Checklist for hiring employees: Steps for small business success

Published Tuesday 4 November 2025

Table of contents

• Assess your hiring needs
• Create a clear job description
• Determine who is doing the recruiting
• Screen and interview candidates
• Make the job offer
• Ensure each employee provides certain information for your records
• Maintain accurate tax records
• Understand your obligations
• Remember key dates and tasks
• Understand the rights of your employees
• Obtain workers' compensation insurance
• Set up a payroll system
• Keep a file for each employee
• Be clear about goals and expectations
• Hiring the right employees strengthens your business
• Frequently asked questions about hiring employees

Key takeaways

• Create a comprehensive job description that includes specific role responsibilities, required skills, salary range, and company culture details to attract qualified candidates and save time during the screening process.

• Collect all required documentation within the first three days of hire, including Form I-9 for work eligibility verification, Federal Form W-4 for tax withholding, and state tax forms to ensure compliance with employment laws.

• Establish a structured payroll system and maintain detailed employee records for at least seven years, including personal information, tax details, and emergency contacts to meet legal requirements and support efficient operations.

• Obtain workers' compensation insurance coverage for all employees and display required federal and state workplace posters in common areas to protect your business from penalties and ensure employee rights compliance.

Assess your hiring needs

Before you write a job description, define why you're hiring and what success looks like for the new role. Understanding the specific problems you need to solve or the growth you want to achieve will help you attract the right candidates. Ask yourself what tasks need to be done. Decide which skills are essential and which are nice to have.

Create a clear job description

Clear job descriptions define exactly what you need before you start recruiting. This saves time and attracts better candidates.

Your job description should include:

• Role responsibilities: Specific tasks and daily duties
• Required skills: Must-have qualifications and experience
• Salary range: Competitive compensation based on market research
• Company culture: Work environment and values

Candidate tracking: Keep detailed records for each applicant, including interview notes, strengths, and salary expectations. Use this information to make your final decision.

You can get started today with our free job description template.

Determine who is doing the recruiting

Recruiting time varies by role complexity, but expect 20-40 hours per hire for small businesses.

Phase 1: Preparation (5-10 hours)

• Job description creation: 2-3 hours
• Job posting setup: 1-2 hours
• Application review system: 2-5 hours

Phase 2: Active recruiting (10-20 hours)

• Candidate communication: 5-10 hours
• Initial screening calls: 3-5 hours
• Interview scheduling: 2-5 hours

Phase 3: Selection (5-10 hours)

• Final interviews: 3-6 hours
• Reference checks: 1-2 hours
• Offer negotiation: 1-2 hours

If you don't have time for every step, consider outsourcing some or all of these tasks to someone on your team or a recruiter.

Screen and interview candidates

Once applications start coming in, use a consistent process to screen and interview candidates. Review resumes against your job description to create a shortlist. Plan your interview questions to assess skills, experience, and cultural fit. A structured interview process helps you evaluate every candidate fairly.

Make the job offer

When you've found the right person, make a formal job offer. Include the job title, start date, salary, benefits, and any other conditions of employment in the offer letter. This gives your new hire clarity and protects your business. Be ready to negotiate. Always follow up with unsuccessful candidates as a professional courtesy.

Ensure each employee provides certain information for your records

Required employee documents help you stay compliant and withhold the right taxes. Every new hire must provide these documents within their first three days:

Work eligibility:

• Form I-9: Completed within 3 days of hire
• Acceptable ID documents: Driver's license, passport, or other approved identification

Tax withholding:

• Federal Form W-4: Determines federal income tax withholding. If an employee submits a replacement W-4, you must begin the new withholding amount no later than the start of the first payroll period ending 30 days after you receive the form.
• State tax forms: Required in most states for state income tax
• Social Security number: Required for all tax reporting

Maintain accurate tax records

Tax record retention is legally required. According to the Internal Revenue Service (IRS), you must keep all records of employment taxes for at least four years after filing your fourth quarter tax return for that year. Poor record keeping can result in IRS penalties and audit complications.

Understand your obligations

Employer obligations include specific legal requirements that vary by business size and location. Knowing your responsibilities helps you avoid costly violations and protects your business.

Federal requirements:

• Payroll taxes: withhold and deposit federal income tax, Social Security, and Medicare taxes. If you deposit late, you may face a late deposit penalty of 2% to 15%, depending on how late the deposit is.
• Unemployment insurance: Pay federal unemployment tax (FUTA)
• Workers' compensation: Required in most states for employee injury coverage
• Equal opportunity: Follow hiring and workplace discrimination laws

State requirements:

• State income tax: Withhold and deposit state taxes where applicable
• State unemployment: Register and pay state unemployment insurance
• Workers' compensation: Obtain coverage through state programs or private insurers
• Wage and hour laws: Follow state minimum wage and overtime requirements

Remember key dates and tasks

Key employment deadlines are important for compliance. Automated reminders help you stay on track as you bring on new hires.

