Hiring Employees in Alabama LLC – Wages, Laws, Compliance Guide


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Any business structure or corporation stands firm on its foundation laid by the employees. An LLC is no exception to this rule. Hiring employees in your LLC comes with some rules, regulations. Before understanding the rules of hiring employees in Alabama LLC, we must understand what an LLC means.

A Limited Liability Company is a business structure that protects the owners from any personal responsibility of the debts or liabilities arising out of the LLC. If an employee action succeeds to liabilities, the owners get the protection against it. LLCs are a combination of the characteristics of a partnership firm & a sole proprietorship. 

Hiring Employees in Alabama

In order to hire employees in LLC in Alabama, there are many requirements that a business has to fulfill. One should keep these points in mind while hiring employees in an LLC. These requirements include:

1. Federal & State Employment posters in Alabama

The employers in Alabama are required to show both Federal & State Employment posters mentioned in Equal Employment Opportunities Act, Americans with Disabilities Act, Fair Labour Standards Act (FLSA),  etc. You should seek professional help to fulfill all the norms or requirements.

2. Federal & State Required Forms

Hiring employees is a lengthier process that involves the filing of different forms & applications. Suppose you wish to hire employees in Alabama. In that case, you must ask your employees to submit the Employment Eligibility Form, the Federal Tax withholding form, the W-4 Form, Workers Compensation Claim Form, Disability Self- Identification Form, U.S. Citizenship and Immigration Services Form, etc. These Legal forms are easy and free to download.

3. Requirements of Alabama New Hire Reporting program

Employers of Business owners are bound by Alabama’s New Hire Reporting Program, under which they have to submit a report consisting:

  • Company Name
  • Company Address
  • Company federal tax ID number
  • Employee’s Name
  • Employee’s Social Security Number
  • Employee’s Address
  • First Day of paid Work

In addition to the forms mentioned above, payments, taxes, tax forms, & requirements, there may be some additional compliance for hiring in Alabama (specifically); you must adhere to those norms as well.

Can an LLC Hire Employees?

An LLC or a Limited Liability Company can be regarded as a corporation, partnership, or sole owner business. The owners of the LLC are often referred to as members. Individuals, Corporations &, in some cases, other LLCs can form an LLC as members.

The members form LLCs because of their limited or no liability provided to the owners or members. In the event of liabilities arising out of an employee’s action, the members of the LLC are not personally liable – the LLC is liable for the actionable claim.

Any LLC (even one with a single owner) can hire unlimited employees on wages or salary. (The single-member owner LLC may have different rules and regulations). In addition to the salaried employees, the LLC can appoint Independent contractors for certain tasks on a contract basis. Check out member-managed vs manager-managed LLC to know more about LLC members.

Rules to Hire Employees in an LLC in Alabama?

Just like any other business corporation, an LLC is also not immune from certain procedures & rules of hiring. An LLC files many documents & pays a number of taxes to various Government Agencies while hiring employees. Some of the essential rules or steps to hire employees in an LLC are:

  • Federal Employer Identification Number – Every LLC must obtain an Employer Identification Number (EIN) from the Internal Revenue Service. EIN helps report taxes & a few other documents to the IRS.
  • Employee Eligibility Form – It is mandatory for an LLC owner to check if the employee is eligible for employment in the U.S. An LLC has to ask the employees to submit the I-9, Employment Eligibility Verification Form to verify the identity of the employee & to authorize the employment. the I-9 form is a mandatory requirement while hiring an employee.
  • Employee’s Social Security Number – The employee has to have a valid Social Security Number (SSN) to work. LLCs have to ask the new employees to submit their SSN before employment. The SSN is helpful in payment & tax purposes.
  • Setting up a process for collection & payment of the appropriate taxes – There has to be a due process for the employees’ future collection & payment of taxes. This process needs to be set up by the employer (in this case, the LLC)
  • Employee handbook – In the hiring process, one of the crucial elements of hiring paperwork is an Employee Handbook. Although it is not essential in Alabama, it is usually needed as one of the legal documents in many other states. An Employee Handbook consists of a complete list of all the basic rules & policies of the company.
  • Alabama payroll Taxes – An LLC that is running a business with employees or businesses with employees has to pay many federal taxes & state Taxes. Following the rules on payroll taxes is also an essential requirement.  After hiring employees, an LLC is subject to the State Unemployment Compensation Act. Under the said Act, an LLC will have to pay Unemployment tax to the state & to do that; the LLC must register itself with the Alabama Workforce Commission. The process involves simple steps & can be completed in 20 minutes. 
    Payroll taxes also include Federal Income Tax withholding, an employer can withhold money from the employee’s account for the income tax.
  • Workers’ Compensation Insurance An LLC operating in the state of Alabama has to carry workers’ compensation insurance & has to display relevant posters.
  • New Hire Report or Report of the New Employee – An LLC has to
    • Report about hiring the new employees in the form of “Report of New Employee(s)” to the Alabama Workforce Commission within 7 days from the date of hire.
    • Deposit and report federal employment taxes as per the IRS procedures for payroll reporting & payment.

