How to Hire Employees in Vermont: The Complete First Hire Sequence

Vermont is a small state with a long compliance list, and hiring your first employee means working through all of it in the right order. The first employer I helped hire in Vermont was a two person design studio in Winooski that assumed the process looked like the one they had used in New Hampshire. It does not.

Vermont requires workers compensation coverage from the very first employee, paid sick time from every employer regardless of size once a new employer is past its first year, a compensation range inside the job ad once the team reaches five employees, and a new hire report inside ten days.

None of those steps are hard on their own. They are hard because they are sequenced, and because three different state agencies own different pieces of the sequence. The Department of Taxes gives you the withholding account. The Department of Labor gives you the unemployment insurance account, takes the new hire report, and enforces workers compensation. The Attorney General enforces the pay transparency rules that apply before you have even met a candidate.

I built FirstHR after watching founders lose weeks to exactly this kind of sequencing. The guide below walks the ten steps in the order the work actually happens, from the federal Employer Identification Number (EIN) through the ninety day mark, with the Vermont numbers verified against the state agencies that publish them.

Vermont Hiring at a Glance: Every Deadline in One Place

Ten obligations attach to a Vermont hire, and each one has a trigger rather than a vague best practice. The cards below are the whole sequence: what the task is, when it is due, what happens if it slips, and which agency owns it.

Two of these come before the hire itself: workers compensation coverage has to exist before the start date, and the compensation range has to exist before the advertisement goes live. The rest follow the deadlines shown on each card.

Step 1: Get Your Federal Employer Identification Number

The federal Employer Identification Number is the first item in the sequence because every Vermont account asks for it. You apply online with the IRS, the application takes minutes, and the number is issued at the end of the session. There is no fee and no waiting period.

If you already formed an entity and received an EIN, you do not need a second one. If you have been running as a sole proprietor and filing under your Social Security number, you need an EIN now, because payroll tax reporting cannot be done on a personal identification number. Save the confirmation letter. Vermont registration screens ask for the legal name exactly as the IRS recorded it, and a mismatch there is a common cause of rejected state applications.

Step 2: Open a Vermont Withholding Account with the Department of Taxes

Vermont income tax must be withheld from wages for work performed in Vermont regardless of where the employer sits, so an out-of-state business with one remote Vermont employee has the same obligation as a Montpelier storefront. The Vermont Department of Taxes is explicit about the package that comes with an employee: withhold Vermont income tax from wages, collect Form W-4 and Form W-4VT, have the employee complete Form HC-2, and issue a Form W-2 at the end of the year.

Registration happens through myVTax, the state’s free online tax portal, where withholding gets its own business tax account, separate from any sales tax or meals and rooms account. Withholding is then paid on a schedule that generally mirrors your federal deposit frequency, and the quarterly reconciliation form is where two Vermont-only items also land.

Vermont also runs a state facilitated retirement savings program for employers that do not offer a plan of their own, with registration deadlines phased in by employer size and an exemption certification for businesses that already sponsor a qualified plan.

Step 3: Register for Unemployment Insurance with the Department of Labor

Unemployment insurance is a separate registration with a separate agency. Under 21 V.S.A. section 1301, an employer becomes liable once it pays at least $1,500 in wages during any calendar quarter in the current or preceding calendar year, or has at least one employee for part of a day in each of 20 different calendar weeks. A single full-time hire clears the wage test in a matter of weeks.

Once registered, you file quarterly wage and contribution reports electronically. Contributions are calculated on a taxable wage base that the department resets annually: for calendar year 2026 employers pay on the first $15,400 of each employee’s wages, up from $14,800.

New employers pay an entry rate rather than an experience rate, and the department has set that entry rate at one percent for most employers beginning July 1, 2026. Rates are recalculated on a rate year that starts in July, not in January.

According to the Vermont Department of Labor, most employers stay at the entry rate for at least two years before claims history produces an experience rating, since the law first requires a full calendar year of benefit liability.

Step 4: Put Workers Compensation Coverage in Force Before Day One

Vermont requires workers compensation insurance from the first employee. There is no headcount threshold, no waiting period, and no opt-out for small businesses: a company with one part-time or seasonal employee carries the same obligation as an established manufacturer. Coverage comes from a private carrier, or through self-insurance if the Vermont Department of Labor approves the arrangement.

