Final answer:
When a newly hired employee fails to complete Form W-4, the employer defaults to the withholding status of 'Single, 0 allowances' to calculate the EE's withholding.
Step-by-step explanation:
If a newly hired employee (EE) who is married with two children fails to complete Form W-4 by the first payday, the employer (ER) should use withholding status 'd. Single, 0 allowances' when calculating the EE's withholding. This default status is specified by the IRS to ensure that enough taxes are collected throughout the year to cover the EE's potential tax obligation.