How do I hire my first employee?

How to Hire Your First Employee in Minnesota

Hiring your first employee in Minnesota involves several operational steps to ensure compliance and smooth onboarding. Follow this practical guide to get started efficiently.

Step 1: Register Your Business for Employer Purposes

• Obtain an Employer Identification Number (EIN): Apply through the IRS website to use for tax reporting and payroll.
• Register with the Minnesota Department of Revenue: Set up your withholding tax account for state income tax withholding.
• Register for Unemployment Insurance: Register with the Minnesota Unemployment Insurance Program to cover employee unemployment benefits.

Step 2: Understand Employee Classification

Correctly classify your worker as an employee or independent contractor. Employee classification impacts payroll taxes, benefits, and compliance with labor laws.

Step 3: Set Up Payroll and Tax Withholding

• Implement payroll systems: Consider payroll software or service providers that handle tax withholdings, wage calculations, and reporting.
• Collect Form W-4: Have your employee complete the federal withholding certificate for accurate tax deductions.
• Submit state withholding forms: Ensure compliance with Minnesota withholding requirements.

Step 4: Obtain Required Insurance

• Workers’ Compensation Insurance: Minnesota requires most employers to carry workers’ compensation coverage.
• Unemployment Insurance: Already addressed during registration, but maintain compliance through timely reporting and payments.

Step 5: Comply with Recordkeeping and Reporting

• Maintain employee records: Keep accurate records of wages, hours, and tax documents as required by Minnesota and federal law.
• Report new hires: Submit new hire reports to the Minnesota New Hire Reporting Center within 20 days of hiring.

Step 6: Establish Workplace Policies and Onboarding

• Create an employee handbook: Outline workplace policies, safety procedures, and expectations.
• Conduct onboarding: Provide necessary training, collect I-9 employment eligibility verification, and explain benefits if applicable.

As of 2026, staying current with Minnesota’s employment regulations and tax requirements is essential for smooth operations. Using automation tools for payroll and compliance reporting can reduce errors and save time.