What to set up before you pay your first employee

The first payday was a transfer from an account with my name on it, and a text that said it should be there.

She had started on a Monday. We had agreed on a number. I had not agreed with myself on what that number became after tax, or who was sending the form, or what I was supposed to keep. On the fourteenth I moved the money, felt like a company for an afternoon, and put the rest on a list. The list already had the operating agreement on it. Lists were how I stored the parts of the job I did not want to do wrong in public.

A paycheck is a public document even when you send it quietly. It says the person is employed, that you withheld something or did not, and that the date will happen again. A transfer says you are generous and organized this once. I learned the difference when she asked, politely, whether she would get a stub. I said yes. Then I went and looked up what a stub was supposed to contain, which is not the order you want.

We had already written the piece for the stage before a payroll exists, pay stubs when you are not on a payroll yet. A stub you build by hand is a favor. A job is a date. The date is the part I had been treating as a mood. There is also the blunter version, about stopping the Venmo transfer once the work is a real job. This is the list I wish I had finished before the text went out.

What to set up before you pay your first employee is shorter than the software market wants it to be.

Classify the person before you celebrate the hire. An employee and a contractor are not a tone of voice. If you set the hours, supply the tools, and expect them on a Tuesday, calling them a contractor because the form is shorter is how a quiet year becomes a bill. If they are genuinely a contractor, pay the invoice and keep the agreement. Do not invent a third category called helping out.

Know the pay date before you say the start date. I had said the fifteenth because it sounded like a company. The fifteenth is fine if the money and the filing can meet it. Pick a date you can hit in a bad week. Twice a month or every other week is a choice, not a personality. Write it down and tell them. A surprise payday is not a perk. It is a sign the calendar is yours and not theirs.

Withhold what you are supposed to withhold, and do not catch it up from memory. Federal income tax, Social Security, Medicare, and whatever the state wants are not a tip you add in April. The amount that lands in their account should be the amount you can explain. If you cannot explain it, you are not ready to send it. A rough transfer that you plan to true up later is how people end up owing both the tax and the apology.

Get the forms before the first day, not after the first deposit. The federal withholding form, the work eligibility form, and the state version if there is one, belong in a folder that is not your camera roll. Direct deposit needs a voided check or the routing numbers, and it needs them before you are texting that it should be there. I have chased banking details on the morning of payday. The person waiting is not comforted by how busy the morning was.

Keep the business money in the business account. Paying a wage from the personal account feels faster and reads, later, as if the company was never separate from you. Run the payroll from the account that receives the client money. If that account cannot cover the wage and the tax, the hire was early, or the invoice was late. Both are fixable. Mixing the accounts to hide it is not.

Tell them how time off works before they need it. Even a plain rule, unpaid for the first ninety days, or a set number of days, is better than we’ll figure it out. People get sick in week three. A rule you invent while they are sick is a rule they will not trust.

When the payday cannot be a transfer anymore, I send people to OnPay. Not so a founder can become a payroll department. So the wage, the withholding, and the filings stop depending on a text from a personal login. Patriot is the other small-shop name that comes up when you do not want a platform that also wants to run your apps. Homebase fits if the work is hourly and the schedule is the actual mess. Gusto is already the name on the other payroll piece here, so I am not sending you back to the same door. If one of those is the system you will open before the fifteenth, use that one. I point here because the failure I kept seeing was not the logo. It was a founder who could move money and could not show what the money was.

The first run will look fussy. You will mistype a filing status. A direct deposit will need a day you did not leave. Stay long enough to finish one cycle and read the stub yourself before you forward it. If you cannot tell what was withheld, do not send it with a shrug. After that cycle, the text message can retire. The date cannot.

If you sell payroll software, or you are the person who cleans up the first year of transfers, write about the fourteenth, not a tour of the dashboard. The Write for Us page is where that goes. OnPay is already named. A pricing table in the first line will not go up.

She got the money. The stub came a week later than it should have. That week is the part I would set up before the welcome email, if I had the Monday back.