Laws Relating to Wages of The Employees

Alabama doesn’t have any state-mandated labor laws. The State follows the federal regulations which protect the employees from any kind of discrimination and ensures payment of minimum wage, overtime pay, right to family leave, etc. The provisions relating to the rights of the employees are governed by the Fair Labour Standards Act.

  1. The minimum wage is calculated at the rate of $7.25 an hour. Unless the employee is exempted by the Federal or State law, the minimum wage rate is applicable to every employer and employee.
  2. Apart from the regular pay, the Fair Labor Standards Act mandates that the employers are required to pay employees for any overtime work as well, where the total number of working hours exceeds 40 hours in a week.
  3. All the employers in Alabama are required to provide a reasonably safe workplace to their employees as emphasised by the Occupational Safety and Health Act.
  4. The Alabama Department of Labor provides a list of posters that should be mandatorily posted by the employers for informational purposes.

Structure of The Wages of The Employees

The State of Alabama does not have any particular labor regulations and is guided by federal laws. In the following section, we have listed the key provisions that structure the employee wages in the State.

Alabama Minimum Wage Structure

  • Regular Wage: Apart from the wage rate of $7.25 an hour paid to the regular employees, the State has the following criteria and pay rate for training and student workers:
    • Student minimum wage: Any student who works part-time should be paid 85% of the Alabama minimum wage rate, approximately $6.16 per hour for up to 20 hours every week.
    • Training minimum wage: Alabama allows its employers to pay their employees who are under 20 years of age and undergoing their training period should be compensated at the rate of $4.25 per hour for the first 90 days of the employment.
  • Tipped employees: Alabama allows employers to pay employees who earn tips a rate that is $2.13 per hour, as established by the FLSA so long as the wage rate plus tips results in the employees earning standard minimum wage when combined.
  • Overtime wage: The workers in Alabama are entitled to overtime pay when they work more than 40 hours per week. The employees shall be compensated at the rate of 1.5 times their regular pay rate. However, certain employees are exempt from the overtime pay and consequently, cannot recover the same from their employers.

Exempt employees are those who, due to their job duties and pay, are not legally entitled to overtime and are, therefore, “exempt” from the laws regarding overtime pay. Non-exempt employees are those whose job duties do not fit within any of the exemptions provided for under the FLSA and are, therefore, entitled to overtime pay.

Employee Leave And Breaks Structure

  • Meals and Breaks: The State does not include provisions relating to breaks during working hours. However, the minor employees who are 14 and 15 years of age must be given a 30-minute break in a 5 hours period.
  • Minor employees: Any child below the age of 13 years is prohibited from being employed in any occupation.
  • Paid leave: The employers are not required to give any paid or unpaid time off to their employees.
  • Sick leave: The State does not require the employers to provide the employees with paid sick leaves. During sickness, the employee can take an unpaid sick leave. However, the employer may grant a family and medical leave under the Family and Medical Leave Act up to 12 weeks per year.
  • Holiday leave: The employers are not bound by any law to provide holiday leave to their employees. Similarly, no holiday pay is required and the employers can call their employees to work during holiday on the regular wage rate.
  • Severance Pay: The employers in the State are not required to provide any severance pay to their employees.
  • Other allowed leaves: The employers should grant paid leave to their employees for any jury summons. The public employers must also provide paid leave to the military members when they are called on duty. The employers should also provide an unpaid one hour leave for employees to register their votes in elections.

