The day you bring on your first W-2 employee, two things stop being optional: real payroll, and knowing which jobs are actually making you money. A lot of new employers handle both badly at first, running payroll by hand and lumping every expense into one bucket at tax time. Here is what actually changes, the real payroll options, and how to set up job costing that tells you something useful.
What hiring actually triggers
Our B&O tax and bookkeeping basics guide covers the regulatory side: workers' comp through L&I, Employment Security Department unemployment insurance, and Paid Family and Medical Leave all become real, ongoing obligations the moment you have an employee, not a subcontractor. This guide picks up where that one leaves off, on the software and systems side: how to actually run payroll correctly and see whether each job is profitable once labor is a real line item, not just your own time.
It also starts with paperwork you may not have needed before. Even for a first helper, putting the basics in writing — pay rate, schedule, at-will status, and what the job is — heads off the most common disputes. A fill-in employment offer letter template is a reasonable starting point for a straightforward first hire; step up to an attorney once you are writing in commissions, non-competes, or anything unusual. (This is an affiliate link; see the note at the bottom.)
Get registered, bonded, and insured before you worry about payroll software. Build your free Contractor Lane roadmap and see the whole order.
Payroll options, honestly
Gusto is one of the most commonly recommended payroll platforms for small employers, built around a simple setup flow and handling federal and state payroll tax filings automatically. Check gusto.com directly for current plan pricing before committing; it changes, and we are not going to guess a number here.
ADP is one of the oldest, largest payroll processors in the country and is a safe, established choice, especially once you have more than a couple of employees. ADP does not publish flat online pricing for its small-business plans; you get a quote based on your headcount and the features you need, so budget time for that conversation rather than expecting a sticker price.
QuickBooks Payroll is worth a specific look if you already run QuickBooks for bookkeeping, since it adds payroll as an add-on to the platform you are already using rather than a second separate system. See our QuickBooks vs FreshBooks comparison if you have not picked a bookkeeping platform yet.
Xero also runs its own tiered plans (published pricing has run roughly in the $25-$90/mo range across its tiers, though verify the current numbers and what payroll support is bundled at each tier directly at xero.com, since that changes and varies by state).
None of these are an affiliate relationship for Contractor Lane today; these are plain links, evaluated on their own merits, not a paid placement.
Job costing: the part payroll software alone will not do for you
Payroll tells you what you paid someone. Job costing tells you whether the job that person worked on actually made money once labor, materials, and overhead are all counted against it. Most new employers skip this until a job that looked profitable on the invoice turns out to have lost money once real labor hours were counted honestly.
- Track labor by job, not just by pay period. If your scheduling tool (see our Jobber vs Housecall Pro comparison) or timesheet system can tag hours to a specific job, use that from day one. Reconstructing it later from memory does not work.
- Separate materials per job instead of one big "materials" bucket for the month. A job-specific materials list is what lets you compare estimated cost to actual cost afterward.
- Allocate overhead honestly. Insurance, vehicle costs, and your own admin time all belong somewhere in the real cost of a job, not just in a general "expenses" category that never gets reviewed per job.
- Review actual vs. estimated after the job closes. This is the step almost everyone skips, and it is the only way you find out your pricing was wrong before it costs you on ten more jobs. See our pricing guide and break-even guide for the numbers side of this.
Where this fits in your setup order
This is a "you are hiring or already have employees" step, not a startup-week step. Contractor Lane is the front door for starting a contracting business in Washington: registration, bond, insurance, and L&I come first. Payroll and real job costing come once there is a payroll to run and more than one job's numbers to compare.
General educational information for people starting a business in Washington. Vendor prices and features change. Contractor Lane is not a law firm, CPA, or payroll provider.