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Hiring Your First Employee in Michigan? Here are 10 things You Need to Know.

Publication date: May 21, 2025 

🕒 8-minute read

You got into business to do what you love, but now you’re growing and need a team to support your success. Perhaps you’ve worked with independent contractors, but what got you here won’t get you there, so you’re ready to hire your first employee. 

Check out this 10-step process to walk you through bringing on your first W-2 employee. 

Step 1: Set Up Payroll, Tax Filings, and Unemployment Insurance 

Before you hire an employee, you’re responsible for withholding income tax and contributing to unemployment insurance. Here’s what you need to do: 

Then, you can begin to set up your payroll and timekeeping system. Make sure your payroll and timekeeping system: 

  • Withholds Michigan state income tax properly. 
  • Accounts for unemployment insurance (FUTA and SUTA) payments. 
  • Issues W-2 forms to employees at year-end. 
  • If you’re an employer doing business or maintaining an establishment within a taxing city, you’ll need to review requirements to withhold local taxes from employees’ paychecks. 
  • Track hours worked for nonexempt employees to ensure accurate pay and compliance with the Fair Labor Standards Act (FLSA) and the Earned Sick Time Act (ESTA), effective February 2025. 

Step 2: Get Workers’ Compensation Insurance 

If you have just one employee working 35+ hours per week for at least 13 weeks, OR three or more part-time employees, you must have workers’ compensation coverage. Contact a business insurance agency to secure coverage.  

Step 3: Comply with Michigan Wage & Hour Laws 

Here are some key things to keep in mind: 

  • Minimum wage (as of January 2025) is $12.48/hour (subject to increases annually). 
  • Tipped minimum wage is $4.74/hour (subject to increases annually).  
  • Overtime is required for nonexempt employees who work more than 40 hours in a 7-day pay week. 
  • In Michigan, the Earned Sick Time Act (ESTA) generally applies to all employers that employ one or more employees in Michigan. If you have less than 10 employees, you must provide up to 40 hours of paid sick leave under Michigan’s Earned Sick Time Act (ESTA). If you have 10+ employees, you must provide up to 72 hours of paid sick leave under Michigan’s Earned Sick Time Act (ESTA). Small businesses that did not employ an employee on or before February 21, 2022, are not required to comply with this act until three years after the date that the employer first employs an employee. 
  • Each work week, track hours worked for nonexempt employees. Nonexempt employees must be paid overtime for any time worked over 40 hours per week and accrue 1 hour of earned sick time for every 30 hours worked. 

Step 4: Post Required Labor Law Notices 

You must provide digital or physical copies of Michigan labor law notices to your employees. Sign up for a subscription service to monitor legal updates. Check out the Michigan Chamber or JJ Keller, etc.  

Step 5: Prepare for Hiring & Onboarding 

Once you’ve handled tax and compliance steps, it’s time to draft your essential HR documents. As a small business, having the tools to hire the right person will save you a lot of headaches down the road. A good onboarding experience sets the tone for the rest of the employee relationship. Nothing’s worse than investing in talent and having them leave, especially when you’re a small business with limited resources. The cost of losing a new hire goes beyond money—it impacts your team’s morale, culture, and brand. Here’s what you’ll need:  

  • Job descriptions that clearly outline roles and expectations, including physical requirements (like lifting). 
  • Job postings to attract the right talent. 
  • Employment application to document candidate details. 
  • Interview guides to structure effective candidate conversations. 
  • Offer letters to officially extend employment terms. 
  • Employee handbook covering workplace policies and procedures including PTO, holidays, harassment, etc. 

Step 6: Get Creative with Benefits You’ll Offer 

Most candidates and employees want to know what’s in it for them! As a small business, you may not be able to roll out a traditional health plan right away. But that doesn’t mean you can’t offer valuable benefits to your employees. The world of work is changing, and many employees are looking for flexibility, support, and a positive work culture over just salary and health insurance. 

