The First Hire Report 2026: What First-Time Employers Wish They'd Known

New small business owners face plenty of hurdles, but hiring the first employee is one of the most intimidating. 

The stakes, after all, are high; the right employee can catapult a business’s efficacy and profitability, but the wrong employee can sap a business’s energy and make everyday operations more complicated. In 2026, economic headwinds are making the decision to hire even more challenging; according to Yahoo Finance, over 90% of business owners were uncertain that their businesses would survive.⁽¹⁾

But Americans are still forming small businesses at a tremendous rate; according to the U.S. Census Bureau, small business formation in July 2026 was up over 8% over the previous month.⁽²⁾ And many of those small businesses will need to hire their first employee in the near- or medium-term. 

So what will that first-hire experience be like? What are the challenges of hiring Employee #1? And, if you’re a small business owner, what can you learn about hiring your first employee from those who have done it before?

SurePayroll By Paychex has spent more than two decades working with owners at exactly this moment: the point where a business stops being one person and becomes a payroll. It’s a useful vantage point, but it’s no substitute for asking directly.

That’s why we decided to ask the owners directly. In July of 2026, we surveyed a group of small business owners to find out what their first hire experiences were like (and what they’d change about the experience next time).

Here’s what they said:

• Making your first hire will probably be about as complex as you expect
• You’re almost certainly underestimating the cost
• Nothing can replace preparation and research
• AI can help with paperwork and organization, but the most important element to get right is human

Below, we’ll dive into each insight.

(Want to see a full report of our findings? Keep scrolling to the bottom.)

#1. Good news: “New hire dread” isn’t justified by the numbers

Provided you’ve prepared for the hire (keep reading), you’ve got a pretty decent shot at being happy with it. 

Of the small business owners surveyed, over 70% said making the new hire wasn’t any more complex than they expected. 

A clear majority (57%) said that the complexity of their first hire was "about what I expected," making it the single largest response to any question in the survey. Almost 1 in 5 found the process less complex than they had braced for. Only about 1 in 4  got hit with a harder challenge than they had planned for.

“This tracks with what we’ve seen,” said Judy Gordon, vice president of marketing at SurePayroll. “New owners worry a lot about getting the first hire right, or that something big is going to derail their plans, but most often making the hire itself is about as difficult as they expect.” 

The difficulty often comes later, when figuring out the finances.

#2. New employers get the cost of a first hire significantly wrong

The headline finding here: Almost 2/3rds of respondents were surprised by the cost when they hired their first employee.

The most common surprise was payroll software and processing fees, named by almost 21% of all respondents. Benefits and additional compensation came next at around 13%, then workers' comp insurance at 12.5%. Employer FICA taxes surprised almost 9% of owners and state and local taxes surprised another 8%, which means that 17% of everyone we surveyed named some form of payroll tax as the thing they had not seen coming.

In short? Most entrepreneurs who hire their first employee don’t have accurate information about how much that hire will cost. (That’s why we built the First Hire Estimator.)

Our respondents said this directly when asked for advice on making the first hire. "It will cost more than you think," said one, "plan accordingly."

Other respondents, echoing these sentiments, emphasized the need to ask experts for help. One owner told us to "Meet with a lawyer and a tax person first." Another laid out the whole checklist from memory: "Get an EIN, register for state taxes, buy Workers Compensation, verify work eligibility, create a financial model, and review your onboarding processes." A third put it more bluntly: "Make sure you have the money to pay the employee and their taxes. That is a very big thing."

Worth noting, too, is that the costs of hiring someone aren't only legal and logistical. One respondent noted, wryly, that if you're going to hire someone at the entry level, you should "be sure you're ready" and "can afford their mistakes."

All of this leads to the importance of preparing yourself.

#3. The key to a successful hire? Doing your research

Preparedness is vital to hiring success.

Among owners who were surprised by no cost at all, nearly 6 out of 10 said there was nothing they would do differently about the whole process. But among owners who were surprised by the cost? The number fell to a bit over 1 in 10. A steep drop.

