Your first hire: when, and what it really costs

In this article

The short answer

Hire when you are turning work away, not when you are tired — those feel identical and only one of them pays for a wage. And do not pay your first hire on a 1099 because it is simpler. If they use your van, your tools and your schedule, they are an employee whatever the paperwork says, and getting that wrong is the most expensive mistake available at this exact moment in a business’s life.

The first hire is the point where a trade stops being a job and starts being a business, and it is where a lot of good operators go backwards for a year.

When you can actually afford one

Being busy is not the signal. Being busy is the normal state of a one‑person trade and it never goes away. The signal is narrower than that:

You are turning down work you would have taken, repeatedly, for a couple of months. Not “I am flat out” — actual jobs you said no to.
Your quoting has slipped, and you are losing work on response time rather than price. That is a business already paying for a second person and not getting one — see why you lose jobs you should have won.
You can cover roughly three months of their full cost from money you already have, without new work appearing. Not from optimism.
The work is steady rather than one good season. A hire made on a strong spring is a redundancy in November.
There is a job for them on day one. “They can help out” is not a role, and it is how you end up paying someone to hold the other end of things.

The trap, and it is the expensive one

Almost everyone’s first instinct is to pay the new person as a subcontractor on a 1099. No payroll, no withholding, no insurance paperwork. It feels like the sensible small‑business choice.

It is usually misclassification, and it is not a technicality.

The label does not decide it. The relationship does. The IRS looks at behavioural control, financial control and the nature of the relationship. The Department of Labor applies its own economic‑reality test for wage and hour purposes. Neither cares what the agreement says it is.

If this is true…	…they are almost certainly an employee
You set their hours	Behavioural control. A contractor decides when they work.
They use your van, tools and materials	Financial control. A contractor has their own investment in the work.
You tell them how to do the job, not just what the result is	Direction and control — the core of the test.
They work only for you	Economic dependence. A contractor has other customers and can lose money.
They have no licence, no insurance and no business of their own	There is no independent business to contract with.
The arrangement has no end	A contractor is engaged for a project, not indefinitely.

Read that table honestly about the person you are picturing. If most of it is true, they are an employee.

What it costs to get wrong: back taxes and penalties on wages you should have withheld, unpaid overtime under wage and hour law, and — the one that actually closes companies — a workers’ compensation problem. If an uninsured “contractor” is hurt on your job, you may be personally exposed to the whole of it, and your general liability policy will not help. In the trades that is the risk that matters, not the tax bill.

Genuine subcontractors absolutely exist — the licensed electrician who comes for two days with his own van, his own insurance and four other customers is a real contractor. Your helper is not.

What they really cost

An employee costs meaningfully more than their wage, and the gap is where first‑time employers get caught out. Work it through with your own numbers:

Item	Working	Per hour
Wage	What you agreed	$25.00
Payroll burden	Employer taxes, workers’ comp, liability — commonly 25–35%. Use 30%.	$32.50
Non‑productive time	Loading, driving, holiday, the wet Tuesday. Not billable, still paid.	Real, and yours
What they must bill to be worth it	Loaded cost ÷ billable share, plus a margin	Well above $32.50

That last line is the whole decision, and it is the same arithmetic as why charging by the hour is costing you money: a person who is paid for eight hours and billable for five has to carry the other three in their rate. If your prices do not already have room for that, a hire makes you busier and poorer at the same time.

Workers’ comp rates vary enormously by trade — roofing and tree work are in a different world from cleaning. Get your real number before you offer anyone a wage, not after.

Who to hire first

Hire for reliability over skill. You can teach the trade. You cannot teach turning up at seven.
Hire the job you hate, if it is the one costing you money. For many operators the first hire that pays is not a second pair of hands at all — it is someone to answer the phone and book the work.
Take up references properly and ring the last employer. Ten minutes.
Check the licence yourself if the role needs one. Do not take a photograph of a card as proof.
Use a real trial period and say plainly at the start what it is and what the standard is.
Do not hire a friend into an undefined role. The most common first hire and the most common first regret.

The first month

Payroll set up before day one, not after the first pay run. This is the bit people leave.
Workers’ comp in force on day one. Non‑negotiable in any trade with a ladder in it.
Write down what the day looks like — start time, van, what “finished” means on a job.
Send them out alone later than feels comfortable. The callback costs more than the extra week.
Tell them what good looks like, specifically. Most new hires in the trades are not lazy, they are guessing.
Put them in front of customers deliberately. Your reviews are about to be partly theirs — see getting reviews without begging.

What to stop doing

Paying cash. No cover, no record, and every problem that follows is worse.
Calling an employee a subcontractor because payroll looks like a hassle. It is a smaller hassle than the alternative.
Hiring because you are exhausted. Exhaustion is often a pricing problem, and a hire makes a pricing problem worse.
Keeping the good jobs and giving them the rubbish. They will leave, and you will conclude that hiring does not work.
Waiting until you are certain. You will not be. Wait for the turned‑down work, not the certainty.

What this looks like in BizBaby

The first hire only pays if the work is organised well enough to hand over.

BizBaby lets you assign jobs to a person and gives them the address, the customer, the notes and the checklist on their phone, so a day’s work is something you send rather than something you explain twice. You can see what each person actually completed, which is how you find out whether the hire is paying for itself before your accountant tells you.

Free for the first three months.

Sources

Checked in August 2026. Classification is federal and state law both, and states differ sharply — several apply a stricter test than the federal one. Treat this as the question to take to an accountant once, not as advice for your state.

IRS: independent contractor or employee? — the common‑law control test the table above is built on.
DOL Fact Sheet 13 — the economic‑reality test used for wage and hour purposes, which is a separate question from the tax one and can be answered differently.
The 25–35% burden band is the same one used in why charging by the hour is costing you money; workers’ comp is the swing factor and varies by trade far more than anything else in it. The loaded‑cost table is worked here so you can substitute your own figures line by line.