Here are a few creative, low-cost perks that can go a long way in attracting and retaining talent: 

  • Remote Work Opportunities – Offer employees the flexibility to work from home or anywhere they feel most productive. This is a huge perk that helps with work-life balance and can improve overall satisfaction. 
  • Flexible Work Schedule – Allow employees to set their own hours or work condensed weeks (e.g., 4-day work weeks). It’s all about offering the freedom to manage their time while still meeting expectations. 
  • Mental Health Support – Employee Assistance Programs (EAP) help you support your team’s mental health by offering free counseling sessions and access to online mental health resources that encourage regular breaks and a healthy work-life balance. 
  • Gym Membership or Wellness Stipend – If providing a company-sponsored gym membership isn’t feasible, a small monthly wellness stipend (for things like fitness apps, yoga classes, or wellness programs) can show you care about your employees’ health and well-being. 
  • Health Reimbursement Account (HRA) – Offer a QSEHRA (Qualified Small Employer HRA) or ICHRA (Individual Coverage HRA) to reimburse employees for eligible medical expenses and/or health insurance premiums. This is a tax-advantaged benefit that can help employees cover health costs without requiring a full health insurance plan. It’s a simple way to support their health while keeping costs manageable for your business. 
  • Variable Pay– If you can’t offer a big salary boost right away, consider offering a premium hourly rate or performance-based bonuses to motivate and reward hard work. 

These perks don’t require a large budget but can significantly enhance your employees’ experience and loyalty. A little flexibility and creativity can go a long way in making your team feel valued! 

Step 7: Compile Your Company’s New Hire Paperwork 

After you’ve found that all-star candidate for the role, it’s time to hire your first employee. Which means… you need a new hire packet. You can use paper forms, but having electronic paperwork streamlines your process even more. Your new hire packet should include: 

  • Federal, State, and Local W-4 forms for tax withholding. 
  • Form I-9 to verify employment eligibility – must be completed within the first 3 days of employment. 
  • New hire reporting form (as noted in Step 9). 
  • Direct deposit authorization form (if offering direct deposit). 
  • Employee handbook acknowledgment form 
  • Emergency contact form for safety and record-keeping purposes 

Step 8: Conduct Onboarding 

Onboarding is crucial to making your employee feel welcome and prepared. That’s why the cultural aspect of onboarding is so crucial. A great onboarding process helps new employees feel welcome, understand the company’s values, and sets the stage for long-term success. When new hires are aligned with your culture from the start, they’re more likely to stay engaged, contributing to a strong and cohesive team. Here’s how to create a great experience: 

  • Send a pre-boarding email providing instructions to complete new hire paperwork and outlining what to expect throughout the first day and week. 
  • Order branded company swag or write a handwritten card to create a memorable welcome. 
  • Create a PowerPoint or Google Slides presentation to review key policies, company values, history, norms, and benefits. 
  • Ensure their workstation is set up with the tools they need. Don’t forget about name tags, uniforms, computer peripherals, and a complete onboarding schedule for AT LEAST their first week. 
  • Most importantly, the employee’s supervisor should always be present on Day 1 and have a consistent check-in cadence for ongoing training and support  

Step 9: Report Your New Hire 

Michigan requires all businesses to report new hires within 20 days to help enforce child support orders. You can do this through the Michigan New Hire Reporting Program or many payroll providers will offer this.  

Depending on your payroll provider and plan, they may file the necessary new hire form for you, or you can get the new hire reporting form online to file with the state. 

Step 10: Post Hire 

Once your employee is on board, be sure to have the following tools in place to manage performance and help continue to develop the employee. Employees need and deserve timely feedback. Make catching them doing it right a priority. At CPG, we believe everyone deserves a great place to do good work. That means being great leaders—setting clear expectations, removing barriers, and ensuring employees have the tools and resources they need to thrive. Performance management forms include: 

  • Developing a simple yet robust Communication & Engagement Plan ensures employees are informed about company strategies, goals, and expectations, allowing them to contribute more effectively and align their work with the organization’s vision. Solidify what internal communication channels you’ll use to cascade information and what events and meetings will support building team relationships and better collaboration.  
  • Personnel Change Form for documenting updates like pay changes, promotions, or job title changes. 
  • Contribution Review Form, our term for performance review forms, is designed to manage employee growth and provide constructive feedback.  

Hiring your first employee is exciting, but the paperwork can feel overwhelming. Taking these steps will keep your business compliant and set you up for success. If you need help building your business’s HR infrastructure and navigating these requirements, we’re here to support you! Contact us today!