How to Hire Employees in Maryland: The Complete Compliance Sequence

The first time I helped a founder put someone on payroll in Maryland, we registered with the Comptroller, got the account number back, and assumed the state was handled. It was not. Maryland splits the employer registration across two agencies, and the second one, the Department of Labor, had no record of the business at all. We found out three weeks in.

That is the shape of hiring in Maryland. Nothing here is exotic. The rules are simply spread across more desks than a founder expects, and each one has its own clock. Coverage that has to exist before the first shift. A written notice that has to be handed over at the time of hiring. A local income tax that follows the employee home instead of staying at your office.

This guide runs the sequence in the order the work actually happens, from the federal EIN through the ninetieth day. It is written for owners and operators doing this without a dedicated HR person, which is the same reason I built FirstHR: the failure mode at this size is never ignorance of the rule, it is the rule arriving on a week when three other things are on fire.

Maryland Hiring at a Glance: Every Step and Its Clock

Here is the whole sequence with the deadline attached to each step. Read it once before you start, because several of these steps have to be finished before the new hire walks in the door, not after.

The rest of this guide takes each step in turn, with the Maryland agency that owns it and the detail that trips up first-time employers. If this is your first hire anywhere, the general playbook for hiring your first employee covers the parts that are not state-specific.

Step 1: Get Your Federal EIN Before Anything Else

The federal Employer Identification Number is the prerequisite for both Maryland registrations, so it goes first. You apply online with the IRS, the application takes minutes, and the number is issued immediately during the session. Every state form after this one asks for it.

If you already have an EIN from forming the entity, reuse it. If you have been operating as a sole proprietor with no employees and filing under your Social Security number, you need an EIN now, because payroll tax reporting cannot run on an SSN. Getting this out of the way first saves a week of stalled state registrations later.

Step 2: Register for Maryland Withholding With the Comptroller

The Comptroller of Maryland issues your employer withholding account through the Combined Registration Application. New businesses file the application through Maryland Business Express, and new or existing businesses can register and make updates through the Maryland Tax Connect portal. The same application also covers a sales and use tax license and several other accounts if your business needs them.

What comes back is a Central Registration Number, which is the identifier you use for state withholding filings. Do this before the first wage payment. Without it you have no way to remit the state and county income tax you are legally required to withhold from that paycheck.

Maryland withholding is heavier than a flat state tax because of the local layer. Every Maryland county and Baltimore City levies a local income tax that you withhold alongside the state tax and remit together to the Comptroller. The county rate is driven by where the employee lives, which means the address you collect at hire is a payroll input, not just a personnel record. The Maryland payroll setup is worth reading in full before your first run.

Step 3: Open Your Unemployment Insurance Account With Maryland Labor

This is the registration founders miss. The Maryland Department of Labor, Division of Unemployment Insurance, defines an employer as a person or governmental entity who employs at least one person within the state. One hire makes you an employer. You register through the employer side of the BEACON portal, where you select the option to register an account and follow the prompts.

The numbers behind that account matter for your budget. Maryland taxes the first $8,500 earned by each employee in a calendar year. Tax Table A is in effect for 2026, the same table used for 2025, and it is the lowest of the six tables the state can run. Contributory employer rates under Table A range from 0.30% to 7.50%, with 7.50% as the standard rate. New employers land between 1.0% and 2.6%, per the Maryland Department of Labor.

Once the account exists you file quarterly and pay through the same portal. Your rate is recalculated annually based on your own claims experience, which is the practical argument for handling separations carefully from your very first hire onward. See the mechanics of state unemployment tax if this is new territory.

Step 4: Write a Job Posting That Meets the Wage Range Rule

Maryland requires the pay range in the posting itself, and the rule has no employer-size threshold. Since October 1, 2024, every public or internal posting for a position performed at least partly in Maryland must include the wage range with a minimum and a maximum, a general description of the benefits offered, and any other compensation elements. The range has to be what you believe in good faith at the time of posting.

If you never made a posting, the obligation does not disappear. You disclose the wage range and benefits description to the applicant before any discussion of compensation, and again whenever the applicant asks. Records go three years from the date the position was filled, or three years from the posting date if the role is never filled.

Enforcement escalates rather than starting with a fine. A first violation draws a compliance order. A second can reach $300 per affected applicant or employee, and subsequent violations within three years can reach $600. Our pay transparency breakdown covers how this compares with other states.

Step 5: Complete Form I-9 by the Third Business Day

Every employee in the United States completes Form I-9, and the two sections carry different deadlines. The employee completes Section 1 on or before the first day of work. You complete Section 2 by the end of the third business day after the first day, examining original documents that establish identity and work authorization.

You cannot tell the employee which documents to present. They choose from the acceptable lists, you record what you actually see, and you sign. Retain the form for three years from the date of hire or one year after the employment ends, whichever is later. The rules on acceptable I-9 documentation are worth reviewing before your first Section 2.

