What should businesses do before hiring their first employee?

Preparing to Hire Your First Employee in Michigan

Before hiring your first employee in Michigan, it’s essential to complete several operational steps to ensure compliance and smooth onboarding.

Register Your Business

• Obtain an Employer Identification Number (EIN): Apply for an EIN from the IRS. This number is required for payroll tax reporting and employee tax withholding.
• Register with Michigan Tax Authorities: Register with the Michigan Department of Treasury for state withholding taxes and unemployment insurance.

Understand Employment Laws and Compliance

• Familiarize with Michigan labor laws: Review state-specific wage, hour, and workplace safety regulations to ensure compliance.
• Classify Employees Correctly: Determine if workers are employees or independent contractors to avoid payroll and tax issues.

Set Up Payroll and Tax Withholding

• Choose a payroll system: Implement payroll software or services that handle Michigan state tax withholdings, Social Security, Medicare, and federal taxes.
• Register for Unemployment Insurance: Ensure your business is registered to pay Michigan unemployment insurance taxes.

Prepare Required Documentation

• Employment Eligibility Verification: Complete Form I-9 for each employee to verify legal work status.
• New Hire Reporting: Report new hires to the Michigan New Hire Reporting Center within 20 days of hire.
• Employee Records: Maintain accurate records of hours worked, wages paid, and employee details for compliance and bookkeeping.

Obtain Necessary Insurance

• Workers’ Compensation Insurance: Michigan requires most employers to carry workers’ compensation insurance to cover workplace injuries.
• General Liability Insurance: Consider this to protect your business from employee-related claims.

As of 2026, staying updated on Michigan’s employment regulations and tax requirements is critical. Automation tools for payroll and compliance can streamline these processes and reduce errors.