Hire new employees

If you're adding employees for the first time while setting up your account, reference this article. 

If you need to change a contractor to an employee (or vice versa), you'll need to first dismiss them from their previous role then follow the steps below to re-hire them in their new role. 

Hire a new employee

Gusto will assign each employee a unique identifier called the "Gusto employee ID." This is a 6-character alphanumeric ID (e.g. 5G9934) that gets securely generated and randomly assigned, and is meant to help with running payroll with CSV and record keeping.

If you're rehiring a previously dismissed employee, follow the steps in this article instead.

1. Click the People section and select Hire & onboard.
2. Click Hire a new person.
3. Click the Employee tile.
   • Check the box if you want to send an offer letter to your new employee before setting up their Gusto account. They must accept it before you can add them to payroll.
4. Click Continue. 
5. Enter in your new team member's basic information.
   • Full name
   • Work address
   • Personal email address
   • Job title (choose from your existing set of jobs or enter a new one) 
6. Click Save & continue.
   • If you receive an error that the SSN or email is already in use, it means the employee already has a Gusto profile. Employees can only have one Gusto profile. Find their previous profile and rehire them. 
7. Fill in the details for their job and pay.
   • Select an offer letter template and expiration date (if you chose to send an offer letter)
   • Start date
   • Job title (choose from your existing set of jobs or enter a new one) 
   • Assign a manager (if applicable)
   • Employment status (full-time or part-time)
   • Employee type (salary, hourly, etc)
   • Amount of money they'll earn
   • Any special tax exemption status (if applicable).
8. Click Save & continue.
   • If you opted to send an offer letter, add a note for your new team member then click Send offer. After they sign the offer, we'll invite you to complete their onboarding and add them to payroll. You can view, update, or rescind offers from your Gusto account.
   • if you didn't send an offer letter, click Go to checklist to complete your new employee's onboarding. Be sure to add them to payroll.

After you add your new employee to payroll, Gusto will email them an invitation to set up their account and complete their onboarding tasks. If you offer benefits with Gusto, they'll be automatically invited to enroll in benefits once their new hire waiting period is complete.

The work location you enter in Gusto for a new hire depends on several things: where your employees decide to live and work, how long they’ll live or work in a given state, if the states have reciprocity, and a variety of other factors.

Understanding these dependencies can sometimes feel like a challenge, but we’re here to help.

Employee work location

In most cases, you’re required to withhold taxes in the state where your employee physically works—which can either be their resident or non-resident state.

• Resident state: This is your worker’s permanent home address.
• Non-resident state: This is any state that your worker commutes to for work or works in for a short amount of time, but it’s not their permanent home.

Preparation for hiring a remote worker

The golden rule is that taxes are owed in the place where work is done. When preparing to hire a remote worker in a new state, you’ll usually need to register with the state where the employee is living and working in addition to where your business is located. It’s important to understand your withholding obligations in both states.

Employees who work and live in the same state

Each employee's work address should be the address where their work physically takes place. Most employees work and live in the same state.

Employees who work and live different states

State laws vary. If you have employees working in another state, you’ll need to understand that state’s employment tax laws to determine if you are required to pay taxes to both their home and their work state. Consult a legal or tax advisor who can help you.

How to handle this in Gusto

1. Make sure your employee’s home address is correct.
2. Make sure your employee’s work address accurately reflects where the work is being done. If the employee is working from home, you can select that when adding their work address.
   • To edit an employee's work address, administrators need to first add the new address to their company account by clicking the Company section and select Company details.
     • Important note: If you’re adding a work location in a new state, you'll also need to register for payroll taxes in that state. Adding a new work location before you've registered and received an account number may block payroll.
3. In states with both withholding and unemployment requirements, you’ll need to register for both. Head to the State Tax Registration section of our Help Center and follow the steps to register in the new state.

Employees who live out of state, but work in your company's state(s)

Here too, the golden rule is that taxes are owed to the state where the work is done. But—some states have agreements that allow employees who work in one state and live in another to only pay income taxes to their state of residency (aka their home state). This is called a reciprocal agreement. Whether the states you’re dealing with have these agreements could affect an employee’s income tax withholdings.

How to handle reciprocal agreements in Gusto

To be able to withhold and pay income taxes on your employees’ behalf in their home state, your business needs to register for a withholding account in that state.

1. Check to see what states have reciprocal agreements here. 
2. Follow the steps in this article to set up reciprocity.
   • This article also includes resources about how to register to do business in a new state.

