Add 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

Follow these steps to add an employee to Gusto without sending an offer letter. If you want to send an offer letter before onboarding them, check out the steps below in the "Add a candidate (with an offer letter)" section below. 

Gusto will assign each employee a unique identifier, their Gusto employee ID. This is a 6-character alphanumeric ID (e.g. 5G9934) that is securely generated and randomly assigned. It's 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. Sign in to your Gusto admin account.
2. Go to the People section and select Team members.
3. Click Add a team member.
4. Find the Employee tile and click Add.
5. Click Continue. 
6. Enter your new team member's basic information:
   • Full name
   • Start date 
   • Department
   • Manager
   • Work address
7. Add their compensation information:
   
   • Job title (choose from your existing set of jobs or enter a new one) 
   • Employee type (salary, hourly, etc)
   • Compensation
   • Employment status (this is for benefits eligibility, if you offer benefits with Gusto)
   • Any special tax exemption status (if applicable).
8. Click Add employee.

You'll be taken to the Onboarding team members tab. Find the new employee's name and click the action menu to begin their onboarding and 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.

When you add someone to Gusto as a candidate, you can send them an offer letter and run a background check (if included in your plan). 

If you don't 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.

Before you add a candidate, make sure your company has already created an offer letter template. 

1. Sign in to your Gusto admin account.
2. Go to the People section and select Team members.
3. Click Add a team member.
4. In the "Candidate" tile, click Add.
5. Fill out your candidate’s basic information:
   • Full name
   • Work address
   • Personal email
   • Job title
6. Click Job & pay.
7. Select the offer letter template you wish to send the candidate. You can customize the letter in step 12. 
   • If you don't want to send them an offer letter, you'll need to add this person as an employee or contractor instead of as a candidate. Once you hire them, follow the steps in the "Add an employee to Gusto" section above. 
   • You can add an offer letter template from the Documents section of your admin account.
8. Choose the offer expiration date.
9. Add the candidate’s employment details:
   • Start date
   • Job title
   • Department (optional)
   • Manager
10. Add your candidate’s compensation information:
    • Employment status  (for benefits eligibility, if you offer benefits with Gusto)
    • Employee type
    • Earnings 
11. Click Offer letter.
12. Preview the offer letter we'll send your candidate. Click Edit letter to make any changes.
13. If you're performing a background check, click Background check. If not, your next step is Review. 
    • Review the background check package. To change it, click Edit. Then click Select package.
14. Click Review.
15. if you're sending an offer letter, add a note for your new team member.
16. Click Add candidate. This sends the offer letter to the candidate's personal email. 

When the candidate signs the offer, we'll notify you to complete their onboarding and add them to payroll. You can view, update, or rescind offers from the Hire & onboard section. 

Gusto assigns each employee a unique identifier, their Gusto employee ID. The 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.

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 in 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 employees' 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’ compensation and review state-by-state requirements. When ready, learn how to set 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. In the Team members section, click their name to get started. Here you can also review their onboarding checklist.

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. If you chose not to have the employee self-onboard, you're prompted to fill out their withholding info. 
6. Select whether you'd like Gusto to file a new hire report or if you've already filed it yourself.
7. Click Save & continue.
8. If you chose not to have the employee self-onboard, you're prompted to fill out their payment method info. 
9. 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.
10. 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.