Are you a Delaware small business owner getting ready to hire? Whether you just started a business or have been operating for a while, hiring an employee for the first time is a major milestone.
To set yourself up for success during the hiring process (and beyond), it’s a good idea to dig into Delaware’s unique employer regulations and labor laws. Below, we’re sharing five steps to hiring employees in Delaware:
Step 1: Handle new employer logistics
Just like starting a business, becoming an employer for the first time takes a lot of paperwork. Before you start advertising open positions in your business, make sure you follow these steps:
Apply for a federal employer identification number (EIN) on the IRS website
Every employer needs a federal employer identification number (EIN) from the Internal Revenue Service (IRS). If your business is new or if you’ve been running it as a sole proprietorship or single-member LLC, you probably don’t have a federal tax ID yet. Luckily, the process is easy. You can apply for an EIN on the IRS website.
The good news? If you’re already registered as a partnership, multi-member limited liability company (LLC), C corporation, or S corporation, you already have your EIN. Just make sure you have the number on hand for the following steps.
Register with the Delaware Division of Revenue
Like most states, Delaware requires employers to withhold state income tax from their employees’ wages. To pay withholding taxes, you need to open a State of Delaware withholding account with the Delaware Division of Revenue.
You can create an account here with Delaware One Stop, an online portal for business licensing and registration. Keep in mind that if you already registered your business with the state of Delaware when you began operating, you don’t need to register again.
Register with the Delaware Department of Labor
To hire new employees in Delaware, you also have to register as an employer with the Delaware Department of Labor Division of Unemployment Insurance. The state of Delaware requires employers to make state unemployment insurance contributions, which help support Delaware workers who need temporary unemployment assistance.
Register for workers’ compensation insurance
Delaware requires employers with at least one employee to carry workers’ compensation insurance, which gives injured employees financial support while also offering some liability protection for employers.
First, you have to register with the Delaware Office of Workers’ Compensation, which you can do on Delaware One Stop. If you already have an account, simply sign in and follow the workers’ comp registration instructions. Next, look for a private insurance carrier in Delaware.
For more information, check out these workers’ comp FAQs.
Once you get workers’ compensation insurance, learn how to optimize your policy.
Register for Wilmington city tax
Wilmington is the only city in Delaware that imposes a local income tax, called Earned Income Tax. If you’re an employer in Wilmington, you need to withhold local taxes from each employee’s wages and pay them to the city.
For more information and to register for local taxes, visit the city of Wilmington website.
Step 2: Understand your hiring costs and tax liability
When you hire a new employee, you’re not just paying for recruiting expenses and your employee’s compensation package—you’re also covering federal and state employer taxes, which can add up.
Below are the Delaware payroll taxes you need to budget for. Before you start creating job postings, take a look at them, then use Gusto’s handy hiring calculator to come up with a realistic hiring budget.
- FICA taxes: The Federal Insurance Contributions Act (FICA) requires all employers to pay Social Security and Medicare taxes. The tax rate for Social Security is 6.2% for the employer and 6.2% for the employee; the Medicare tax rate is 1.45% for the employer and 1.45% for the employee.
- SUI taxes: Every state has annual state unemployment insurance (SUI) taxes. For new employers in Delaware, the tax rate is 1% on the first $10,500 of an employee’s wages.
- FUTA taxes: The Federal Unemployment Tax Act (FUTA), which created the federal unemployment program, puts the FUTA tax rate at 6% of the first $7,000 of employee wages. But if you pay SUI taxes on time and in full, you can get a credit on FUTA taxes of up to 5.4%, lowering your FUTA tax liability to 0.6%.
- Federal income withholding taxes: As an employer, you’ll use Form W-2 to file federal income tax withholding reports to the IRS. You’ll also file Form 941 on a quarterly basis and Form 940 annually.
- State and local income withholding taxes: As a Delaware employer, you must withhold income from your employees’ wages and make regular payments. If you conduct business in Wilmington, you’re also responsible for withholding the city’s Earned Income Tax. Learn more about withholding tax rates and filing deadlines on Delaware.gov or review these withholding FAQs from the Delaware Division of Revenue.
Need help calculating paychecks and withholdings for your employees? Use Gusto’s Delaware hourly paycheck and payroll calculator and Delaware’s salary paycheck and payroll calculator.
Step 3: Check Delaware labor laws
As a Delaware employer, it’s your responsibility to follow federal labor laws and Delaware employment laws. It’s crucial to make sure you know (among other things) the difference between full-time employees and independent contractors, Delaware’s wage and hour requirements, and the state laws around pay equity and employment practices.