What if the home state and work state don’t have reciprocity?

If the two states do not have reciprocity, Gusto will withhold income tax (and unemployment, too) in the employee’s work state in Gusto. This means Gusto withholds income tax only from their non-resident state. 

Gusto does not support flexible (variable) “courtesy” withholding–for now, there are safeguards in place to make sure that the required payroll taxes, both unemployment taxes and income withholding taxes, are calculated and withheld based on the work address on file for employees during the work period you pay them for. 

For states with reciprocal agreements, once you’ve set up reciprocity in Gusto the employee’s home address is factored into the income tax withholding logic.

*Exception: courtesy withholding is supported for employees who work in Idaho, and live in either Washington or Wyoming.

Labor laws and compliance in the new state

When hiring a remote employee, you’ll need to follow the pay and labor laws in the state where they are—which could differ from the laws in the state where your business is located. 

Here are some considerations to familiarize yourself with for each employee that works in another state, so you stay compliant:

• Minimum wage: you’ll need to pay your workers at or above the highest minimum wage. Learn how to make a compensation change in Gusto here.

• Overtime: learn when you’ll need to pay overtime to your employees and at what premium rate (e.g. 1.5x the regular rate). 

  • Some employees are exempt from overtime but state and local laws vary, so be sure to check when the employee will be eligible for overtime and how much to pay him or her.

• Pay frequency: determine payday (frequency) requirements in the new state.

  • Some states only allow semi-weekly or monthly payroll, while others also allow weekly and bi-weekly payroll. Additionally, some states have payday requirements based on the work your employee does. 

  • If your pre-existing payroll frequency isn’t allowed in a remote worker’s state, you’ll need to follow the payday laws in that state. Learn how to set up pay schedules in Gusto. 

• Final paycheck rules: there are state-specific rules about how a regular paycheck or final paycheck should be delivered–you’ll need to deliver your employee’s final paycheck within the timeframe dictated by their state laws and this timeframe may vary if your employee quits or is terminated. 

• Meal and rest breaks: every state has laws about how many paid and unpaid breaks you need to provide employees. Be sure you communicate these laws to your employees and provide the mandatory break periods. Learn how to set up meal breaks in Gusto.

• Disability insurance: withholding money from employee’s paychecks for state disability insurance is required in five states–California, New Jersey, Rhode Island, Hawaii and New York. If your employee works in California, New Jersey, Rhode Island or Hawaii, this is taken care of by Gusto. If your employee works in New York, you can elect for Gusto to withhold this, but you’ll have to remit the payments to the agency directly. Scroll to the “State Disability Insurance (SDI)” of this article to learn more.

• Workers’ Compensation Insurance: requirements can vary by state, industry, and the size of your company. Check out our blog to learn about workers’ compensationand review state-by-state requirements. When ready, learn how toset up your workers on Gusto.

Hiring remote contractors

If the contractor’s mailing address is different from where the work was performed and you need a 1099 to be created for the work state, please contact us.

While hiring a remote contractor is generally less complicated than hiring a remote employee, misclassifying an employee as a contractor could lead to serious tax penalties. Before hiring a new teammate, check out our blog article on the difference between employees and contractors.

Once you’ve hired a remote contractor, you can pay them with ease in Gusto. 

International employees and contractors

Employees

Once you've hired an employee, the next step is to add them to payroll. Go to the onboarding checklist and click Start beside the "Add to payroll" task. 

1. Enter the employee's personal email. 
2. Check the box Invite this employee to enter their own details online if you want them to self-onboard. Once they're done, you'll be notified so you can approve the details and get them on payroll. Uncheck the box if you want to enter all of your employee’s personal, tax, and payment details to bring them on board. Make sure to complete Form I-9.
3. If you've set up time off policies, you can assign them to the employee here.
4. Click Save & continue. 
5. Choose which documents you would like to provide the employee during onboarding and click Save & continue. The following documents will be included automatically:
   • Form W-4: Employee Tax Withholding
   • Employee Direct Deposit Authorization
   • Note: Employment eligibility Form I-9 (will be available for new employees whose start date hasn’t already passed. If the employee did not self-onboard, you'll need to complete Form I-9 outside of Gusto.
6. Customize the employee's welcome options and click Save & continue.
   • Email an I-9 reminder (if completing through Gusto) 
   • Add a welcome note
   • Create a digital card for the rest of your team to sign.

Review the onboarding timeline for your new employee and click Send invitation. On the next page, you'll see their onboarding checklist to review and complete other tasks as needed.