Hiring Your First Employee in Texas: A Checklist

Hiring your first employee is exciting, and it can also feel like a pile of unknown forms. The good news is that most of the work happens in a predictable order. Here is the checklist I walk new owners through. It is written for Texas, though much of it applies anywhere in the U.S.

Step 1: Make sure this is an employee

Before anything else, confirm the person should be on payroll. Calling someone a contractor does not make them one. The IRS looks at behavioral control, financial control, and the type of relationship. You can read the IRS explanation of employee vs. independent contractor, and I wrote a plain-language version in Employee vs Independent Contractor in Texas. If you set their hours, direct how they work, and supply the tools, treat them as an employee.

Step 2: Get your Employer Identification Number

If you do not already have one, apply for an EIN with the IRS. It is free through the IRS, and you will need it for payroll, tax filings, and the state accounts below.

Step 3: Check whether you need a TWC unemployment tax account

The Texas Workforce Commission runs the state unemployment tax program. In general, you become a liable employer if you pay $1,500 or more in wages in a calendar quarter, or you employ at least one person for part of a day in 20 different weeks in a year. Once you are liable, TWC says to register within ten days. Use TWC's page to determine whether you need an account, then register. Quarterly wage reports and taxes are due by the last day of the month after the quarter ends.

Step 4: Decide about workers' compensation

Texas is unusual. Most private employers can choose whether to carry workers' compensation insurance, and the ones who do not are called non-subscribers. That choice comes with real tradeoffs and some notice requirements, so make it on purpose rather than by default. I explain it in Texas Workers' Comp: Non-Subscriber Basics.

Step 5: Set up payroll and collect the federal forms

Each new employee needs to complete two federal forms:

• Form W-4, so you know how much federal income tax to withhold. The IRS covers this on its hiring employees page.
• Form I-9, to verify identity and work authorization. Every U.S. employer completes one for every new hire, citizen or not. The employee completes Section 1 by their first day of work, and you complete Section 2 within three business days of the start date. USCIS explains how to complete Form I-9 correctly. Keep I-9s in a file separate from the personnel file.

For payroll tax rules and deposit schedules, the IRS employer guide is Publication 15. A payroll service will handle most of this for you, and it is usually worth the monthly fee.

Step 6: File the new-hire report

Texas employers must report new hires within 20 calendar days of the date the employee starts earning wages. The report goes to the Office of the Attorney General, not to TWC. The TWC new hire reporting page explains how, and there are small penalties for missing it. I covered the details in Texas New-Hire Reporting.

Step 7: Set your paydays and post them

Under the Texas Payday Law, employees who are exempt from federal overtime must be paid at least once a month, and everyone else at least twice a month. You choose the paydays, and you must post a notice of them where employees can see it. Texas also has a clock for final pay, which I explain in When Is Final Pay Due in Texas?.

Step 8: Classify the job correctly

Decide whether the role is exempt or non-exempt from overtime. Paying a salary is not enough by itself. The job duties and the pay level both matter. If you are not sure, start with Salary vs Hourly in Texas. When in doubt, treat the job as non-exempt and track hours.

Step 9: Put the expectations in writing

A short offer letter is enough for most small businesses. Include the job title, start date, pay rate and how often you pay, whether the role is exempt or non-exempt, and a plain at-will statement. If you want to understand what at-will does and does not mean, read At-Will Employment in Texas.

Step 10: Post the required notices and set up a personnel file

Federal and state workplace posters need to be displayed where employees can see them. The U.S. Department of Labor keeps a poster page to get you started. Then create a personnel file for the employee with the signed offer letter, W-4, and any policy acknowledgments. Keep medical information and I-9s separate.

Step 11: Give them a handbook or at least a few written policies

With one employee, you do not need a 60-page manual. You do need clear written expectations on attendance, time off, pay practices, and conduct, and a place where the employee signs to say they received them. More on what to include and what to leave out is in Texas Employee Handbook.

Step 12: Plan the first 30 days

The paperwork is only half of onboarding. Give your new employee a clear first week, a named person to ask questions, and a check-in at day 30. People who understand what a good job looks like are far more likely to stay, and a problem you catch early is much easier to fix.

Frequently asked questions

This article is general information for business owners and is not legal advice. For a specific situation, talk with an employment attorney or a CPA.