How do I hire my first employee?

How to Hire Your First Employee in Tennessee

Hiring your first employee in Tennessee involves several operational steps to ensure compliance and smooth onboarding. Follow these practical guidelines to manage the process efficiently.

Step 1: Register for Employer Accounts

• Obtain an Employer Identification Number (EIN): Get your EIN from the IRS for tax reporting purposes.
• Register with the Tennessee Department of Revenue: Set up your account to handle state withholding taxes.
• Register for Unemployment Insurance: Sign up with the Tennessee Department of Labor and Workforce Development to manage unemployment insurance taxes.

Step 2: Understand Employee Classification

Correctly classify your worker as an employee or independent contractor. Misclassification can lead to penalties and tax issues.

Step 3: Complete New Hire Reporting

As of 2026, Tennessee requires employers to report newly hired employees to the Tennessee New Hire Directory within 20 days of hire. This supports child support enforcement and other state programs.

Step 4: Set Up Payroll and Tax Withholding

• Collect Form W-4: Have your employee complete the federal W-4 for income tax withholding.
• Withhold and remit taxes: Manage federal and state income tax withholding, Social Security, Medicare, and unemployment insurance contributions.
• Consider payroll automation: Use payroll software or services to streamline tax filings and payments.

Step 5: Provide Required Workplace Notices and Documentation

• Post mandatory labor law posters: Display federal and Tennessee workplace posters where employees can see them.
• Complete Form I-9: Verify your employee’s eligibility to work in the U.S.
• Set up employee records: Maintain accurate records of employment, wages, and tax forms for compliance and audits.

Step 6: Obtain Workers' Compensation Insurance

Tennessee requires most employers to carry workers' compensation insurance. Confirm your coverage to protect your business and employees.

Additional Operational Tips

• Develop an employee handbook: Outline workplace policies, benefits, and expectations.
• Plan onboarding and training: Ensure your new hire understands their role and company procedures.
• Consider payroll frequency: Choose a payroll schedule that aligns with Tennessee regulations and your operational needs.