How to Hire Your First Employee
Navigate the process of making your first hire: from defining the role and finding candidates to making an offer and setting up payroll. Avoid the common mistakes that cost early-stage startups time and money.
Before You Start
- 1
A registered business entity with EIN
- 2
Budget for at least 6 months of the role's total compensation
- 3
A clear understanding of what this hire needs to accomplish
Step-by-Step Guide
Define the role with outcomes, not a task list
Write a job description focused on what this person will achieve in their first 90 days, not a laundry list of responsibilities. Define 3-5 measurable outcomes: 'Ship v2 of the onboarding flow and improve activation by 15%' is better than 'Work on frontend development tasks.' Decide on compensation range: research market rates on levels.fyi, Glassdoor, or Pave. Decide if this is full-time, part-time, or contract-to-hire.
Your first hire should be someone who thrives with ambiguity, can wear multiple hats, and is excited about the stage you are at. Do not hire a specialist until you have clear, repeatable work for them.
Source candidates through your network first
Post the role on LinkedIn, your company's Twitter, and relevant communities (Hacker News, IndieHackers, niche Slack groups). Ask your network for referrals. Referrals are your best source of quality candidates at the early stage. Use AngelList/Wellfound for startup-specific hiring. Write your job post to attract the right people: be honest about stage, challenges, and equity. Top candidates self-select into transparent companies.
The best early hires often come from warm referrals. Ask every founder you know: 'Who is the best [role] you have worked with?' Then reach out directly with a personal message.
Run a structured interview process
Keep it to 3 stages maximum for your first hire: (1) 30-minute introductory call to assess culture fit and motivation, (2) a practical work sample or take-home project that mirrors real work (pay candidates for their time), (3) a final interview with the founding team discussing the work sample, role expectations, and mutual fit. Score each candidate on the same criteria. Avoid gut-feel hiring: use a consistent rubric with predefined criteria.
The best predictor of job performance is a work sample test, not interview charisma. Design a project that takes 2-4 hours and resembles actual work they would do in the role. Pay $200-$500 for their time.
Make a compelling offer with equity
Structure your offer: base salary (competitive but not top-of-market for your stage), equity (0.5-2% for first employees, with standard 4-year vesting and 1-year cliff), benefits (health insurance at minimum), and any other perks. Present the offer in a call, not email. Walk through the equity component in detail: number of shares, current valuation, vesting schedule, and exercise window. Give candidates 3-5 business days to decide.
Create an equity explainer document that shows potential outcomes at different company valuations. Most candidates do not understand startup equity. The founders who explain it clearly attract better talent.
Set up payroll and compliance
Use Gusto for US-based employees with a simple, intuitive interface for small teams. Rippling offers more automation and scales better as you grow. Deel handles international contractors and employees in 150+ countries. Set up: payroll with proper tax withholding, workers compensation insurance, state unemployment registration, new hire reporting to your state, I-9 employment verification, and W-4 tax forms. These platforms automate most of this.
Get workers compensation insurance before your first employee starts. It is required in almost every state and protects both you and your employee. Gusto and Rippling can set this up within their platform.