E-Verify is a separate system, and Maryland does not impose a general E-Verify mandate on private employers. Federal contractors whose contracts carry the E-Verify clause are the common exception. Participation in E-Verify never replaces the I-9. Every hire gets an I-9 regardless.

Step 6: Collect Form W-4 and the Maryland Withholding Certificate

Maryland takes two withholding forms, not one. Federal Form W-4 sets federal income tax withholding. The state Employee Withholding Exemption Certificate sets state and local withholding, and the Comptroller of Maryland now publishes it as Form MWH. Payroll systems and older guidance still call it the MW507, so expect both names on the same task.

Both forms need to be in hand before the first wage payment. Without them you withhold as if the employee claimed no exemptions, which produces the maximum withholding and an unhappy first paycheck conversation. The state certificate carries more weight in Maryland than a state withholding form does in most states, because the county income tax rides on the same withholding. County of residence is a required field on the form. The local rate follows where the employee lives rather than the work location, so an employee who lives in Baltimore City and works at your office elsewhere is taxed at the Baltimore City rate. Remote and hybrid staff make this a question you ask at hire and again after any move.

Step 7: Give the Written Notice Maryland Requires at Hire

Maryland requires a written notice at the time of hiring covering three things: the rate of pay, the regular paydays the employer sets, and leave benefits. This is a statutory duty under the state wage payment law, not a best practice, and it is the step most first-time Maryland employers have never heard of.

The cleanest way to satisfy it is to fold all three into the offer letter and have the new hire sign. Rate of pay, the payday schedule, and a description of leave, in one dated document you can produce later. If you use an offer letter template, add the payday schedule and the leave summary rather than treating them as handbook material.

Two related duties start at the same moment. Every pay period you must provide a written pay statement that includes your registered business name, address and phone number, the payment date and pay period dates, hours worked for non-exempt employees, rates of pay, gross and net pay, every deduction by name and amount, and any additional bases of pay such as bonuses or commissions. And a change to a payday, or a cut in the wage rate, requires notice at least one pay period in advance. The same section says nothing stops you from raising a wage without advance notice.

Step 8: File the New Hire Report Within 20 Days

Report every new hire to the Maryland State Directory of New Hires within 20 days of the date of hire. The date of hire is the first day the employee performs services for pay, not the offer date and not the acceptance date. Reports are filed electronically through the state employer portal.

Federal law fixes the seven data elements: the employee name, address, Social Security number, and date of hire, plus your business name, address, and federal employer identification number. It also caps what any state may charge for a missed report at $25 per newly hired employee, rising to $500 where the employer and employee agree not to report. Rehires count too if the person was gone long enough to be separated. Our new hire reporting guide covers the state-by-state variation.

Step 9: Secure Workers Compensation Before the First Shift

Maryland law requires each employer to secure compensation for all covered employees. There is no headcount floor and no opt-out. This is the single biggest difference between hiring in Maryland and hiring in Texas, where private employers may decline coverage entirely, and it catches multi-state employers who assume the Texas model travels.

The statute gives you a short list of ways to comply: maintain insurance with an authorized insurer, participate in an approved self-insurance group, or qualify as an individual self-insurer. For a small business the first option is the only realistic one. Buy the policy from a licensed carrier, or through the state carrier of last resort if the standard market will not write you. Details on employer obligations sit with the Maryland Workers Compensation Commission.

Timing is the part people get wrong. Coverage has to exist when the first covered employee begins work, which is usually earlier than the first payroll run. Quote the policy while the offer is out so the certificate is in hand on Day 1. Confirm the classification codes describe the work the person will actually do, because a mismatch surfaces at audit with a premium adjustment attached. Read more on workers compensation insurance if this is your first policy.

Step 10: Post the Required Notices and Run the First 90 Days

Federal and Maryland notices have to be displayed where employees can see them before anyone starts work. On the federal side that means the Fair Labor Standards Act minimum wage notice, the OSHA job safety poster, the Employee Polygraph Protection Act notice, and the Family and Medical Leave Act notice for covered employers. Maryland adds its own set.

Employers in Montgomery County, Prince George’s County and Howard County post the county minimum wage notice in addition to the state version. All of these are free downloads from the issuing agencies. There is no reason to buy a poster package.

Compliance gets someone legally onto your payroll. It does not make them productive. The first 90 days are where the hiring investment either compounds or evaporates, and Gallup research has found that only 12% of employees strongly agree their organization does a great job of onboarding, which tells you how low the bar is and how cheap it is to clear it.

This is the workflow I built FirstHR around. The offer letter carrying the Maryland written notice goes out with e-signature. The I-9, W-4, and the state withholding certificate are collected before Day 1. Reminders cover the third business day and the twenty-day report, and the AI onboarding wizard turns the job description into a 30-60-90 day plan instead of a blank calendar. FirstHR is an onboarding and HR platform, not a payroll provider, so the payroll filings stay with your provider.

Maryland-Specific Rules That Change How You Hire

Maryland is not a light-touch state, but it is a predictable one. These are the rules that change the mechanics of a first hire rather than just the paperwork, and most of them apply from your very first employee with no size threshold at all.

