Hiring Your First Employee? Start Here! (for Canada and the U.S.)

Woo! Congrats! Hiring your first employee is a pretty big deal.

Until now, you may have been doing everything yourself: sales, admin, customer service, invoicing, the list goes on.... But the business is growing, your to-do list has become mildly unhinged, and it’s finally time to bring in some help.

Exciting? Very. 🎉

A little scary? Also very. 😅

Hiring an employee means becoming an employer - and that comes with payroll, paperwork, employment rules and actual responsibility for another human’s work experience.

But don’t panic. You don't need a 50-page employee handbook, a fancy HR department or a bunch of beige filing cabinets before someone can start.

You just need to get the important pieces right.

First: Are You Actually Ready to Hire an Employee?

Sometimes a business owner knows they need help but hasn’t quite figured out what that help should look like.

Before posting a job, get clear on three things:

1. What work needs to come off your plate?

2. How many hours of work do you realistically have?

3. What can the business actually afford?

And when we say “afford,” we don’t just mean salary. Your real cost may also include:

• Employer payroll contributions and taxes

• Workers’ compensation insurance

• Vacation or holiday pay

• Overtime

• Benefits

• Payroll software or support

• Equipment and technology

• Training time

• Paid leave required in the employee’s location

A $70,000 salary does not mean the employee costs the business exactly $70,000. So build yourself a little breathing room before deciding what compensation you can offer.

Employee or Independent Contractor?

And please don’t just pick the easier or cheaper one....

One of the first decisions is whether you’re hiring an actual employee or engaging an independent contractor. And no, you generally cannot make someone a contractor just by putting “independent contractor” at the top of an agreement.

The person’s actual working relationship matters.

For example:

• Who controls how and when their work is completed?

• Can the worker provide services to other businesses?

• Who supplies the tools and equipment?

• Can the worker hire someone else to complete the work?

• Does the worker take on a genuine opportunity for profit or risk of loss?

• Is the person running their own business, or are they really part of yours?

Both the Canada Revenue Agency (CRA) and the U.S. Department of Labor look beyond the label used in the agreement. And misclassification can lead to unpaid payroll deductions, taxes, overtime, vacation pay, benefits, penalties and other expenses.

🚩 In other words: not a particularly fun (or cheap) surprise.

If the person will work as part of your business, follow your direction and depend primarily on your company for their work, pause before calling them a contractor.

The Employee’s Location Matters... a Lot

Before you start preparing the paperwork, confirm where the employee will physically be performing their work from. This is especially important with remote employees.

If your company is in Vancouver but your employee works from Toronto - Ontario requirements will apply to their employment. Similarly, if your U.S. business is in Texas but your employee works from California - Cali rules will come along for the ride.

And “I didn’t realize they were working from another province or state” is not an especially powerful compliance strategy.

🇨🇦 Hiring Your First Employee in Canada: The Basic Checklist 🇨🇦

Most Canadian employers are governed by the employment standards legislation of the province or territory where the employee resides.

*Note: for federally regulated businesses (including banks, airlines, telecommunications companies and certain interprovincial transportation businesses) follow the Canada Labour Code instead.

Here are the main steps for a typical provincially regulated Canadian small business:

1. Open a CRA Payroll Account

You will generally need a payroll program account with the CRA. The CRA says a new employer must register before its first payroll remittance is due. Still, we recommend doing this before the employee begins.

Your payroll setup will help you manage deductions and employer contributions.

The CRA has a helpful starting point for setting up a new employee.

2. Collect the Employee’s SIN and TD1 Forms

You’ll need the employee’s Social Insurance Number for payroll and reporting.

The employee should also complete:

• A federal TD1 Personal Tax Credits Return

• The applicable provincial or territorial TD1 form

These forms (found on the Government of Canada's website) help you calculate the correct income-tax deductions. Keep them secure and private - your new employee probably doesn't want their SIN hanging out in a random Google Drive folder called “HR Stuff.”

3. Confirm the Province of Employment

Remember, the employee’s province of employment helps determine which payroll deductions, forms, and rules apply.

Know that Quebec also has its own payroll requirements, including QPP and QPIP considerations, so make sure you don’t treat it like every other province. Quebec always likes to keep things interesting...

4. Register for Workers’ Compensation (If Required)

Canada does not have one national workers’ compensation program. Each province and territory has its own system, such as WorkSafeBC or Ontario’s WSIB. Registration requirements can depend on your province and industry. Some businesses must register as soon as they hire their first worker, while exemptions may apply in certain situations.

