Dr. Paul Borosky, DBA, MBA
Business Plan Writer & Financial Projections
What Do New Employers Need to Know Before the First Hire?
Calling Someone a Helper Does Not Make Them a Contractor.
After 1,000+ clients, business consultant Dr. Paul Borosky, DBA, MBA, sees this one all the time. You brought on help for the busy season, paid cash at the end of each day, and called them helpers. It seemed simpler. Then a letter arrives from the tax office with a bill you did not see coming. Below: the basic duties that come with your first employee.
Last Updated: 11/08/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Definition
What Is Employment Compliance?
Short Answer
Employment compliance means meeting the legal duties that come with paying people to work for you. It begins with sorting each worker into the right category, employee or contractor, by looking at the real working arrangement instead of the label. From there, employers keep payroll records, withhold and pay the required taxes, and post the required notices. The specific rules vary by location.
New employer basics = classify correctly + keep records + withhold and pay on time + post the notices
Doctor Owl, in Plain English
“They wear your vest, ride your wagons, and follow your timetable. You can call them anything you like. They are your employees.”
How This Guide Works
Need the answer fast? Read the Short Answer above and the numbered steps. Want the full picture? Follow Colt, a horse who runs forest tours from Dr. Paul’s Fabled Forest Business School Series, as he pays two new guides in cash and calls them helpers. His story shows up in a few short gold notes along the way. The math sits in one section, clearly marked.
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Meet Colt Again: The Mayor’s Own Guides
Some lessons stick better as a story. Dr. Paul’s Fabled Forest Business School Series teaches business through a forest full of small business owners. Doctor Owl, a dry-witted consultant who lives in the Lone Oak, helps them fix the same problems real owners face.
Today he attends a class at the town hall called Your Duties as an Employer, taught by Agnes, a plain-spoken armadillo from the Revenue Office. Commander Colt, the mayor and tour operator, opened the class with a proud speech. When it ends, Agnes walks to the front row and hands the mayor a letter about the two guides he hired this summer.
Why It Matters
Why Do New Employers Get Into Trouble?
Most new employers do not set out to break rules. They hire quickly when the work arrives, pay the simplest way, and assume a casual arrangement means casual obligations. The trouble comes later, when the tax office, a former worker, or an audit asks how those people were classified and paid.
By then the back payments, penalties, and paperwork cost more than doing it right from the start. Employment compliance is mostly a set of habits you build on day one.
In the Fabled Forest
Colt had paid two summer guides, a young pelican and a young deer, in daily cash and treated them as freelancers. Everyone had agreed. It seemed easier. The Revenue Office’s letter said they were employees, and the share he should have held back, plus a late charge, came to forty coins.
Employee or Contractor
How Do You Know if a Worker Is an Employee or a Contractor?
- Who controls how and when the work is done? If you set the schedule and the method, that points to an employee.
- Whose tools and equipment? Workers using your equipment are more likely employees.
- Do they work only for you? Independent contractors usually serve several clients.
- Do they represent your business? Uniforms and your brand point toward an employee.
- The label does not decide it. How the work is actually done does. See employee vs independent contractor.
In the Fabled Forest
Agnes laid it out for the mayor: the guides wore the Forest Trails vest, rode his wagons, followed the timetable on his booking board, and guided only his tours. Whatever he called them, they were his employees.
The Basics
What Records and Duties Come With Your First Employee?
Every location has its own rules, forms, and deadlines, so check with your local tax and labor agencies or a payroll professional before your first payday. The common basics are the same almost everywhere: classify each worker correctly, keep a payroll record for each person, withhold and pay the required amounts on schedule, follow wage rules such as the minimum wage where you operate, and post the required employee notices where everyone can see them.
Then put your own rules in writing, too. An employee handbook makes expectations clear on both sides.
In the Fabled Forest
Colt paid the forty coins from his reserve. He opened a pay ledger with a page for each guide, started holding back the required share from every payday into a separate tin, explained it to both guides, and posted the employee rights notice in the barn.
The Numbers
How Did a Small Shortcut Add Up?
Here is how the Revenue Office worked out Colt’s bill, using the forest’s one simple rule.
| Item | Amount |
|---|---|
| Guides | 2 |
| Pay | 3 coins a day, 5 days a week |
| Weeks since June | 10 |
| Total wages | 300 coins |
| Share that should have been held back (1 in 10) | 30 coins |
| Late charge | 10 coins |
| Total owed | 40 coins |
| Colt’s reserve after paying | 62 − 40 = 22 |
Step 1: Total wages. Two guides, 3 coins a day, 5 days a week, over 10 weeks: 300 coins.
Step 2: What was owed. At the forest’s single withholding rate of 10 percent, that is 30, plus a 10-coin penalty: 40.
Step 3: Your version. Real payroll rules have more parts, and they differ by place. Ask a payroll professional to calculate your obligations before the first payday, not after the first letter.
Illustrative numbers in forest coins, from the book. The forest has one simple rule; your location will have several. This is not tax or legal advice.
Step by Step
What Should a New Employer Do Before the First Payday?
Four steps before anyone starts working for you.
Classify each worker.
Employee or contractor, based on how the work is actually done.
Set up payroll records.
A page or account for each person: hours, pay, and what is withheld.
Learn your withholding and deadlines.
Check with your local agencies or a payroll professional, then put the dates on your calendar.
Post the notices and write your rules.
Required employee notices where everyone can see them, plus a short handbook.
In the Fabled Forest
Doctor Owl’s scroll for Colt covered four things in short lines: each worker’s status, the records to keep, the payroll deductions and their due dates, and the notices for the wall.
Colt’s Full Story
How Did the Mayor Handle the Letter?
This page gives you the short version. The book gives you the whole evening: a poster telling everyone to bring a pencil, the only owl who did, an armadillo with half-moon spectacles, a letter handed to the mayor in front of the room, and the margin of a goose’s booking board that saved him.
Every chapter of Human Resources for Small Businesses works the same way. One owner, one problem, one real idea you can use on Monday, plus a one-page worksheet to do it.
A Business Consultant’s View
What Would a Consultant Check When an Owner Adds Payroll?
Dr. Paul Borosky, DBA, MBA · Business Consultant
When an owner adds payroll, Dr. Paul checks three things before anything else: how each worker is classified and whether it matches how they actually work, whether payroll records exist for every person, and whether the withholding deadlines are on a calendar someone actually watches. He also recommends a payroll service or an accountant for the first year, because the rules differ by location and the penalties for small mistakes add up quickly. In a business plan, he budgets the full cost of an employee, not just the wage, so the projections reflect what payroll really costs. Getting it right on day one is far cheaper than fixing it after a letter arrives.
FAQ
What Do First-Time Employers Ask?
What do I need to do before hiring my first employee?
How do I know if someone is an employee or an independent contractor?
What happens if I misclassify a worker?
Keep Going
More on Being a Good Employer
This is foundation 10 of 20. These pages build on it. New to a term on this page? Every one is in the human resources glossary.
Written by Dr. Paul Borosky, DBA, MBA, business consultant and author with 14+ years of experience and 1,000+ clients served. Hiring, paying, or managing a team and want a second set of eyes? See business consulting and prices.
This page is for general educational purposes only. It is not legal, financial, employment, or other professional advice. Figures are illustrations. The Fabled Forest and its characters are fictional. For decisions about your own business, consult a qualified professional.