Hiring Your First Construction Employee: A Solo Contractor's Guide | Projul

You’ve been running solo for a while now. Maybe a couple years, maybe longer. You’re pulling permits, running jobs, chasing invoices, and somehow still finding time to swing a hammer. Business is good. Actually, business is too good, and that’s becoming a problem.

You’re turning down jobs. You’re working weekends just to stay on schedule. Your phone keeps ringing, and you keep telling people you’re booked out for months. At some point, you have to ask yourself: is it time to bring somebody on?

Hiring your first employee is a big deal. It changes your tax situation, your insurance requirements, your daily routine, and honestly, your identity as a business owner. You go from “just me and my truck” to “I’ve got a guy.” And with that comes a pile of paperwork, legal obligations, and financial commitments that nobody really warns you about.

This guide breaks down everything you need to know before you make that first hire. No fluff, no theory. Just the practical stuff that solo contractors actually need to figure out.

Knowing When It’s Actually Time to Hire

Let’s start with the decision itself, because a lot of guys jump the gun on this. You have one really busy month and suddenly you’re posting job ads. That’s a recipe for disaster.

Here’s what “ready to hire” actually looks like:

You’re turning down profitable work consistently. Not just one big job you couldn’t fit in. We’re talking about a pattern over 3-6 months where you’re leaving real money on the table because you physically can’t do the work yourself.

Your backlog is deep enough to support two people. If you hire someone at $25/hour, that’s roughly $1,000/week in labor cost before taxes and insurance. Do you have enough signed contracts and incoming leads to cover that for at least the next 3-4 months? If the answer is “probably,” that’s not good enough. You need “yes.”

You’re making mistakes from being stretched too thin. This is the one that should really get your attention. When you’re so busy that you’re cutting corners, forgetting details, or putting out work that’s not up to your standards, it’s not just a scheduling issue. It’s a liability issue.

You’ve got your financial house in order. You know your numbers. You know your margins. You have a solid handle on your accounting and you can tell me, right now, what your break-even point is. If you can’t, fix that before you hire anyone.

One more thing: don’t hire just because you’re tired. Being tired is normal. Being consistently unable to meet demand, that’s the signal.

W-2 Employee vs. 1099 Sub: Get This Right

This is where a lot of contractors get into trouble, and I mean real trouble. The IRS does not mess around with worker misclassification.

Here’s the simple version: if you control when someone works, how they do the work, what tools they use, and they work primarily for you, that person is a W-2 employee in the eyes of the law. Calling them a “sub” and paying them on a 1099 doesn’t change that.

The IRS looks at three categories:

1. Behavioral control. Do you tell them what to do, when to show up, and how to perform the work? That’s an employee.
2. Financial control. Do you provide tools, materials, and cover expenses? Do they have the opportunity for profit or loss independent of you? If they don’t have their own business expenses and can’t work for others, that’s an employee.
3. Type of relationship. Is there an expectation of ongoing work? Do you provide benefits? Is the work they do a key part of your business? Employee.

Why this matters so much: If you misclassify an employee as a 1099 contractor, you’re on the hook for all the payroll taxes you should have been paying, plus penalties and interest. Some states will add their own fines on top of that. And if that person gets hurt on the job without workers’ comp coverage? You’re personally liable.

The honest truth is that most solo contractors who bring on their “first guy” are hiring an employee, not a subcontractor. If he’s showing up to your jobs, using your tools, and you’re telling him what to do each day, he’s your employee. Pay him like one.

If you genuinely need subcontractor help for specific trades or overflow work, that’s a different situation. A licensed plumber who carries their own insurance and works for multiple GCs is a sub. The laborer who rides with you to every job site is not.

The Paperwork and Legal Stuff (Yes, All of It)

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Once you’ve decided to make a W-2 hire, there’s a stack of paperwork between you and actually putting someone to work. Here’s what you need to handle:

Get an EIN. If you’ve been operating as a sole proprietor using your Social Security number, you’ll need an Employer Identification Number from the IRS. It’s free and you can get it online in about 10 minutes. You’ll use this for all tax filings related to your employees.