Critical deadlines:

• Form I-9 completion: Within 3 business days of hire
• First payroll taxes: Deposit within 1-15 days depending on deposit schedule
• Quarterly tax returns: File Form 941 by the last day of the month following each quarter. However, the IRS grants ten additional days to file if you have deposited all of your taxes on time.
• Annual tax forms: File W-2s and unemployment returns by January 31

Reminder tools:

• IRS online calendar: Free federal tax deadline reminders
• State tax agency alerts: Automated state deadline notifications
• Payroll software: Built-in compliance calendars and alerts

The Internal Revenue Service (IRS) offers an online calendar for business reminders. State tax agencies also provide important dates.

Understand the rights of your employees

Workplace poster requirements are mandatory for all employers and help employees understand their legal rights. Missing required posters can result in fines during labor inspections.

Required federal posters:

• Fair Labor Standards Act: Minimum wage and overtime rules
• Equal Employment Opportunity: Anti-discrimination protections
• Family and Medical Leave Act: Unpaid leave rights (if 50+ employees)
• Occupational Safety and Health: Workplace safety rights

State-specific posters:

• State minimum wage: Often higher than federal requirements
• Workers' compensation: Injury reporting and benefits information
• Unemployment insurance: How to file claims and eligibility

Poster management:

• Free downloads: Available from Department of Labor website
• Annual updates: Check for changes each January
• Visible placement: Post in common areas where all employees can see them

Learn more about workplace poster requirements for small businesses from the Department of Labor and download the posters you need.

Visit Employer.gov to learn more about your obligations to your employees.

Obtain workers' compensation insurance

Workers' compensation insurance is legally required in most states and covers employee medical expenses and lost wages from work-related injuries. Penalties for non-compliance include fines and potential criminal charges.

Coverage options:

• Private insurance: Purchase from commercial carriers, typically most cost-effective for small businesses
• State programs: Available in some states, often competitive rates for small employers
• Self-insurance: Set aside funds to cover claims directly, typically only viable for larger businesses with substantial cash reserves

Coverage requirements:

• All employees: Full-time, part-time, and seasonal workers
• Work-related injuries: Medical expenses and disability benefits
• Minimum coverage amounts: Varies by state, typically $100,000+ per incident

It's easy to overlook insurance, but it's essential for your business. Insurance protects you if something unexpected happens.

Set up a payroll system

Your options when setting up your payroll include:

• doing it all yourself
• outsourcing the setup to your accountant or bookkeeper
• outsourcing to a payroll service

Look for accounting or payroll software that:

• makes it simple to stay compliant
• can pay your employees efficiently
• files reports with the IRS and other agencies

Keep a file for each employee

Keep up-to-date and accurate records for all your employees. You may need to provide these records to employees, their representatives, or regulators if requested.

Each employee's file should include their:

• full name, address and contact details
• emergency contact details
• tax details
• preferred payment method and details, for example direct deposit information
• any other important information about them

Consider using an HR system that includes these features. These records must be kept for at least seven years after the employee has left.

If you have questions about what information to collect for each employee, contact your advisor.

Be clear about goals and expectations

Set clear goals and expectations with every employee from day one. They should already have a good idea from the interview process.

Be clear about what you will provide in return. Build a professional relationship based on mutual trust, respect, and honesty. When you treat your employees well, they are more likely to work hard for your business.

Hiring the right employees strengthens your business

Hiring your first or next employee is a big step and an opportunity for growth. Use a clear checklist to navigate the process with confidence and find people who help your business thrive. With the right team, you can focus on your business, not paperwork.

Xero accounting software helps you manage payroll and finances, so you can support your new team from day one. Try Xero free for one month and see how simple it is.

FAQs on hiring employees

Here are some common questions small business owners may have about hiring employees.

What is a hiring checklist?

A hiring checklist is a step-by-step guide for employers. It covers key tasks such as defining the role, recruiting, interviewing, and completing legal paperwork to help you hire with confidence and stay compliant.

What are the first steps to hiring an employee?

Start by assessing your business needs and defining the new role. Create a clear job description with a competitive salary, and decide who will manage recruiting.

How do I stay compliant when hiring?

To stay compliant, verify work eligibility with Form I-9 (Employment Eligibility Verification), have employees complete tax forms such as the W-4 (Employee’s Withholding Certificate), obtain workers' compensation insurance, and follow all federal and state labor laws, including displaying required workplace posters.