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How to Hire Employees In Kentucky

Hiring in Kentucky for the first time can be challenging, especially with the state's complex employment laws. Whether you're hiring independent contractors, setting up a legal entity, partnering with a PEO, or using an Employer of Record (EOR), it's essential to understand the local employment landscape. Playroll's comprehensive guide is here to help, whether you're onboarding local talent or relocating team members.

Here are four primary ways companies can hire employees in Kentucky:

Establishing a local entity: Creating a legal entity in Kentucky allows for direct hiring, but it can be costly and time-consuming. However, it gives you full control over employment and reduces risk exposure.
Partnering with an Employer of Record (EOR): An EOR, like Playroll, takes on the legal responsibilities of employment, acting as the employer on your behalf. This option streamlines hiring, payroll, and compliance with Kentucky’s labor laws, helping you hire in Kentucky without navigating the complex legal landscape yourself.
Working with a Professional Employer Organization (PEO): A PEO, such as Playroll, co-employs your team, managing essential HR functions like payroll, benefits, and compliance. Partnering with a PEO ensures you meet Kentucky’s labor regulations while offering competitive employee benefits.
Hiring independent contractors: Hiring independent contractors can be more cost-effective, but Kentucky has strict contractor classification rules. Proper classification is essential to avoid penalties for misclassification when hiring in Kentucky.

Complying with Kentucky specific employment regulations and federal laws is critical to avoiding legal risks and costly fines. Our guide focuses on hiring in Kentucky, employment compliance, and how Playroll’s services can support your business as you navigate the complexities of hiring in the state.

Good To Know

As of 2024, Kentucky has an estimated population of approximately 4.5 million residents.

The state's economy is diverse, with key industries including manufacturing, agriculture, and healthcare.

Advanced manufacturing and logistics are among the fastest-growing sectors, offering numerous employment opportunities.

Kentucky mandates specific labor laws, such as providing rest breaks and meal periods to employees, to ensure fair working conditions.

Key Things to Know About Hiring in Kentucky

Labor Laws in Kentucky

Working Hours in Kentucky

Kentucky has specific employment and labor laws governing working hours, designed to protect employees’ rights and ensure fair compensation. Whether you’re hiring local employees or working with an Employer of Record (EOR), it's essential to understand the state's regulations around working hours to ensure compliance.

1. Standard Workweek and Overtime

A standard workweek in Kentucky typically consists of 40 hours.
Employees working beyond 40 hours in a workweek are entitled to overtime pay.

2. State-Specific Working Hour Regulations

Employers are required to pay overtime at a rate of 1.5 times the regular pay for hours worked over 40 in a workweek.
Certain exemptions apply for specific job categories and industries.

3. Meal and Rest Breaks

Employees working 7.5 hours or more must be provided with a reasonable meal period, typically 30 minutes, between the third and fifth hour of work.
Meal breaks are unpaid if the employee is relieved of all duties.
Employees are entitled to a paid 10-minute rest period for every four hours worked.

Minimum Wage in Kentucky

As of 2024, the minimum wage in Kentucky is $7.25 per hour.

Kentucky follows the federal minimum wage.
There are no regional variations within the state.

Overtime in Kentucky

In Kentucky, non-exempt employees are entitled to overtime pay at 1.5 times their regular rate for hours worked over 40 in a workweek. Certain employees, such as those in executive, administrative, or professional roles, may be exempt from overtime provisions.

Onboarding New Hires in Kentucky

We can help you get your new employee started in Kentucky fast, with a minimum onboarding time from just 1-2 working days. Note that the timeline is dependent upon registration with the local authorities, and begins after the employee has submitted all the required information on the Playroll platform.

For non-citizens of the US, a work eligibility assessment may be required, and can add three extra days to the onboarding time. If a follow-up is needed, there may be additional delays.

Please note that payroll cut-off dates can impact the actual first day of employment. Playroll’s payroll cut-off date is the 10th of the month, unless otherwise specified.