Check the workers’ compensation authority where the employee will work before their first day.

5. Check Provincial Employment Standards

Employment standards establish minimum requirements for things like:

• Minimum wage

• Hours of work

• Overtime

• Vacation and vacation pay

• Stat holidays

• Job-protected leaves

• Payroll records

• Termination notice or pay

Remember, these are minimum standards. An employment agreement or company policy cannot give someone less than what the law requires.

And the rules are not identical across Canada. Ontario is not BC. Alberta is not Quebec. Manitoba is over there doing its own thing too. Start with the employment standards website for the employee’s province or territory.

6. Prepare a Written Employment Agreement

Give the employee a written employment agreement (and ideally have it actually signed before their first day).

The agreement should clearly address topics such as:

• Job title

• Start date

• Work location / Governing province or territory

• Compensation

• Hours and schedule

• Vacation

• Benefits, if offered

• Confidentiality

• Termination terms

A good agreement creates clarity while things are happy and uncomplicated! And that is exactly when you want to create clarity (not six months later when everyone remembers the conversation differently).

Canadian termination language is particularly easy to get wrong. We recommend having an employment lawyer review your template before you start to reuse it.

🇺🇸 Hiring Your First Employee in the U.S.: The Basic Checklist 🇺🇸

Before we jump into the checklist, here’s a quick heads-up: hiring in the U.S. can get complicated, fast.

You aren’t dealing with just one set of employment rules. Federal requirements may apply, but states, and even individual cities (or counties!), can have their own rules covering minimum wage, overtime, paid leave, payroll taxes, final pay and plenty of other fun little details.

If you’re planning to hire employees across multiple U.S. locations, we almost always recommend using a Professional Employer Organization, or PEO-type service. These platforms can help manage payroll, benefits, tax, workers’ compensation and many of the location-specific compliance details that come with employing people in different states.

A PEO isn’t a magic “we never have to think about HR again” button, but it can make multi-state hiring way easier.

If you aren’t using a PEO, having dedicated accounting, payroll, tax and compliance support that understands the employee’s location is key. Please don’t assume the rules at your head office automatically cover an employee working somewhere else. Remember, California and Texas are not playing from the same rulebook.

With that friendly warning out of the way, here’s the basic U.S. checklist (most of which can usually be handled by a PEO)!

1. Get an Employer Identification Number

You will generally need an Employer Identification Number, or EIN, from the IRS to report employment taxes and complete other employer filings. If your business does not already have one, visit the IRS EIN information page.

2. Register for State Payroll and Unemployment Accounts

Depending on the employee’s work location, you may need to register for:

• State income-tax withholding

• State unemployment insurance

• Local payroll taxes

• Paid-leave or disability programs

The exact accounts depend on the state. Your payroll provider or accountant should be able to help, but don't assume registration automatically happens just because you opened a payroll-software account.

3. Complete Form I-9

Every U.S. employer must complete Form I-9 to verify the identity and employment authorization of each person hired to work in the United States.

The employee completes their portion no later than their first day of work for pay. The employer generally completes the document-review portion within three business days of the employee’s first day.

There are detailed rules about which documents may be accepted, how they are reviewed and how the form is stored. Use the current instructions from U.S. Citizenship and Immigration Services.

4. Collect Form W-4 and Any State Forms

Your employee should complete Form W-4 so you know how much federal income tax to withhold. A state withholding form may also be required. The IRS hiring-employees guide covers the basic federal paperwork.

Keep these forms secure and private, and resist the urge to email sensitive employee information back and forth forever.

5. Report the New Hire

U.S. employers must report newly hired and rehired employees to the appropriate state new-hire reporting program. Deadlines and reporting details can vary, so check the rules in the employee’s work state right away. This is a small task that is very easy to forget when you’re busy choosing laptops and explaining the Wi-Fi password.

6. Arrange Workers’ Compensation Coverage

Workers’ compensation is handled at the state level. Requirements vary by state, industry and number of employees. Some states require coverage beginning with the first employee. Others have different thresholds or exceptions.

Check before the employee starts working. This is not a particularly good area for the “we’ll figure it out if something happens” approach.

7. Confirm Wage, Overtime and Employee Classification Rules

The federal Fair Labor Standards Act covers minimum wage, overtime, record keeping and youth-employment standards for covered workers. States and cities may set more protective requirements.

You will also need to determine whether the employee is:

• Exempt or nonexempt from overtime

• Paid hourly or by salary

• Full-time or part-time

These categories are related, but they are not interchangeable. Paying someone a salary does not automatically make them exempt from overtime. Giving someone a manager-ish job title does not automatically do it either.