Meanwhile, owners who found the process “about as complex as they expected” were roughly three times more likely to have been ready for the costs than owners who found it harder than expected. Reading the process correctly and reading the price tag correctly were skills that traveled together in our survey.

In other words, the small business owners who had done enough research to set accurate expectations regarding process and finances were significantly more likely to be satisfied with the hiring process.

Gordon confirms this. "There’s no substitute for doing your own learning," she said. "We've found that small business owners who do even just a little bit of research are better prepared for any challenges that arise.”

Owners in the survey said the same thing in their own words, over and over. Roughly one in five pieces of substantive advice we collected was about doing the homework (payroll taxes, employment requirements, the paperwork) before making the hire rather than during it.

As one respondent insisted, "Research hiring laws, research payroll costs, research the candidates.” 

#4. The human element of hiring your first employee is most important

For all the attention given to payroll taxes and paperwork, they’re not what owners found hardest about the first hire process.

Nearly half (47%) of owners surveyed said the hardest part of making the hire was finding the right person. That’s more than paperwork, taxes and affording the hire combined.

Meanwhile, over half of our respondents (53%), when given a chance to give a piece of advice to new employers, responded with a piece of advice about choosing the right person: How to vet them. How to read their character. How to make sure you’ve got the right fit. Meanwhile, only 21% of respondents offered advice about money or compliance combined. 

Strikingly, our respondents' advice about people was, largely, not advice about process. It was about trust and judgment.

“Go with the gut feeling that you have,” said one respondent. Another stated: “Follow your instincts about the person, how they make you feel and how they act.” And another: “Listen to your instincts when hiring.”

Finally, one noted that new employers should “make sure [they] hire someone [they] can trust, especially if it is [their] first employee. It can make or break your business."

In a business environment when AI tools are taking over hiring logistics and paperwork (often very effectively), it’s telling that seasoned employers name the skills that only people have as the most important. 

It seems that the most vital skill in hiring is your humanity.

Full survey findings

A survey of U.S. small business owners who have made at least one hire, fielded across SurePayroll customers and a general small-business panel. All figures are percentages of respondents to that question.

Part 1: Final percentages, all questions

What best describes your business?

How long after starting your business did you hire your first employee?

How complex was the hiring process?

What was the hardest part of hiring your first employee?

What cost surprised you the most when you made your first hire?

Looking back, what would you do differently?

Multi-select; percentages are share of respondents and do not sum to 100%.

What’s your biggest concern about hiring in 2026?

Part 2: Key cross-tab findings

Each finding below compares how the same respondents answered one question against how they answered another. Only findings that cleared significance testing at p < 0.05 are included; weaker patterns in the data have been left out.

Preparedness predicts satisfaction

Owners who were not surprised by any cost of their first hire are more than four times as likely to say there is nothing they would do differently. Read the other way: of everyone who would change nothing, 70.6% were fully prepared for the costs, against a 36.6% baseline

Accurate expectations and accurate budgets travel together

Owners who read the process correctly also read the price tag correctly (roughly three times as often as owners who underestimated the process).

Surprise, not difficulty, is what produces regret

Owners who found hiring less complex than expected report almost exactly the same satisfaction as those who found it about as expected. The outlier is the group blindsided by complexity. What separates satisfied owners from regretful ones is not how hard the process was — it is whether it matched what they expected.

Owners remember the exact cost that caught them out

Surprised by a tax cost

Surprised by no cost

In this survey, being surprised by a tax cost made an owner roughly three and a half times more likely to say they would set aside more for payroll taxes next time. The regret is specific, and it is fixable with information available before the first payroll runs.

Part 3: Open-ended responses, categorized by theme

Themes about choosing the person (vetting, background checks, character) account for 53.0% of all substantive advice. Themes about money and compliance account for 21.0%.

That mirrors the closed-ended data almost exactly — 47.3% named finding the right person as the hardest part. Owners’ unprompted advice and their multiple-choice answers tell the same story.

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Methodology: SurePayroll surveyed U.S. small business owners (current customers + general panel) who have hired at least one employee. The survey was conducted online in July 2026. Some percentages may not total 100% because of rounding or multiple-choice questions.

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