b Payroll Alabama Unique Aspects of Alabama Payroll Law and Practice b
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Payroll in Alabama: A Guide to Unique Payroll Laws and Practices
Overview
Managing payroll in Alabama presents unique challenges and requirements. This guide covers essential information on tax withholding, unemployment insurance, wage and hour laws, and child support withholding.
State Income Tax Withholding
In Alabama, the Department of Revenue, Income Tax Division oversees payroll tax collection. Employers must use the Alabama Form A-4, Employees Withholding Exemption Certificate, instead of the federal W-4 for state income tax purposes.
- Cafeteria Plans: Not taxable for income but taxable for unemployment insurance.
- 401(k) Deferrals: Not taxable for income or unemployment purposes.
- Supplemental Wages: Taxed at a flat rate of 5%.
- W-2 Filing: Employers can file via magnetic media if preferred.
Unemployment Insurance
The Department of Industrial Relations handles unemployment insurance. Alabama's taxable wage base is up to $8,000, and magnetic media reporting is mandatory if an employer has 250 or more employees.
Employers must retain unemployment records for at least five years, including details like hire dates, wages, and reasons for termination.
Wage and Hour Laws
Alabama has no state-specific minimum wage or overtime provisions for non-FLSA employers. Key requirements include:
- New Hire Reporting: Employers must report new hires, rehires, and recalls within seven days. Information can be sent via mail, fax, or electronically.
- Direct Deposit: Compulsory but complies with federal regulations regarding choice of financial institution.
- Pay Frequency and Timing: No regulations governing pay frequency or timelines for final payments upon termination.
- Deceased Wages: Payable to surviving spouse or minor children’s custodian.
- Escheat Laws: Unclaimed wages revert to the state after one year.
Record Retention and Miscellaneous Laws
Alabama lacks specific provisions for pay stub information, tip credits, and record retention guidelines for abandoned wages. Employers should follow FLSA guidelines for record keeping.
For minors under 16, a 30-minute rest is required after five hours of work.
Child Support Withholding
The Alabama Department of Human Resources, Child Support Enforcement Division oversees child support orders:
- Withholding Start: Immediately upon order receipt.
- Payment Dispatch: Within 7 days of payday.
- Termination Notice: Sent within 7 days of employee termination.
- Administrative Fee: Maximum of $2 per month.
- Withholding Limits: Follow Federal CCPA guidelines.
Please note that laws are subject to change, and it’s essential to stay updated with any legislative amendments.
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