When you hire a new employee, head to the People section of your Gusto admin account to start onboarding them. Choose a section below for steps to onboard an employee, how to handle remote and international hires, add a new hire to payroll, and more.
Gusto cannot advise whether a worker should be classified as a W-2 employee or a 1099 contractor. We recommend working with an HR specialist or referring to the IRS government website. More information can also be found on our blog.
Watch our video below for guidance on hiring employees in new states.
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): First dismiss them from their previous role, then follow the steps below to re-hire them in their new role.
If you want to send them an offer letter or background check request, follow these steps instead.
Follow these steps to add an employee to Gusto.
After you add the 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.
Gusto employee ID
Gusto will assign each employee a unique identifier, their Gusto employee ID. This 6-character alphanumeric ID (e.g. 5G9934) is securely generated and randomly assigned. It's meant to help with running payroll with CSV and record keeping.
When you add someone to Gusto as a candidate, you can send them an offer letter and/or run a background check (if included in your plan).
If you do not want the new hire to receive an offer letter or a background check, add them as an employee instead with the steps above.
If you're rehiring a previously dismissed employee, follow the steps in this article.
Follow these steps to send a candidate an offer letter. This will immediately send the offer letter to their personal email. Once they sign it, you'll be notified to add them to payroll.
You can create an offer letter template ahead of time or while following the steps below.
You can view, update, or rescind offers from the Hiring tools section.
Before you start:
When you’re ready to send a candidate employee a conditional offer letter and a background check request, follow the steps below.
The candidate will immediately receive an email requesting them to review their info and authorize a background check. The background check will begin once the candidate authorizes it.
You can see your candidate’s progress in the Team members section under the Candidates tab. Their status will update when they begin their background check. Once they authorize the check and provide their personal information, their status will be “Background check in progress” and we’ll provide you an estimated turnaround time. We’ll notify you once the check is complete.
You can continue onboarding the candidate while the background check is still being processed—go to the Team members tab and click a candidate's actions ⋮ menu to be taken to their onboarding checklist.
Before you start:
When you’re ready to send a candidate employee a conditional offer letter and a background check request, follow the steps below.
We'll immediately send the offer letter to the candidate's personal email. After they sign the offer letter, we’ll email them a request to authorize a background check. The background check will begin once the candidate authorizes it.
You can check your candidate’s progress in the Team members section under the Candidates tab. Their status will update when they sign their offer letter and begin their background check. Once they authorize the background check and provide their personal information, their status will be “Background check in progress” and we’ll provide you an estimated turnaround time. We’ll notify you when the candidate signs their offer and once their background check is complete.
You can view, update, or rescind offers from the Hiring tools section.
You can continue onboarding the candidate while the background check is still being processed—go to the Team members tab and click a candidate's actions ⋮ menu to be taken to their onboarding checklist.
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.
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.
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.
Each employee's work address should be the address where their work physically takes place (exceptions exist, but are rare). Most employees work and live in the same state.
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're required to pay taxes to both their home, and their work state. Certain state-specific rules, like the Convenience of Employer (COE) rule, can make taxation tricky—you should always consult a legal or tax advisor.
How to handle this in Gusto
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.
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.
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:
Gusto does not support employees living internationally or in U.S territories (like Puerto Rico or the U.S. Virgin Islands). Gusto only supports employees with all of the following:
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.
Gusto supports international contractors on a limited pilot (beta). Check out the list of countries you can pay international contractors in.
If you need to add someone to your list of dismissed employees in Gusto for W-2 reporting, follow the steps below.
If you're rehiring a dismissed employee, click here for instructions.
To make sure all W-2s include accurate year-to-date information, you must report any payrolls processed outside of Gusto for both dismissed and current employees.
If you have any dismissed employees who have never been listed in Gusto, follow these steps to add them. They'll be added under "Dismissed employees" and then you can report any missing payrolls for them.
Go to the Run Payroll section of your account to report all missing payrolls that need to be added for the dismissed employee.
Based on the employee’s date of birth, we’ll estimate their monthly premium cost. The summary provides a range of monthly premium costs based on the various benefits and plans you offer, and whether or not the employee has dependents.
If you’d like to see the premiums of each plan, click Download Cost Breakdown (PDF). The PDF breaks down the employee, spouse, and child cost for each plan that you offer.
Assumptions & methodology: estimated costs are used for illustrative purposes only. Actual costs will vary. The estimated cost assumes that any child dependent is younger than 18 and any spouse is the same age as the employee.
Once you've hired an employee, the next step is to add them to payroll. In the Team members section, click their name to get started. Here you can also review their onboarding checklist.
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.
If an employee did not receive a welcome email to onboard, admins can:
If you added someone's email address during onboarding and they did not receive the welcome email, you can resend it.
Heads up
Resend the welcome email
If an employee's email was not added during onboarding