Minimum Wage, Overtime, and Tipped Pay

The state minimum wage is $15.00 per hour under the Fair Wage Act and applies to all employers regardless of size. It is not indexed, so there is no automatic annual bump and any increase requires legislation. Tipped employees who earn more than $30 a month in tips must reach the state rate overall, with at least $3.63 per hour paid in cash wages. Employees under 18 must earn at least 85 percent of the state rate. Overtime is time and a half over 40 hours in a week, with a 60-hour threshold for certain agricultural work, according to the Maryland Department of Labor Employment Standards Service.

Pay Frequency and Final Pay

You must set regular pay periods and pay each employee at least once every two weeks or twice each month. Administrative, executive, and professional employees may be paid less frequently. If a regular payday falls on a day the business does not operate, you pay on the preceding business day. On separation, all wages earned before the end of employment are due on or before the day the employee would have been paid had the job continued.

Accrued leave is a separate question. You are not required to pay out accrued leave at separation if you have a written policy limiting it, you gave the employee notice of your leave benefits at hire, and the policy says they are not entitled to payout. That written notice at hire is doing real work here, which is another reason not to skip Step 7. See final paycheck rules for the wider picture.

Earned Sick and Safe Leave

Maryland leave accrues at one hour for every thirty hours worked. Employers with 15 or more employees must provide it as paid leave. Employers below that threshold must provide it as unpaid leave. The law reaches any employer whose employees have a primary work location in Maryland, whatever the state of incorporation, and certain categories of employee are exempt. You can always be more generous than the statute.

Criminal History Timing

Maryland delays criminal history questions rather than banning them. An employer with 15 or more full-time employees may not require an applicant to disclose a criminal record or criminal accusations at any time before the first in-person interview, and the statute defines a criminal record broadly enough to include arrests and probation before judgment. That means nothing earlier in the funnel, including the application form itself, can ask. The rule took effect on February 29, 2020, and exceptions exist where another law requires or expressly authorizes the inquiry, and for employers providing programs, services, or direct care to minors or vulnerable adults. The same subtitle expressly preserves stricter local ordinances, so check the county before you finalize the workflow. Compare the national picture in our ban the box guide.

Paid Family Leave and Retirement

Maryland has a family and medical leave insurance program on the calendar. The state has set the initial contribution rate at 0.9% of wages up to the Social Security wage cap, split evenly between employer and employee at 0.45% each, with payroll deductions scheduled to begin January 1, 2027 and benefits available in January 2028 at up to 12 weeks of paid leave and up to $1,000 per week. Employers with fewer than 15 total employees, counting Maryland and out-of-state staff, are responsible for remitting 50% of the contribution rate. The detail sits in our Maryland paid family leave guide, alongside the separate state retirement savings mandate.

County Requirements: Montgomery, Howard, and Prince George’s

Maryland lets counties go above the state floor, and three of them do on wages. Track the rate by the work location of each employee, not by where your business is headquartered. A single company can owe three different minimums.

Montgomery County is the one to watch. Its rates are tiered by employer size and rise every July under a CPI-W adjustment, so a rate you verified for an earlier posting may already be stale. Wages are not the only local layer either. Maryland lets a local jurisdiction run criminal record screening rules stricter than the state standard, and several do, so a hiring workflow that clears the state rule can still miss a county one.

The practical approach: attach a work location to every role before you post it, and check the county rate at posting time rather than at offer time. If you have staff in more than one county, your handbook should describe the rule by location instead of stating one number. Our Maryland compliance hub collects the local variations in one place.

Employee vs Independent Contractor: Maryland Uses an ABC Test

For unemployment insurance purposes Maryland applies an ABC test, and all three prongs must be satisfied before work falls outside covered employment. This is stricter than the federal common-law control test, and it is the reason a classification that survives an IRS review can still fail in Maryland.

Under the state statute, work is not covered employment only if the individual is free from control and direction over its performance both in fact and under the contract, the individual customarily is engaged in an independent business or occupation of the same nature as the work, and the work is either outside the usual course of your business or performed outside any of your places of business.

A signed agreement does not settle the question. The state looks at the economics of the relationship, and reclassification brings back contributions plus interest and civil penalties. If the test is close, hire as an employee. The cost difference between a properly employed worker and a reclassified contractor is never in the contractor’s favor. Our employee versus contractor comparison covers the tests side by side.

The Mistakes That Cost Maryland Employers the Most

These are the errors I see most often at Maryland small businesses. Each one is a timing or sequencing failure rather than a knowledge failure, which is exactly why checklists and reminders beat compliance expertise at this size.

The pattern is consistent. The founder knows the I-9 is due. The founder knows the report has a deadline. What breaks is the week: a customer emergency lands on Day 2, and the third business day passes without anyone noticing. Every one of these mistakes is prevented by a task with a date on it, not by knowing the rule better.

Frequently Asked Questions