Growth
When to Hire Your First Employee as a Contractor
Hiring your first employee is the most consequential decision a solo contractor makes. Get it right and you unlock capacity that breaks the one-person ceiling. Get it wrong and you add cost, complexity, and stress to a business that was not ready for it. The answer is almost never "hire when you are busy" — it is "hire when your systems can support another person."
The three signals you are ready
1. You are turning down work consistently
Not one busy week — multiple weeks in a row where you cannot take jobs you would normally accept. If you are turning down $2,000-$5,000 per week in work, that is revenue a hire could capture.
2. Your margins support the cost
A hire costs 25-35% more than their wage after employer taxes, workers comp, insurance, and equipment. If your current margins cannot absorb that cost during a slow week, you are not ready. Run the numbers before you post the job.
3. You have documented processes
If the way you run jobs exists only in your head, a new hire will constantly need you to stop working and explain things. Before hiring, document your job process, customer communication standards, and quality expectations — even if it is just a one-page checklist.
The real cost of a first hire
| Cost category | Typical range | Notes |
|---|---|---|
| Wage | $18-$35/hour | Varies by trade, region, and experience |
| Employer payroll taxes | 7.65% of wages | Social Security + Medicare (employer portion) |
| Workers compensation | $2,000-$8,000/year | Rates vary by trade risk class and state |
| Tools and equipment | $500-$3,000 upfront | Basic tool set, safety gear, vehicle access |
| Training time | 2-4 weeks | You earn less during training because you are supervising, not billing |
Rule of thumb: A $25/hour hire costs you $32-$34/hour fully loaded. Budget for the loaded cost, not the wage, when deciding whether you can afford to hire.
Employee vs. subcontractor
| Factor | Employee | Subcontractor |
|---|---|---|
| Your control | Full — schedule, methods, standards | Limited — you set the outcome, they choose the method |
| Cost structure | Wage + taxes + insurance + equipment | Flat rate or per-job — they carry their own costs |
| Risk | Higher fixed cost, lower quality risk | Lower fixed cost, availability risk |
| Best when | Steady, predictable volume | Overflow or project-based work |
The IRS has specific criteria for classifying workers. Misclassifying an employee as a subcontractor can result in significant penalties. Consult a tax professional if you are unsure.
The pre-hire checklist
Confirm you have 3+ months of operating expenses saved
Calculate the fully loaded cost of the hire
Verify your margins support the cost during a slow week
Document your job process — even a one-page checklist counts
Set up payroll (Gusto, Square Payroll, or your accountant)
Obtain workers compensation insurance
Create a clear job description with expectations
What I have learned about first hires
The biggest mistake I see is hiring to escape being overwhelmed instead of hiring to grow. If your systems are broken — no lead tracking, no follow-up, no bookkeeping — adding a person does not fix the chaos. It doubles it. The person you hire inherits your disorganization and neither of you can work efficiently.
The contractors who hire successfully do it in order: fix systems first, build steady volume, then hire into a business that runs on processes instead of one person's memory.
Your first hire does not need to be full-time. A part-time helper or per-project subcontractor lets you test the model with lower risk. If the economics work at 20 hours per week, you can scale to full-time with confidence.
-- Richard