Alabama Employee Rights

Federal and state laws protect the employee’s rights during their jobs as listed above. The laws aim to strive for a balance in the bargaining powers between the employers and the employees. On similar grounds, the State offers certain rights to the employees in Alabama.

Protection Against Discrimination and Harassment

The Civil Rights Act of 1964 restricts any form of discrimination in the workplace by employers based on race, color, religion, sex, age, disability, or origin.

Right to Take Leave

Employers are mandated to allow leave to their employees in case of military service, jury duty, voting in elections, or family and medical leave. During the family and medical leave, the group health benefits of the employees must not be discontinued and the employees hold the right to be reinstated to their original jobs after the leave period gets over.

Right to Minimum Wage

Employers must pay the highest minimum wage applicable to their employees. No matter what industry or service they are in, the minimum wage must be paid to them accordingly.

Unemployment Benefits

If the employees lose their jobs, not due to their own faults, they may qualify for unemployment benefits. Such employees shall receive a percentage of their previous income for up to 26 weeks.

Workplace Safety

The employees have the right to request an assessment and inspection of their workplace for safety compliance or hazards to the Occupational Safety and Health Administration. In case any employee gets injured on the job, their medical treatment is covered by the Workers’ Compensation Insurance. The Workers’ Compensation Insurance should be carried by the employers.

How to Hire Employees Fast in Your Alabama LLC

To hire employees for your Alabama LLC you need to verify if the person is eligible to work in the US and then report him/her as ‘new hires’ to the state.

In Alabama, LLCs must file an annual report and Business Privilege Tax Return with the Alabama Department of Revenue. The department has online forms and a directory of regulatory agencies in each city and county. Additionally, Alabama LLCs must pay a minimum of $100 in taxes each year.

Starting a new business is a daunting process. You must hire employees to run your company, and you must make sure that you follow the laws of the state. While there are some rules and regulations, there are also many resources and professionals that can help you with the process. For example, Alabama has the third lowest property tax in the nation, and the state offers other incentives to entrepreneurs. Additionally, the state’s economy is one of the fastest growing in the country.

First, a business plan should include an effective marketing plan that targets your ideal customer. A good business plan should include the name of the business, a brief description of its function, a detailed market analysis, an organizational structure flowchart, product/service descriptions, target customer profiles, and a marketing and logistics plan. It also includes a federal employer identification number, which is a unique identification number assigned to each business by the federal government. This ID number will be used for tax purposes.

Lastly, Alabama’s State Unemployment Compensation Act requires you to register with the Alabama Workforce Commission and register for state unemployment compensation. While Alabama is the South’s economic engine, it’s also one of the fastest growing states. Its low property and corporate income tax rates make it an ideal place to start a business.

Once your LLC is registered, you must name it and nominate a registered agent in Alabama. This person receives important government correspondence and state documents for the business. A registered agent can be a person, employee, or member of the LLC. Your registered agent must have a physical address in Alabama and be on-site during regular business hours. You can also apply for a business credit card for your business.

In Alabama, the process for setting up an LLC is easy. All you have to do is fill out a short application form. You can also choose your business name and legal structure by visiting the Secretary of State website. The process takes only 10 days, but you can expedite the process if necessary.

When hiring employees, make sure you pay them well and offer competitive salaries. This is essential for attracting top talent and keeping them. You also need to keep in mind local labor laws. For example, a right-to-work state may have different requirements than a state with an at-will policy. You should also have a system in place for processing payroll and related benefits.

FAQs

What Is an LLC?

An LLC is a business entity that can be treated as either a corporation, a partnership, or a sole owner business.

Is the LLC liable for damages caused by employees?

The owners of the company are not personally liable for the actions of the employees, the LLC is liable for any such actions.

What is the IRS Form I-9?

Before hiring an employee, under federal law, the business has to verify an employee’s eligibility to work in the United States with the (IRS Form I-9). The business owner also has to make sure the employee has a valid SSN or Social Security Number.

What is LLC self-employment?

LLC members, or LLC owners, are self-employed according to the IRS because they pay themselves through the earnings of LLC.

In Conclusion

All the LLCs with employees are bound by many rules and regulations with reference to wages. It is always advisable to register a registered agent service to understand the laws better. Feel free to share your feedback with us in the comment section below.

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