Payroll for your first hire
What changes the day you have an employee, what the state wants, and why most small businesses pay $56 a month to not think about it.
4 min read · updated 2026-10-29
A contractor sends an invoice and you pay it. An employee needs withholding, employer taxes, a state unemployment account, workers' compensation, a new-hire report, and quarterly and annual filings. Miss one and the penalty is usually more than a year of payroll software.
Payroll software does all of that for a base fee plus a few dollars per person. For one employee it comes to about $56 a month with Gusto. Doing it by hand is possible and almost never worth it.
Before the first paycheck
Get a federal EIN if you do not have one. Register with your state for withholding and unemployment insurance; both issue account numbers the payroll tool will ask for. Buy workers' compensation, which most states require from the first employee. Have the employee complete a W-4 and an I-9, and file the new-hire report within the state's window, usually 20 days.
Gusto for most businesses
Gusto's Simple plan is $49 a month plus $7 per person and covers all of the above in all 50 states, with automatic filings and year-end W-2s. Employees get their own login for pay stubs. It integrates with QuickBooks, Xero, and most time clocks.
Homebase if your staff are hourly
Restaurants and shops with a time clock and tips usually do better in Homebase, where scheduling, hours, tips, and payroll are one system. Payroll is $49 a month plus $6 per person.
A PEO once benefits matter
If you need to offer health insurance to compete for hires, a professional employer organization such as Justworks pools you with other small companies for better rates. It costs from $79 per employee per month and takes on compliance. It is overkill for one hire and sensible at ten.
Hiring outside the US is a different problem. Deel handles contractors and employer-of-record for foreign employees; it is not a replacement for domestic payroll.