Register with your state. Every state has its own requirements for employers. At minimum, you’ll need to register with your state’s department of labor and tax agency. Some states require additional registrations. Check your state’s new employer checklist.

Set up for payroll tax deposits. You’re now responsible for withholding federal income tax, Social Security, and Medicare from your employee’s paycheck, and depositing those taxes with the IRS on a regular schedule (monthly or semi-weekly, depending on the amount). You’ll also need to handle state income tax withholding if your state has one.

New hire reporting. Federal law requires you to report new hires to your state’s new hire directory within 20 days (some states require it sooner). This is how child support enforcement agencies track employment.

I-9 verification. You must verify that your employee is authorized to work in the United States. The I-9 form must be completed within 3 days of their start date. Don’t skip this. Fines start at $252 per violation.

W-4 form. Your employee fills this out so you know how much federal income tax to withhold from their paychecks.

Workers’ compensation insurance. In most states, you need this as soon as you have one employee. We’ll cover this more in the next section, but do not skip it. Check out our workers’ comp guide for a deeper breakdown on what construction businesses need.

Post required notices. Federal and state law require you to display certain labor law posters where employees can see them. Yes, even if it’s just one guy and your “office” is your truck. The DOL has a poster advisor tool that tells you exactly which ones you need.

This sounds like a lot, and it is the first time. But most of it is one-time setup. Once you’ve got your EIN, state registrations, and systems in place, adding the next employee is much simpler.

Insurance: What Changes When You Have Employees

Your insurance situation changes dramatically the moment you hire someone. If you’ve been running lean with just general liability and maybe a commercial auto policy, get ready to add a few more line items to your budget.

Workers’ compensation. This is the big one. Construction is one of the highest-risk industries for workplace injuries, and workers’ comp premiums reflect that. Rates vary by state and by your specific trade classification, but expect to pay anywhere from $5 to $30+ per $100 of payroll depending on the type of work. A roofer pays a lot more than a painter.

Workers’ comp covers medical expenses and lost wages if your employee gets hurt on the job. Without it, you’re personally on the hook for those costs, and a single serious injury could wipe you out financially. Our insurance guide walks through the full picture of what coverage you need as your business grows.

General liability adjustments. Your existing GL policy may need to be updated to reflect that you now have employees. Your premium will likely increase since there’s more exposure with more people on job sites.

Commercial auto. If your employee will be driving a company vehicle or even their own vehicle for work purposes, make sure your commercial auto policy covers them. Personal auto insurance does not cover accidents during work-related driving.

Consider EPLI. Employment Practices Liability Insurance protects you against claims of wrongful termination, discrimination, harassment, and other employment-related issues. With just one employee, this might seem excessive, but it only takes one dispute to make it worthwhile.

Health insurance. You’re not legally required to offer health insurance until you have 50+ full-time equivalent employees (thanks to the ACA), but offering some kind of benefit can help you attract and keep good people. Even a simple stipend toward individual coverage can make a difference.

Talk to an insurance agent who specializes in construction. Not a generalist, not your buddy who does auto insurance. Someone who understands contractor risk and can build you the right coverage package at the right price.

Setting Up Payroll and Tracking Time

Here’s where the rubber meets the road. You need a system for paying your employee correctly, on time, every time. “I’ll just write him a check” is not a system. It’s a liability waiting to happen.

Payroll options for small contractors:

You’ve got three basic paths. First, you can use a payroll service like Gusto, QuickBooks Payroll, or ADP Run. These handle tax calculations, withholding, deposits, and year-end forms (W-2s) for you. They cost anywhere from $40-$80/month for one employee, and they’re worth every penny when you factor in the time and risk of doing it yourself.

Second, you can hire a bookkeeper or accountant to run payroll. Good option if you already have someone handling your books. Third, you can do it yourself, but honestly, don’t. The penalty for a late or incorrect payroll tax deposit starts at 2% and goes up to 15%. It’s not worth the risk.

