Handling payroll in Alabama has some unique rules and laws that employers need to follow. This article covers key information like tax withholding, unemployment insurance, wage laws, and child support payments.
Alabama Income Tax Withholding
In Alabama, the Department of Revenue manages income tax withholding from employees’ paychecks. Here’s their contact information:
Address:
Department of Revenue, Income Tax Division
Withholding Tax Section
50 North Ripley St., P.O. Box 327480
Montgomery, AL 36132-7480
Phone: 334-242-1300
Website: www.ador.state.al.us
In Alabama, you use a form called A-4 (Employee’s Withholding Exemption Certificate) to figure out how much state tax to withhold, instead of the federal W-4 form.
- Cafeteria plans are not taxed for state income tax but are taxed for unemployment insurance.
- 401(k) plan contributions are not taxed for both income tax and unemployment insurance.
If you pay employees any extra wages, like bonuses, these are taxed at a flat rate of 5%. Employers can also file W-2 forms electronically if they want.
Alabama Unemployment Insurance
Unemployment insurance is handled by the Department of Industrial Relations. Their contact details are:
Address:
Department of Industrial Relations
649 Monroe Street, Montgomery, AL 36131
Phone: 334-242-8990
Website: www.dir.state.al.us
In Alabama, the taxable wage base for unemployment is $8,000. Employers with more than 250 employees must submit their wage reports electronically. Records for unemployment need to be kept for at least five years, which should include hire dates, wages, and termination information.
Wage and Hour Rules in Alabama
There is no state minimum wage in Alabama, so the federal minimum wage rules apply. Alabama also does not have any special rules about paying overtime unless the company is covered by federal laws.
The state does not have laws about how often employees need to be paid, what needs to be on the pay stub, or when a terminated employee must receive their final paycheck.
All new hires must be reported within seven days. Employers must provide basic information like the employee’s name, Social Security number, and employer’s EIN. Employers can also offer direct deposit, but employees can choose their own bank.
Other Payroll Information
- Breaks for Minors: Employees under 16 must get a 30-minute break after working for five hours.
- Pay for Deceased Employees: Any unpaid wages must be given to the surviving spouse or the guardian of any minor children.
- Unclaimed Wages: If wages are not claimed after one year, they must be handed over to the state under Alabama’s escheat law.
Child Support Withholding
Child support payments are managed by the Alabama Department of Human Resources, Child Support Enforcement Division:
Address:
50 Ripley St., Montgomery, AL 36130-1801
Phone: 334-242-9300
Website: www.dhr.state.al.us
Child support deductions follow these rules:
- Start withholding as soon as you receive the order.
- Send payments within 7 days after payday.
- If the employee is terminated, send a notice within 7 days.
- The administrative fee is a maximum of $2 per month.
- Withholding limits follow federal guidelines.
Conclusion
Alabama has its own rules for payroll, especially when it comes to taxes, unemployment insurance, and child support. Employers must stay updated and follow these laws to avoid any issues.