HR for founders in the United States
Reviewed by Mellow Editorial Team, HR & payroll content team
Hiring your first employee in the United States means taking on real legal obligations from day one. This guide covers the core HR requirements every founder needs to understand before making that first offer.
Get your employer accounts in order
Before you can pay anyone, you need a few things in place.
Employer Identification Number (EIN). Apply through the IRS — it's free and you can get one online within minutes. Every payroll filing, tax form, and business bank account will reference this number.
State tax accounts. Most states require you to register separately for state income tax withholding and unemployment insurance. If you're in a state with no income tax — Texas, Florida, and Washington are common examples — you still need to register for state unemployment.
New hire reporting. Federal law requires you to report every new hire to your state's designated agency within 20 days of their start date. States use this data to enforce child support orders. It's easy to overlook and easy to do — don't skip it.
Classify workers correctly from the start
One of the most consequential decisions you'll make is whether someone is an employee or an independent contractor. Getting it wrong is expensive.
Employees trigger payroll taxes, benefits obligations, and labor law protections. Contractors do not — but only if the working relationship genuinely qualifies. The IRS and the Department of Labor each have their own tests, and they look at factors like behavioral control, financial control, and the nature of the relationship. A contractor who works exclusively for you, on your schedule, using your equipment, is likely an employee in the eyes of the law regardless of what your contract says.
The risk: misclassification can result in back taxes, penalties, and unpaid benefits claims going back years.
Understand payroll taxes and withholding
Once you have employees, you're responsible for withholding and remitting taxes correctly.
Federal income tax is progressive, with brackets running from 10% to 37%. Employees complete a Form W-4 to tell you how much to withhold. You don't choose the amount — you calculate it based on what they've submitted.
FICA taxes split into two parts:
- Social Security: 6.2% withheld from the employee, up to the annual wage base, plus a matching 6.2% from you as the employer.
- Medicare: 1.45% withheld from the employee (no wage cap), plus a matching 1.45% from you. High earners owe an additional 0.9% Medicare surcharge — you withhold this but don't match it.
Federal Unemployment Tax (FUTA) is paid by the employer only. You also owe state unemployment insurance (SUTA), with rates varying by state and your claims history.
Payroll taxes are deposited on a schedule set by the IRS — either monthly or semi-weekly depending on your total tax liability. You also file Form 941 quarterly to reconcile what you've withheld and deposited.
By January 31 each year, you must send Form W-2 to every employee and to the Social Security Administration. If you use contractors, you issue a Form 1099-NEC to anyone you paid $600 or more in the prior year.
Know the employment law basics
At-will employment. In the US, employment is generally at-will — either party can end the relationship at any time, for any lawful reason. This gives you flexibility, but it doesn't override anti-discrimination law or implied contract obligations. Document your decisions.
Anti-discrimination law. Federal law prohibits discrimination based on race, color, religion, sex, national origin, age (40 and over), disability, and other protected characteristics. These rules apply as soon as you hit certain headcounts — some protections kick in at 15 employees, others at 20. State and city laws often have lower thresholds or broader protections, so check local requirements early.
Leave. There is no federal statutory paid annual leave or paid sick leave. However, the Family and Medical Leave Act (FMLA) requires unpaid, job-protected leave for qualifying employees — and it applies once you have 50 or more employees. Several states and cities mandate paid sick leave at lower thresholds; California, New York, and others have their own requirements that may apply from day one.
Non-competes. This varies significantly by state. California prohibits most non-compete clauses outright. Other states enforce them under varying conditions. Don't assume a clause in your offer letter will hold up — get local legal advice.
Build documentation habits early
HR problems tend to surface at the worst moments, and documentation is your first line of defense.
Keep signed offer letters that clearly state compensation, classification, and at-will status. Maintain a basic employee handbook covering your policies on leave, conduct, and pay practices — even a short one is better than none. Store I-9 employment eligibility verification forms separately from personnel files and retain them for the required period.
If you're managing payroll across multiple states or countries, how Mellow runs payroll across six countries gives a useful sense of where complexity tends to build.
Good records won't prevent every dispute, but they make resolution much faster and cheaper.
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