Just Hired Your First Employee? Here’s How to Set Up Payroll Correctly
- rezzilientinnovati
- Dec 9, 2025
- 3 min read
Hiring your first employee is exciting because it means your business is growing, your workload is expanding, and you’re officially stepping into leadership. But once you bring someone onto payroll, things get real, real, real fast, so it's understandably also scary.
Payroll isn’t just “paying people.”It’s a legal system you must follow with state and federal rules, strict deadlines, tax responsibilities, and reporting requirements. Missing even one step can lead to penalties, back taxes, or compliance issues you didn’t even know existed. The worst thing is for an employee to wake up on payday with inaccurate pay, or even worse...NO PAY!
This guide is for you if you just hired your first employee or are about to and are feeling stuck on what's next. Let’s break down everything you must have in place before running your first payroll.
1. Get Your EIN and State Tax IDs Set Up
Before you can pay anyone, you need to be recognized as an employer by both the IRS and your state.
You’ll need:
Federal Employer Identification Number (EIN) (Get one here)
State Withholding Tax Account (Depends on your state)
State Unemployment Insurance (SUI) Account (Depends on your state)
Each state has its own requirements and timelines, and some industries require additional registrations. If you’re missing one, you can’t legally run payroll.
2. Properly Classify Employees vs. Contractors
Misclassification is one of the most common and most costly mistakes. The IRS and state agencies take this very seriously.
Ask yourself:
Do you control how they work?
Do you set the hours?
Do they rely on your equipment?
If the answer is yes, they are likely employees, not contractors. Employees must be on payroll with taxes withheld. Contractors receive 1099s at year-end.
Getting this wrong can cost thousands in penalties and back taxes.
3. Collect All Required Employment Forms
Before you even think about running payroll, your employee must complete:
W-4 form (federal tax withholding)
State withholding form (if required)
I-9 employment eligibility verification
Direct deposit authorization (if applicable)
These forms must be stored securely and accessible for audits.
4. Choose Your Pay Schedule (and Follow It)
Most states regulate how often employees must be paid. Common options include:
Weekly
Bi-weekly
Semi-monthly
Monthly (not always allowed for hourly workers)
Once you choose a pay schedule, you’re legally required to follow it consistently.
5. Calculate Gross Pay, Deductions, and Withholdings Correctly
Payroll math isn’t cute. Missing one deduction or incorrectly calculating withholding can cause employee frustration and government involvement.
A proper payroll run includes:
Regular wages or salary
Overtime (if applicable)
Bonuses, stipends, or commissions
Federal income tax
State/local taxes
Social Security & Medicare
Unemployment taxes
Any voluntary deductions (benefits, 401k, etc.)
Every number must be accurate and traceable.
6. Deposit Payroll Taxes On Time
When you withhold taxes from an employee’s paycheck, you’re holding money in trust for the government.
That means:
💡 It’s not your money.
💡 It must be submitted by the required deadline.
💡 Late payments = penalties + interest.
The IRS and states have strict deposit schedules depending on your payroll size.
7. Provide Pay Stubs and Maintain Clean Records
Most states legally require you to give employees a pay stub each payday. Beyond that, you must maintain detailed payroll records for years, including:
Hours worked
Wages paid
Taxes withheld
Benefit deductions
Employment dates
Signed employee forms
Clean records protect you if there’s ever a dispute, audit, or compliance review.
8. File Quarterly and Annual Payroll Reports
Your responsibilities don’t end with paying your team.
Every employer must file:
Quarterly tax reports
Unemployment reports
Year-end W-2s for employees
1099s for contractors (if applicable)
Missing a single filing can trigger costly letters and penalties.
Payroll Is One of the Most Serious Areas of Compliance in Your Business
If this feels overwhelming… that’s because payroll is overwhelming when you don’t do it every day. It’s one of those areas where “trial and error” is not the vibe the government expects accuracy from day one.
The good news? You don’t have to figure any of this out alone.
Let Rezzilient Innovations Handle Your Payroll So You Can Focus on Leading Your Team
From setup to tax filings, we take care of:
Payroll setup for new employers
Employee & contractor onboarding
Accurate payroll runs (weekly, bi-weekly, or monthly)
Direct deposit and pay stubs
State and federal payroll tax payments
Year-end filings (W-2s, 1099s, etc.)
Coordination with bookkeeping + tax prep
You get peace of mind. Your employees get paid accurately and on time. And your business stays fully compliant.
Ready to hand payroll over to a professional? Book your payroll setup today.
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