The exceptions are narrow and worth knowing precisely. Sole proprietors and partners in unincorporated businesses are not required to cover themselves, though they may elect coverage. Up to four executive officers of a corporation or managers of a limited liability company may be excluded with the Commissioner of Labor’s approval. Casual labor outside the trade or business of the employer is excluded, and farm employment sits outside the mandate when the aggregate annual payroll is below $10,000.

What worked for me

Bind the policy in the same week you send the offer letter, not the same week the employee starts. Carriers underwrite by job classification, and a payroll estimate for a role that does not exist yet takes a few days to price. I ask for the certificate of insurance with an effective date one day before the start date and file it with the signed offer so the whole hire record sits in one place.

Nick Anisimov, FirstHR founder

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Steps one through four happen once for the business rather than once per hire, and the account numbers they produce get asked for all year: on the quarterly reconciliation, on the wage and contribution report, by the carrier at renewal, and by whoever files the next new hire report. Write them down in one place the first time. The record below is that page, and the last section is the January list, because three of these numbers move at the start of the year.

Step 5: Write a Job Ad and Application That Comply Before You Interview

Two Vermont rules bind before a candidate ever applies. Act 155, effective July 1, 2025, requires the good faith compensation range in written job advertisements for positions physically located in Vermont, and for remote positions predominantly tied to a Vermont office.

Act 155 reaches employers with five or more employees, at least one of them working in Vermont, so a business grows into the requirement rather than starting under it. Internal postings for promotion or transfer count as advertisements.

The second rule is Vermont’s fair chance hiring statute. An employer may not request criminal history record information on an initial employment application form. You can raise the subject in an interview or after the candidate has been deemed otherwise qualified, and the candidate must get a chance to explain the circumstances and any rehabilitation. Vermont also bars asking an applicant about current or past pay, so ask about pay expectations instead.

The practical effect on a small business is that compensation planning moves earlier. You cannot advertise first and figure out the budget later.

Step 6: Complete Form I-9 by the Third Business Day

Every employer in the United States must verify identity and work authorization on Form I-9, and Vermont adds nothing to the federal process. The employee completes Section 1 no later than the first day of work. You complete Section 2 by the end of the third business day after the start date, examining original documents the employee chooses from the list of acceptable documents.

You may not tell the employee which documents to present, and you may not ask for more documents than the form requires. Under 8 CFR 274a.10, federal civil penalties for paperwork violations run from $288 to $2,861 for each individual concerned, the amounts set in January 2025 and left unchanged for 2026.

Vermont does not require E-Verify. There is no state mandate for private employers, so participation is voluntary unless a federal contract clause imposes it.

Step 7: Collect Form W-4 and Form W-4VT Before the First Paycheck

Vermont has its own withholding certificate, so a Vermont hire signs two tax forms rather than one. The employee completes the federal Form W-4 for federal withholding and Form W-4VT for Vermont withholding. The Department of Taxes instructs employers to ask new hires for both, because the federal form alone may not produce the right Vermont withholding amount.

The Department of Taxes also wants Form HC-2, the declaration of health care coverage, so the health care fund contribution can be reported correctly on the quarterly reconciliation.

Vermont income tax is progressive, running from 3.35 percent to 8.75 percent across brackets, which is why the state certificate matters more here than in states with a flat rate.

If the employee never returns a W-4, the IRS has you withhold as if the employee were single or married filing separately, with no other entries on steps 2, 3, or 4 of the form, so treat both forms as pre-start paperwork rather than day one paperwork.

Collecting all of this on paper on the first morning is how the first day gets wasted. Most of that table, except Section 2 of the I-9, can be handled before the start date.

Step 8: File the New Hire Report Within Ten Days

Vermont employers must report each new hire to the Vermont Department of Labor within 10 calendar days of the first day work is performed. The same obligation applies to a rehire when the person has been separated from your business for at least 60 consecutive days.

The report carries seven data elements: the employee name, address, Social Security number, and first date of employment, plus your business name, address, and federal identification number. Reporting runs through the department employer e-Services application, and in the department’s new unemployment insurance system every report must be filed electronically rather than on paper.

Vermont matches the reports against child support records and forwards them to the National Directory of New Hires, which is also how a state catches unemployment claims filed by people who have already returned to work. Reporting is mandatory, not optional courtesy. Ten days sounds generous until the founder who owns the task is also covering the new employee’s first week.

Step 9: Post the Required Notices and Hand Over the At-Hire Policies

Vermont requires a set of state posters in addition to the federal set, and it requires two documents to be handed to the employee individually rather than posted on a wall. Both of those are easy to miss because they are not part of any payroll workflow.