Here are a handful of common labor law topics from the Delaware Department of Labor:
- Minimum wage: The Delaware minimum wage is $11.75 per hour as of January 1, 2023. The minimum wage will increase to $13.25 per hour in 2024 and $15 per hour in 2025.
- Overtime: Per federal law (the Fair Labor Standards Act, or FLSA), Delaware non-exempt employees who work more than 40 hours in a workweek must be paid overtime pay at a rate of 1.5 times. Here’s more Delaware wage and hour information.
- Pay frequency: Delaware employers are required to pay employees at least once a month. Employees who are laid off or who quit must be paid the wages owed to them on the next regularly scheduled payday.
- Breaks at work: Under Delaware law, employers are required to give employees who work at least seven and a half consecutive hours a 30-minute unpaid break during their day.
- At-will employment: The state of Delaware is an employment-at-will state. As an employer, you have the right to fire employees at any time without reason or cause. Your employees also have the right to leave their jobs at any time without reason or warning.
- Leave: There’s no state law in Delaware that requires employers to provide sick leave, voting leave, jury duty leave, or vacation time. What you offer employees is up to you as an individual employer. (Keep in mind that employee benefits, like paid time off and healthcare, go a long way toward improving business outcomes.)
- Salary history: Delaware employers have to comply with the state’s compensation history law, which prohibits employers from screening job candidates based on their compensation history or asking them about their previous salaries during the hiring process. See Gusto’s state-by-state guide to salary history laws for more information.
- Paid leave: Delaware has a forthcoming state paid leave program that will go into effect on January 1, 2026. The law requires most employers with 10 or more employees to provide up to 12 weeks of paid time off for parental leave, caregiver leave, medical leave, and other qualifying events.
- Discrimination laws: Under Delaware’s Discrimination in Employment Act, employers cannot discriminate against job candidates or employees on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, age, marital status, or genetic information.
- Pay equity: Delaware’s Pay Equity Law makes it illegal for employers to pay an employee less than another employee of the opposite sex for equal work. It also makes it illegal for employers to prohibit their employees from openly discussing their wages in the workplace. Learn more about the steps Delaware is taking to improve pay equity with this Equal Pay Factsheet.
- Criminal history: Delaware’s Ban the Box Act prohibits employers from asking job candidates about their criminal history on an initial job application.
Step 4: Fill out the Delaware new hire reporting form and other hiring documents
Every time you hire new employees in Delaware, you need to report information about them to the Delaware State Directory of New Hire Reporting. New hire reporting is a national system used primarily to find parents who are late on their child support payments.
In Delaware, you need to report new hires (part-time, full-time, and seasonal) within 20 days of your employee’s official date of hire. The hiring date is the first date an employee performs services you’ll pay them for, or the first day an employee is eligible to earn commission. You have to report both newly hired employees and rehired employees.
You can report new hires at the Delaware State Directory of New Hire Reporting website. You’ll provide your employee’s name, address, Social Security number, date of birth, and work start date, as well as your business information.
For more information, read Delaware’s new hire reporting FAQs.
Make sure you also fill out these other key hiring documents, including:
- Employment contract: Creating an employment contract for new employees is a good way to make sure you and your employees are on the same page. In the contract, list your employee’s job responsibilities and expected pay, then explain your most common workplace policies and include resources like your employee handbook.
- Form I-9: Form I-9, the Employment Eligibility Verification Form, verifies that employees are able to work in the US. As an employer, you have to complete the I-9 form for every employee you hire, and each employee has to attest to their employment authorization. You don’t have to file Form I-9 with the US Citizenship and Immigration Services (USCIS) or Immigration and Customs Enforcement (ICE). Instead, just hold onto the form as a record for at least three years from the date of hire or from one year after employment ends. You can download Form I-9 and read the completion instructions here.
- Form W-4: Every new employee you hire needs to complete IRS Form W-4, The Employee’s Withholding Certificate, on or before the date of their employment. Form W-4 determines how much federal income tax will be withheld from the employee’s paychecks. Download the form.
- Form DE-W4: You also need to give employees Form DE-W4, the Delaware Employee’s Withholding Allowance Certificate, to fill out.
Don’t forget to save copies of all these documents as part of your business’s records.
Step 5: Display labor law posters and required notices
The Delaware Department of Labor requires employers to post labor law signs in the workplace that explain things like the state’s current minimum wage, how many breaks employees are entitled to, and what constitutes workplace discrimination.
Upgrade your business payroll
Now that you’re officially a Delaware employer, consider investing in a smarter payroll solution.
Gusto’s all-in-one payroll platform automates payroll for you, organizes all your documents, and makes filing taxes pain-free. That’s a win-win-win. Want to get started? Create an account today.