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Capital City
Montgomery
Timezone
CST
(
GMT-6
)
Paid Leave
None
Income Tax
8.25%
Employer Tax
9.65% - 14.65%
Capital City
Montgomery
Timezone
CST
(
GMT-6
)
Paid Leave
None
Income Tax
8.25%
Employer Tax
9.65% - 14.65%
Alabama has a relatively low cost of living, which can make it more affordable for businesses to offer competitive salaries while keeping operating costs low.
Alabama is home to a number of universities and technical colleges, providing a steady stream of skilled graduates, particularly in fields like engineering, technology, and healthcare.
Alabama has a generally business-friendly regulatory environment with lower state taxes, fewer labor regulations compared to other states, and no state-level minimum wage above the federal standard, offering employers greater flexibility.
In Alabama, workers’ rights are protected by numerous employment and labor laws, at both the state and federal level. As a result, employees enjoy protection from discrimination based on age, religion, sexual orientation, gender, and race. Here are the key things you need to know about hiring in Alabama.
Yes, both an Employer Identification Number (EIN) and a Payroll Tax Number are necessary to employ in Alabama.
The standard work week consists of 40 hours.
There is no legal definition specifying the number of hours that constitute full-time employment. Typically, full-time positions range from thirty to forty hours per week.
Alabama operates under at-will employment, meaning that either the employer or the employee can terminate the employment relationship at any time without cause.
Alabama does not have its own state-mandated minimum wage. Therefore, the federal minimum wage of $7.25 per hour applies to all employees. Employers should remain vigilant for any federal changes and ensure compliance with any updates.
Alabama follows the federal Fair Labor Standards Act (FLSA) for overtime regulations. Employees in Alabama must receive overtime pay at 1.5x their regular rate after 40 hours of work per week. There are no additional state-specific daily overtime rules.
Under the federal Fair Labor Standards Act, employees are exempt from overtime if they:
The federal weekly salary threshold for exemption is $684 per week or $35,568 per year.
Alabama prohibits discrimination in employment based on race, color, religion, sex, national origin, age, disability, and genetic information. These protections apply to all aspects of employment, including hiring, firing, and promotions. Employers are forbidden from making employment decisions that favor or disadvantage individuals based on these protected characteristics.
Bi-weeekly, semi-monthly, and monthly schedules.
Employment taxes and statutory fees affect both your payroll and your employees’ paychecks in Alabama. Understanding the tax obligations for both employers and employees is crucial when operating in Alabama's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Alabama. Note that employees may be liable for additional local taxes in certain cities and jurisdictions.
Alabama employers contribute to State Unemployment Tax (0.6% - 5.4% on the first $8,000 of wages) and Workers’ Compensation Insurance, which varies by industry.
Employees in Alabama pay 2% - 5% in state income tax, plus Social Security and Medicare contributions as per federal law.
In Alabama, the deadline for filing individual state income tax returns aligns with the federal deadline, typically on April 15. If April 15 falls on a weekend or federal holiday, the deadline is extended to the next business day.
In Alabama, businesses must withhold state income tax based on employees' W-4 forms. Employers are also required to contribute to Unemployment Insurance (UI), with rates ranging from 0.65% to 6.8% on the first $8,000 of an employee's wages. Compliance with federal payroll taxes, such as FICA (Social Security and Medicare), is essential. Employers need to file quarterly UI reports with the Alabama Department of Labor.
Alabama does not mandate employers to provide pension or retirement plans.
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The state does not require employers to provide paid or unpaid vacation time to employees.
Below are the mandatory leave entitlements for full-time employees in Alabama.
Alabama does not require employers to provide paid time off (PTO). PTO policies, including vacation and personal leave, are at the employer’s discretion.
In Alabama, there is no specific state law that mandates maternity or paternity leave. Eligible employees can use FMLA leave for the birth of a child and to bond with the newborn within the first year after birth. This includes both fathers and mothers. This leave is unpaid.
Sick leave is not required by Alabama state law. If offered, it is based on employer policy and typically applies to full-time employees.
Employees who serve in the National Guard or Reserves are entitled to up to 15 days of unpaid leave annually for military training. Employers must provide job protection during this leave.
Employers must allow employees to take leave for jury duty but are not required to pay them for the time off. Employees are protected from retaliation for serving.
Employers must allow up to 1 hour of paid leave for employees to vote during general elections if needed.
Not required by state law; if offered, it’s based on employer policy.
Alabama mandates workers' compensation insurance for businesses with five or more employees. There are no state requirements for paid sick leave or health insurance, but businesses with 50 or more employees must comply with the federal Affordable Care Act (ACA). While not legally required, offering benefits like vacation time, health insurance, and maternity leave is a common practice to attract and retain top talent.
Competitive benefits are essential for attracting and retaining top talent in Alabama. Offering the right package helps employees feel valued and motivated. Our benefits experts understand the local labor market's trends, requirements, and expectations, ensuring your employees feel valued and supported. Common benefits in our Alabama packages include:
No, employers in Alabama are not required to provide health insurance unless they meet specific criteria under the federal Affordable Care Act (ACA).
Part-time employees in Alabama are generally not entitled to the same benefits as full-time employees unless the employer offers them voluntarily. Employers are not required by state law to provide health insurance or retirement benefits to part-time workers. However, some employers may choose to offer limited benefits based on their policies.
Employers in Alabama (like employers in all U.S. states) are not required by law to offer a 401(k) or any other retirement plan. Offering a 401(k) plan is entirely at the discretion of the employer.
In Alabama, which follows "at-will" employment (unless otherwise specified in an employment contract), employers are not required to provide a reason for termination.
Alabama follows at-will employment, meaning there is no mandatory notice period required by law for termination. However, if an employment contract, union agreement, or company policy specifies a notice period, both the employer and employee must adhere to those terms.
Severance pay is not required by Alabama state law. It is typically offered at the discretion of the employer or may be specified in an employment contract or company policy. Some employers may provide severance pay based on factors like length of employment, role, and the circumstances of termination
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