The first document is the written policy against sexual harassment. Vermont law requires every employer to adopt one and to give individual copies to new employees when they are hired, and to redistribute it whenever the policy changes.

The second document is the earned sick time notice. The department rules require the employer to post the official notice and to notify the employee of the provisions of the Act at the time of hire, so put the accrual rate, the permitted uses, and the ban on retaliation in writing and collect an acknowledgment.

Vermont publishes the state poster set for free, refreshed annually, so there is never a reason to buy a laminated compliance package. Download the current year set in January when the minimum wage changes, and keep a digital copy accessible to remote employees who never see the wall in the office.

Step 10: Onboard from Day One Through Day Ninety

Compliance gets the employee legally on payroll. Onboarding decides whether they stay. According to Gallup (2018), only 12 percent of employees strongly agree that their organization does a great job onboarding new employees, which means the bar is low enough that a written plan alone puts you ahead. In a state with a labor pool this small, replacing a bad first hire costs far more than getting the first ninety days right.

This is the part of the sequence software actually solves. In FirstHR, the offer goes out with built-in e-signature, the tax and eligibility forms go on the new hire’s first-day list as tasks, the ten day report sits on a task with a deadline, and the AI onboarding wizard builds a 30-60-90 day plan from the job description instead of leaving the founder to write one at midnight.

Form I-9, the W-4, and the W-4VT themselves are completed outside the platform, and the completed copies are kept in the new hire’s employee file.

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Vermont-Specific Rules That Change How You Run the Job

Vermont sits toward the employee-protective end of the spectrum, and several of its rules bind at one employee where other states wait for scale. These are the ones that change day-to-day operations rather than paperwork.

Two details deserve a second look. First, Vermont’s overtime statute carves out several categories, including certain retail and service establishments and seasonal amusement operations, but the federal standard still applies to covered employers, so the carve-out rarely means no overtime at all.

Second, the 72 hour discharge deadline is short enough that an off-cycle payment is usually needed, which is worth confirming with your payroll provider before you ever have to terminate someone.

What worked for me

Write the Vermont-specific rules into the handbook on day one rather than adopting a generic template and patching it later. Earned sick time accrual, the pay calendar and the notice that goes with it, and the harassment policy all have to exist in writing anyway. Building them into the employee handbook at the first hire means the second and third hires cost you nothing extra.

Nick Anisimov, FirstHR founder

Local Rules: Burlington Is the One City That Adds Requirements

Vermont municipalities generally do not set their own minimum wage for private employers, so for most small businesses the state rules are the whole picture. Burlington is the exception, and only for a defined group of employers: its livable wage ordinance reaches any employer that receives city contracts or grants totaling more than $15,000 in any 12 month period.

If you never contract with the City of Burlington, the ordinance does not reach you. If you do, the wage floor and the paid time off requirement are conditions of the contract, and the city publishes the certification form contractors sign. Check the rate every summer, because it moves on July 1 rather than January 1.

Employee or Independent Contractor: Vermont Applies the ABC Test

Vermont presumes an employment relationship exists and puts the burden on the business to prove otherwise. For unemployment insurance purposes the state applies the ABC test, and all three prongs must be satisfied before a worker can be treated as self-employed. Failing one prong is enough to make the person an employee.

Prong B is the one that catches small businesses. A bakery that engages a plumber passes it easily. The same bakery that engages a baker as a contractor does not, no matter what the agreement says. Under 21 V.S.A. section 1314a the Commissioner can assess an administrative penalty of up to $5,000 for each improperly classified employee, plus $100 for each quarterly wage report that never arrived, alongside workers compensation exposure for someone you never covered.

When the analysis is close, classify as an employee.

The Five Mistakes That Cost Vermont Employers the Most

These are the failures I see repeatedly, and every one of them is a timing problem rather than a knowledge problem. The owner knew the rule. The task simply did not have a date attached to it.

The pattern behind all five is that Vermont attaches obligations to events rather than to headcount growth. Coverage attaches to a start date. The report attaches to the first day of work. The pay range attaches to publication, once the team has five employees. A small business without a dedicated HR person needs those events wired to reminders, because nobody is going to remember them during a hiring week.

Vermont is also an at-will employment state, which some owners read as a reason to be casual about documentation. The opposite is true here: with paid sick time, wage payment timing, and broad anti-discrimination coverage all applying from the first employee, the paper trail is what makes at-will status defensible.

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