Time tracking is not optional. When it’s just you, nobody cares when you show up or leave. But with employees, you need accurate records of hours worked. Federal law (FLSA) requires you to keep time records for all non-exempt employees, and construction workers are almost always non-exempt.

Good time tracking does more than keep you legal. It gives you real data on labor costs per job, helps you bid more accurately, and protects you if there’s ever a wage dispute. A lot of contractors start with paper timesheets and quickly realize they need something better.

Digital time tracking through a tool like Projul ties hours directly to specific jobs, so you always know where your labor dollars are going. That kind of visibility matters even more when you’re paying someone else’s wages and need to make sure every hour is accounted for.

Pay frequency and method. Check your state’s requirements. Some states mandate weekly or biweekly pay for construction workers. Most states also have rules about when a final paycheck must be issued if someone leaves or is terminated.

Overtime. Construction employees are generally entitled to overtime pay (1.5x their regular rate) for hours worked over 40 in a workweek. Some states have daily overtime rules too. Build this into your labor cost estimates because if your employee is working 50-hour weeks, that extra 10 hours at time-and-a-half adds up fast.

Managing Your First Employee (and Planning for Growth)

Getting someone on the payroll is only half the battle. Now you’ve got to actually manage them, and that’s a different skill set than swinging a hammer.

Set clear expectations from day one. What time do you want them at the shop or the job site? What’s the dress code? What tools do they need to bring vs. what you provide? What does a good day’s work look like? Don’t assume they know. Tell them.

Create a simple onboarding process. It doesn’t have to be fancy. A one-page sheet with your company policies, safety rules, and job expectations goes a long way. Walk them through it on their first day. If you’re working on multiple jobs, use a scheduling tool to keep assignments clear so nobody shows up at the wrong site.

Safety training matters, especially in construction. OSHA requires that employers provide a safe workplace and train employees on hazards. At minimum, cover fall protection, PPE requirements, tool safety, and your emergency procedures. Document everything. If OSHA shows up after an incident, they’re going to ask for training records.

Start thinking about retention early. Good construction workers are hard to find, and losing your first employee after spending time and money to hire and train them is a painful setback. Fair pay, steady work, and basic respect go further than you’d think. Our employee retention guide gets into specific strategies that work for construction businesses.

Build systems now, not later. The habits you build with employee number one are the habits that will carry you to employees five, ten, and beyond. If you’re thinking about scaling your business, the foundation starts here. Track your time. Track your costs. Document your processes. The contractors who grow successfully are the ones who run their business like a business from the beginning.

Use the right tools. A lot of solo contractors get by with a notepad and a spreadsheet. That works fine for one person. But once you’re coordinating with employees, tracking their hours, scheduling jobs, and managing payroll, you need something more structured. Project management software built for construction, like Projul, keeps everything in one place: scheduling, time tracking, job costing, and client communication. See how it works and whether it fits your operation.

Plan your next hire before you need them. If your first hire goes well and business keeps growing, you’ll want to bring on someone else. Don’t wait until you’re in the same overwhelmed position that forced your first hire. Start thinking about your second employee when your first one is consistently busy and you’re still turning down work.

The Bottom Line

Hiring your first employee is scary. There’s no way around that. You’re going from being responsible for just yourself to being responsible for someone else’s livelihood. That’s a big deal.

But here’s the thing: every successful construction company you’ve ever seen started right where you are now. Some guy with a truck and a skill set decided it was time to grow. He figured out the paperwork, got the insurance, set up payroll, and made it work. You can do the same thing.

The key is doing it right from the start. Don’t cut corners on classification. Don’t skip workers’ comp. Don’t try to run payroll off the back of a napkin. Set up real systems, get professional advice where you need it (a good accountant and insurance agent are worth their weight in gold), and treat your first employee the way you’d want to be treated.

See how Projul makes this easy. Schedule a free demo to get started.

You got into this trade because you’re good at building things. Now it’s time to build something bigger than what one person can handle. Take it one step at a time, get the fundamentals right, and you’ll look back on this hire as the moment your business really started to grow.