The employee’s duties, pay and applicable federal and state tests all matter. The U.S. Department of Labor’s FLSA guide is a useful starting point.

8. Prepare an Offer Letter or Employment Agreement

U.S. employers commonly use an offer letter that confirms:

• Job title

• Start date

• Work location

• Compensation

• Schedule

• Benefits eligibility

• Employment classification

• Reporting relationship

• At-will status, where applicable

Employment is generally presumed to be at will in the U.S., but there are exceptions (and at will does not mean an employee can be fired for an illegal reason).

State-specific language matters a lot. We highly recommend having employment counsel review your standard offer documents when hiring in the U.S. It can get tricky!!

Do You Need an Employee Handbook for Your First Employee?

Maybe - but you don’t need a giant, overly corporate handbook filled with legal jargon no one will ever read.

You do, however, need to give your employee some clear guidelines. Depending on where they work, certain policies may also be legally required (even when your team is still very small).

Your starting policies might cover:

• Hours of work and timekeeping

• Overtime approval

• Vacation or paid time off

• Sick time and leaves

• Remote work

• Expenses

• Workplace conduct

• Harassment and discrimination

• Health and safety

• Confidentiality and data security

• Technology use

Start with what is legally required and what you genuinely want your employee to know. You can build from there as your team grows.

We’ve actually written a whole separate post about this: The Essential Guide: Why Your Small Business Needs an Employee Handbook.

It breaks down what a handbook does, what you might want to include and why it’s worth setting one up before your workplace rules become a chaotic collection of emails, Slack messages and things you’re pretty sure you mentioned once.

Set Up Payroll Before the First Payday

Payroll isn’t something we recommend figuring out as you go. We’re HR people, not payroll or tax experts, so ensure you're working with an accountant, payroll specialist, PEO or reputable payroll platform to get everything set up correctly.

They can help you manage deductions, employer contributions, remittances, pay statements, record keeping and year-end tax forms. Just remember that payroll software isn’t a magical compliance force field; it still needs to be configured for the employee’s location and employment details.

Not sure who to call? Reach out! We’re always happy to recommend some of the great payroll and accounting folks in our network.

Make an Actual Onboarding Plan

Compliance matters, but onboarding should involve more than forms. Your employee also needs to understand:

• What the company does!

• What success looks like

• What they should focus on first

• How decisions are made

• Which tools the company uses

• Who they can ask for help

Try at minimum to plan their first day, first week and first 30 days.

Give them a schedule. Set up their accounts before they arrive. Book check-ins. Explain the things that feel obvious to you but are absolutely not obvious to someone new.

Your first employee is joining a company that has never onboarded an employee before. They already know there may be a few bumps, but clear communication goes a very long way.

A Quick First-Employee Checklist

Before making the offer

• Define the role and responsibilities

• Build the employment cost into your budget

• Confirm whether the worker is an employee or contractor

• Confirm where the employee will actually be working from

• Research requirements in that location

• Decide whether the role is eligible for overtime

Before the first day

• Send and finalize the written offer or employment agreement

• Set up the required payroll accounts

• Arrange workers’ compensation coverage if required

• Collect the applicable tax and identity forms

• Prepare any required policies

• Add the employee to payroll

• Set up equipment, email and system access

• Create a first-week schedule

During the first month

• Explain the role and your expectations

• Set clear initial priorities

• Schedule check-ins

• Provide training and feedback

The Bottom Line

Hiring your first employee in Canada or the U.S. does involve a few forms, registrations and rules. But it doesn't have to become a giant corporate production.

Focus on the essentials:

• Know where the employee will work

• Classify and pay them correctly

• Set up payroll and required coverage

• Put the terms in writing

• Check the employment laws in their location

• Give them a thoughtful start

The goal isn’t just to avoid compliance problems. It’s to build a workplace that feels organized, fair and human from employee number one.

The habits you create with your first hire tend to stick around. And it is much easier to build good people foundations now than to untangle five years of “this is just how we’ve always done it.”

Need Help Hiring Your First Employee?

Becoming an employer can feel like a lot, especially when you’re also trying to run the rest of the business.

Chase & Co. HR helps small businesses across Canada and the U.S. get the people side set up properly, without hiring a full-time HR department.

We can help with employment agreements, policies, onboarding and all the little “Are we supposed to be doing this?” questions that appear along the way.

Let’s chat about your first hire.