Hiring your first employee or contractor can be an exciting step for a growing business—but it is not automatically the right next step. A successful first hire should create meaningful capacity, improve client service, and free you to focus on the work that drives the business forward. Before extending an offer, take time to define the problem, understand the true cost, and prepare for the operational and compliance responsibilities ahead.

For small business owners in Federal Way, Tacoma, and throughout Washington, the best hiring decision begins with a simple question: Will this person make the business stronger, or simply add another responsibility to manage?

Start With the Problem You Need to Solve

People should solve problems—not create new ones. Before deciding to hire, identify the specific constraint that is holding your business back.

Are you spending too much time on administrative work? Are customer calls going unanswered? Do you need help with bookkeeping, sales follow-up, production capacity, or specialized technical work? The clearer the problem, the easier it becomes to decide whether a hire is the right solution.

It is also important to document the work before assigning it to someone else. List the tasks involved, how often they occur, how long they take, and how they are currently handled. This exercise often reveals whether you truly need another person—or whether a process change, better technology, or automation could solve the issue more effectively.

Recurring work is usually a stronger case for hiring than sporadic work. Daily, weekly, and monthly responsibilities can often justify a part-time or full-time role. A short-term project, seasonal workload, or isolated expertise need may be better suited to a contractor or outside service provider.

Identify the Work Only You Can Do

Many owners become overwhelmed because they are handling every task personally, including work that does not require their particular expertise. Before hiring, identify the highest-value activities that should remain on your plate.

For example, an owner may be uniquely positioned to build client relationships, make strategic decisions, close important sales, or deliver specialized professional services. Scheduling, data entry, routine follow-up, bookkeeping support, and basic administrative work may be more appropriate to delegate.

A first hire is often successful because it gives the owner more time for revenue-producing and strategic activities. If hiring will not create that capacity, it may be worth revisiting the role definition before moving forward.

Calculate the True Financial Cost

A new employee costs more than the wage or salary listed in an offer letter. Before hiring, build a realistic estimate that includes payroll taxes, workers’ compensation, benefits, equipment, software, training time, recruiting costs, and the management time required to support the person well.

You should also consider whether the business can handle a slower-than-expected ramp-up. A new team member may need weeks or months to become fully productive. Stable cash flow, adequate profitability, and reasonable expectations for growth can make that investment more manageable.

Hedlund Tax and Accounting encourages small business owners to view a first hire as a business investment rather than simply an added expense. The goal is to understand whether the additional capacity is likely to produce stronger service, more sustainable operations, or increased revenue over time.

Employee or Independent Contractor?

One of the most important decisions is whether the person should be treated as an employee or an independent contractor. This is not simply a matter of preference or what the parties call the arrangement.

For federal tax purposes, worker classification depends on the actual relationship between the business and the worker. The IRS considers behavioral control, financial control, and the nature of the relationship when evaluating whether a worker is an employee or an independent contractor. ([irs.gov](https://www.irs.gov/businesses/small-businesses-self-employed/employee-common-law-employee?utm_source=openai))

A contractor may be appropriate when an individual operates an independent business, offers services to the public, controls how the work is performed, and is engaged for a defined project or specialized need. An employee relationship may be more likely when the business directs how and when work is performed, provides ongoing training, and integrates the worker into regular business operations.

Misclassification can create tax, payroll, and legal complications. If you are uncertain, it is wise to seek professional guidance before making a final decision. This is especially important for startups and businesses creating their first formal working relationship.

Prepare for Washington Employer Responsibilities

Becoming an employer in Washington involves more than starting payroll. Businesses hiring employees may need to address workers’ compensation coverage, unemployment insurance, Paid Family and Medical Leave reporting and premiums, workplace notices, and other state and local requirements.

Washington employers that hire employees generally need a workers’ compensation account through the state’s Labor & Industries system, which is initiated through a new or updated state business license. ([lni.wa.gov](https://lni.wa.gov/insurance/insurance-requirements/how-to-get-a-workers-compensation-account/?utm_source=openai)) Washington employers also have Paid Family and Medical Leave reporting, premium, and employee-notice responsibilities; the details can vary based on employer size and the current rules. ([paidleave.wa.gov](https://paidleave.wa.gov/employers/?utm_source=openai))

These requirements are manageable when addressed early, but they can become stressful when handled after the fact. Establishing payroll and compliance processes before the employee’s first day helps reduce avoidable surprises.

Build Basic Systems Before Day One

Even an excellent employee needs clear direction. Before a new person starts, create basic onboarding procedures, document the role, and decide how success will be measured.

Consider what access the person will have. Will they handle money, customer information, passwords, accounting records, or other sensitive systems? If so, put appropriate controls in place. Separate duties where possible, limit access to what is needed, and establish clear approval procedures.

Define practical performance expectations as well. What does a successful first 30, 60, or 90 days look like? How will you know whether the new role is improving turnaround time, client communication, sales activity, production, or another important business outcome?

Clear expectations support accountability while making it easier for a new team member to succeed.

A Quick First-Hire Readiness Check

You may be ready to move forward when the role is clearly defined, the work is recurring, the full cost is understood, cash flow can support the investment, and you have a basic plan for onboarding and measuring success.

It may be time to pause when duties remain unclear, costs have not been fully calculated, employee-versus-contractor classification is uncertain, compliance requirements have not been reviewed, or there is no plan for training and supervision.

At Hedlund Tax and Accounting, a hiring review can help business owners connect the operational decision to broader tax planning, entity selection, cash-flow planning, and long-term business strategy. The right first hire should support the business you are building—not distract from it.

FAQ

Should I hire an employee or use a contractor?

It depends on the facts of the working relationship, the type of work, the level of control you need, and whether the role is ongoing or project-based. Do not rely solely on a job title or contract label.

How much should I budget for my first employee?

Include more than wages. Account for payroll taxes, workers’ compensation, Paid Leave obligations, equipment, software, training, recruiting, and the time you will spend managing the role.

When is a contractor a better choice?

A contractor may be a good fit for specialized, temporary, project-based, or seasonal work when the person operates independently and controls the manner of performing the services.

What should I prepare before a new employee starts?

Document responsibilities, establish payroll and required registrations, create onboarding steps, set access controls, and define how performance will be evaluated.

What if I am not sure hiring is the right next step?

Start by defining the problem. You may find that process improvements, automation, outsourcing, or better delegation can solve the issue before you commit to a new ongoing employment relationship.

This article is for educational and planning purposes only and is not legal, tax, accounting, employment, investment, or financial advice. Employment laws, tax rules, and business circumstances vary. Consult appropriate professional advisors regarding your specific situation.