has to decide which payroll schedule is best for them and their employees. The most common frequencies in the US are monthly, semi-monthly (twice a month), biweekly (every two weeks), and weekly. State laws typically require a minimum pay frequency, so you can always pay more often but not less. Each schedule has advantages and disadvantages. Use this guide to learn which payroll schedule is right for you.
FAQs
What happens if a new employee doesn’t submit a Form W-4?
If an employee doesn’t submit a Form W-4, you must withhold federal income tax as if they were single or married filing separately, with no adjustments for dependents or deductions. Ask for the form as soon as possible. Once they submit one, you can use it to withhold for future paychecks.
Do new hire requirements apply to part-time and seasonal employees?
Yes. Federal requirements apply to every employee, including part-time, seasonal, and temporary workers, so each one generally needs a Form W-4, a Form I-9, and a new hire report. Independent contractors are the exception and complete a Form W-9 instead. Some state and local rules, such as paid sick leave, may depend on hours worked.
How do I correct a mistake on Form I-9?
Draw a single line through the incorrect entry, write the correct information next to it, then initial and date the change. Don’t erase anything, use correction fluid, or backdate the fix. If the mistake is in Section 2, the person who completed that section should make the correction. See USCIS’s I-9 Central for more information.
Is an employee handbook required by law?
No federal law requires employers to have an employee handbook, or to have employees sign one. Most states don’t require one either. Still, a handbook gives your team the same clear expectations and gives you a record of the policies you shared, which is why many employers create one.
Can I complete Form I-9 remotely for a remote employee?
Yes. You still have to examine the employee’s original documents, but an authorized representative, like a notary or a trusted colleague near the employee, can do it for you. Employers enrolled in E-Verify and in good standing can instead review documents over live video. Confirm current rules with USCIS, and see Gusto’s guide to verifying I-9s for remote employees.