Payroll Taxes For Kentucky

Payroll taxes in Kentucky are deductions employers must take from employees’ wages and remit to the state. These taxes fund various state programs and services, including unemployment benefits and disability insurance. Examples of payroll taxes include:

State Income Tax: Kentucky imposes a flat state income tax rate of 4% on employee wages.
State Unemployment Insurance (SUI): Employers contribute to SUI at rates ranging from 0.3% to 9% on the first $11,100 of each employee's wages, depending on the employer's experience rating.

Payroll Cycle in Kentucky

Employers in Kentucky are required to pay employees at least semi-monthly, with paydays scheduled no more than 18 days apart. Specific industries may have additional regulations, and employers must provide employees with a statement of wages detailing hours worked and deductions made.

Looking to grow your team in Kentucky?

Stay Compliant: Navigate Kentucky’s complex labor laws with ease.

Affordable Solution: Reduce costs with a budget-friendly EOR option.

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Kentucky Employment Taxes

Employment taxes and statutory fees affect both your payroll and your employees’ paychecks in Kentucky. Understanding the tax obligations for both employers and employees is crucial when operating in Kentucky's business landscape.

Employer Tax Contributions

Employers in Kentucky are responsible for several employment taxes, including State Unemployment Insurance (SUI) and federal taxes such as Social Security and Medicare. Employer payroll contributions are generally estimated at an additional 7.65% on top of the employee salary in Kentucky.

Employment Tax Type	Tax Rate
State Unemployment Insurance (SUI)	0.3% – 9%
Federal Unemployment Tax Act (FUTA)	6% on the first $7,000 of wages
Social Security	6.2%
Medicare	1.45%

Employee Tax Contributions

Employee tax contributions are generally estimated at 7.65% of employee salary in Kentucky.

Employee Payroll Tax Contribution	Tax Rate
State Income Tax	4%
Social Security	6.2%
Medicare	1.45%

The tax-related information provided in this guide is intended for general guidance and informational purposes only. Reach out to our dedicated team for insights on remote hiring in Kentucky tailored to your needs.

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Benefit Requirements for Employers in Kentucky

In Kentucky, employers are mandated to provide certain benefits, such as workers' compensation insurance and unemployment insurance. While not required by state law, many employers choose to offer additional employee benefits to attract and retain talent.

Employee Benefits for Kentucky

Competitive benefits are essential for attracting and retaining top talent in Kentucky. 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 Kentucky packages include:

Pension or 401(K)
Vision Insurance
Life Insurance
Medical Insurance
Dental Insurance
Health Savings Plan (HSA)
Flexible Spending Account (FSA)

Paid and Unpaid Leave Policies in Kentucky

Family and Medical Leave

Under the federal Family and Medical Leave Act (FMLA), eligible employees are entitled to up to 12 weeks of unpaid leave within a 12-month period for specific family and medical reasons.

Voting Leave

Kentucky law requires employers to grant employees at least four hours of leave to vote.

Adoption Leave

Employers must provide unpaid leave for the adoption of a child under the age of 10.

Jury Duty Leave

Employers are required to grant unpaid leave for jury duty without penalizing the employee.

Sick Leave

Sick leave is not mandated but may be offered at the employer’s discretion.

It’s Easy To Manage Benefits For Employees In Kentucky With Playroll

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Employment Termination Protocols in Kentucky

Hiring Employees in Kentucky with an employer of record

Discuss how an EOR handles onboarding, including setting up compliant employment contracts, registering for taxes, and managing benefits like Kentucky's superannuation system (if applicable).

The employer of record is responsible for:

Employment Compliance: Ensure all employment contracts comply with Kentucky's labor laws and regulations, including proper classification of employees.
Payroll Management: Calculate, process, and distribute employee salaries in accordance with Kentucky's payroll laws, including deductions for taxes and social security contributions.
Tax Filing and Contributions: Handle the registration, filing, and payment of employer taxes and social security contributions to the relevant authorities.
Employment Contracts: Draft and maintain compliant employment agreements, detailing salary, benefits, working hours, and termination terms in line with Kentucky's legal requirements.
Benefits Administration: Provide mandatory employee benefits as required by Kentucky's labor laws, such as health insurance, pension contributions, and statutory leave.

Employer of Record for Kentucky

Guide to Hiring Employees in Kentucky