Hiring your first employee in Indiana

When a helper stops being cash under the table, Indiana asks for five things from you, in a fixed order. Most of them cost less than operators expect. Here's the list, what each piece costs, and the one shortcut that turns it into a bill.

This isn't legal advice. An hour with an Indiana CPA before the first paycheck is money well spent.

Workers' comp starts with employee number one

Indiana requires workers' compensation coverage from the day you have an employee. There's no minimum headcount and no grace period. Operating without it is a Class A misdemeanor, and the Worker's Compensation Board can add penalties up to $10,000, double the benefits owed on any injury, and a stop-work order.

What a policy costs depends on the classification code for your trade, and the spread is wide. A cleaning crew and a tree crew are priced like different businesses, because to the insurer they are. Get two Indiana quotes with your trade's code before you assume the worst number. Ask the agent about excluding yourself as the owner, which most solo operators do.

The 1099 shortcut

Every operator's first idea is to call the helper a contractor. Whether someone is a contractor is a legal test, and the test is control. If they wear your shirt, work your schedule, and use your equipment, they're an employee, whatever the check says. Indiana's marketplace-contractor law, which comes up as a loophole, applies to gig platforms that connect contractors to customers under a written contract. It does nothing for a lawn crew.

The enforcer operators fear is the IRS. The one that shows up is the insurance company. At the annual workers' comp audit, the carrier counts every 1099 payment as payroll unless the sub can show their own coverage, and bills you the premium on it. In Indiana, a sub who works alone in the construction trades can hold a certificate of exemption from the Worker's Compensation Board. A sub with employees needs a policy of their own. Either way, the paperwork has to be on file before the audit.

There's also the arithmetic of who pays. A misclassified worker pays the full 15.3 percent payroll tax instead of half. That money comes out of their wages.

W-2 doesn't mean full time

This is the misconception that stops most first hires. There's no minimum hours requirement for a W-2 employee. Ten hours a week on a seasonal schedule is a part-time W-2, and it's normal.

That matters in a state with a 30-week mowing season. The usual shape of a first hire here is part-time, seasonal, and W-2, with a plan for what the hours look like in December.

The Indiana checklist, in order

1. Buy the workers' comp policy before the first shift. Get the quote with your trade's classification code and confirm whether you're excluding yourself.

2. Register as an employer with the Department of Workforce Development for unemployment insurance. New employers pay 2.5 percent of taxable wages for the first four calendar years, then a rate based on your own claims history. Construction employers start at a different rate.

3. Set up withholding with the Department of Revenue and have the employee complete a WH-4. The WH-4 asks for their county, and here's the Indiana quirk: you withhold county income tax for the county where the employee lived on January 1. Not where they live now, and not where they work. Someone who moves from Marion County to Hamilton County in March stays on the Marion rate through December. If they lived out of state on January 1, use the Indiana county where they mainly work.

4. Report the hire to the Indiana New Hire Reporting Center within 20 days. It's a free form with a legal deadline.

5. Run payroll through software. Budget the true cost of an employee at about 1.17 to 1.27 times the wage once payroll taxes and comp are in, before any benefits. Use the higher number when you quote.

Whether the hire pays

A lawn-care operator in Indiana laid out the version of this question most people are really asking. He ran 35 accounts solo over a 30-week season for about $75,000 a year. Taking on his parents' accounts would add about $100,000 in revenue, but it meant two hires at $45,000 each plus a truck, a trailer, and workers' comp. He wanted to know whether he'd actually make money.

The checklist is how you find out. Price the hires at 1.27 times wage, add the comp quote for your classification code and the 2.5 percent, and see what's left. If the answer is yes, the next thing that changes is the calendar, because the schedule stops being one person's day. If it's no, take half the accounts and one part-time hire, and run the math again next year.

One more thing operators who've done this say: whoever you hire depends on you for rent. When a slow month comes, the employee gets paid first and you skip the paycheck. Decide whether you can carry that before you take the accounts.