What Changes as Your Team Grows
Each new hire brings new questions about payroll, benefits, and managing people. Get ahead of them before they land on your desk.
From First Hire to Full Team
Paperwork starts with your very first hire. The IRS says every U.S. employer must complete Form I-9 to verify identity and work eligibility for each person hired, and you should have a signed Form W-4 on file for each employee so you know how much income tax to withhold. Benefits come next. The federal employer mandate applies only to employers averaging at least 50 full-time employees, counting full-time equivalents, so most growing teams offer benefits to hire and keep good people, not because the law requires it. These guides cover what to expect at each stage.
Hiring Your First Employees: What Changes
What changes the day you make your first hire, from work eligibility and withholding forms to payroll and benefits.
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Small Business Health Insurance: Under 10 Employees
Your health insurance options with a very small team, or even a team of one, in PA, NJ, and DE, and what actually qualifies.
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Small Business Health Insurance Without an HR Team
How to choose the right plan and keep benefits running when no one on staff is dedicated to HR.
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Payroll Services
Payroll support that scales with your team, so every new hire is set up and paid without a scramble.
Learn moreWhat Changes at Each Milestone
Growth changes your obligations in steps. Here are the headcount milestones where something new comes into play.
Your first employee
What changes: you complete Form I-9 to verify identity and work eligibility for every person you hire, and you keep a signed Form W-4 on file for each employee so you know how much income tax to withhold.
Worth knowing: you also collect each employee's name and Social Security number to report their wages on Form W-2.
The tax credit starts to shrink
What changes: if you qualify for the small business health care tax credit, it shrinks once you pass 10 full-time equivalents, and it ends at 25 or more.
Worth knowing: part-time hours add up to full-time equivalents, with 2,080 hours a year counting as one.
COBRA comes into play
What changes: COBRA continuation coverage generally applies to your group health plan once you had 20 or more employees in the prior year.
Worth knowing: full-time and part-time employees both count toward the 20, and each part-time employee counts as a fraction.
The employer mandate applies
What changes: you are likely an applicable large employer. The mandate asks you to offer affordable coverage that provides minimum value to full-time employees and their dependents, or potentially make a payment to the IRS.
Worth knowing: whether you are an applicable large employer depends on your workforce in the preceding calendar year.
Because these lines look back at your workforce, it helps to plan one step ahead of each one.
First-Hire Questions Owners Ask
Do I need an EIN to hire my first employee?
Yes. The IRS says you need an Employer Identification Number if you have employees. It is free directly from the IRS, and you can apply online and get it in minutes.
Do I have to report new hires to the state?
Yes. Federal law requires employers to report new and rehired employees to the state where they work within 20 days of hire. State law may add requirements or shorten the timeline, so check the rules where your employee works.
Do I need workers' compensation insurance when I hire?
In Pennsylvania, New Jersey, and Delaware, generally yes. Pennsylvania generally requires it for employers with one or more employees, full-time or part-time. New Jersey requires it for all employers not covered by federal programs. Delaware requires it for almost every employer with one or more employees, with limited exceptions. Your insurer or the state agency can confirm any exceptions for your business.
How do I tell an employee from an independent contractor?
The IRS looks at the degree of control and independence across three areas: behavioral, financial, and the type of relationship. No single factor decides it, and there is no magic number of factors. Misclassifying an employee as a contractor can leave you liable for employment taxes, so document how you reached your decision.
What payroll taxes do I handle for an employee?
Generally you withhold and deposit income taxes, Social Security taxes, and Medicare taxes from an employee's wages. You also pay the matching employer portion of Social Security and Medicare, plus unemployment tax on wages.
What if a new employee does not give me a Form W-4?
The IRS says to withhold tax as if the employee is single. Ask every new employee for a signed Form W-4 when they start, and make it effective with the first wage payment. IRS Publication 15, the Employer's Tax Guide, covers the exceptions.
This content is provided for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor to determine how regulations apply to your situation.
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Disclosures
We are compensated by the insurance carriers for policies you choose through us. There is no direct cost to you. Compensation may vary by carrier and product. Information on this page is for educational purposes and does not constitute legal, tax, or accounting advice. Please consult your professional advisors about your specific situation. Tax treatment of ICHRA reimbursements can vary by employer and employee. We are licensed to advise clients in Pennsylvania, New Jersey, and Delaware. Contact us to confirm availability in other states.
