Hire your first people

Why this step matters

Your first hires shape the culture, the speed and the quality of everything that follows. A great early person can take a whole area off your plate; a poor fit costs months. Hiring also brings legal and tax duties that differ by country and by whether someone is an employee or an independent contractor. Getting the structure right at the start avoids back taxes, disputes over code ownership and messy equity later.

How to do it

1. Hire for the bottleneck. List what is slowing growth: shipping product, closing sales, answering support. Hire for the one constraint that matters most now, and write a scorecard with the outcomes you expect in the first 90 days.
2. Choose contractor, employee or employer of record.
3. Contractors and freelancers suit defined projects and part-time work. They control how they work and invoice you.
4. Employees suit ongoing core roles where you direct the work. Treating someone who works like an employee as a contractor is misclassification and can lead to back taxes and penalties; in the US, rules differ by state, and the UK has its own employment status and IR35 rules.
5. An employer of record (EOR) legally employs someone for you in another country and handles local payroll, tax and benefits, so you can hire abroad without opening a local company.
6. Set up payroll and registrations before day one. In the US, you need an EIN, state employer and unemployment registrations, Form W-4 and Form I-9 for each employee and a payroll provider that files and pays withholding. In the UK, you register as an employer with HMRC for PAYE, check the right to work and enrol eligible staff in a workplace pension. In India, check provident fund and state rules. A payroll service handles most of this.
7. Write proper contracts. Every employee and contractor agreement should assign intellectual property to the company and include confidentiality. Founders often skip this for early contractors and pay for it during due diligence.
8. Source through your network first. Ask investors, advisers and customers; post in communities where the people you want already spend time; use niche job boards and freelance platforms for contractors.
9. Run a short, fair process. A screening call, a practical paid trial task close to the real work, reference checks, and a final conversation about values and expectations.
10. Make a clear offer. State salary, start date, benefits and, if offering equity, the number of options or shares, the vesting schedule (four years with a one-year cliff is common in US startups) and that it needs board approval. Grant options properly through your lawyer or cap table tool.
11. Onboard deliberately. Prepare accounts, documentation, a first-week plan and a 30-60-90 day check-in.

What it costs and how long it takes

Contractors cost their rate plus any platform fee. Employees cost salary plus employer taxes, benefits and payroll software, which typically runs from tens of dollars a month for a small team. EOR services charge a monthly fee per worker. Expect four to ten weeks from writing a role to someone starting.

Free credits, perks and services that help

Compare payroll, HR, contractor payment and employer-of-record providers in /best/payroll-hr; several offer startup discounts listed in /perks. Contract templates and legal help are in /best/legal.

Equity and pay for early hires

Early employees usually accept a lower salary than at a large company in exchange for meaningful equity and responsibility. Decide your salary bands and option pool before talking numbers, so offers are consistent and fair between people doing similar work. In the US, stock options are granted at a strike price based on a 409A valuation, and early employees should understand vesting, exercise windows and tax; give them the details in writing and suggest they ask their own adviser. In the UK, many startups use EMI options, which have tax advantages when the company and the employee qualify; check the conditions with an accountant before promising them.

Common mistakes

• Misclassifying workers. The label in the contract does not decide status; how the work is done does.
• Handshake equity. Verbal promises of "a few percent" cause disputes; put everything in writing with vesting.
• No IP assignment. Code written by a contractor without an assignment may not belong to you.
• Hiring too fast. Payroll is the biggest monthly cost; match hires to revenue or runway.
• Skipping onboarding. A good hire with no plan wastes weeks.

Go deeper

VibeCodes lists AI coding apps, agents and MCP servers that let a small team ship more before the next hire: vibecodes.net.