Hiring Employees in Kentucky

Classifying Your Workers Correctly

Your company must distinguish properly between employees and independent contractors under IRS common law tests and Kentucky wage and hour rules. You should look at behavioral control, financial control, and the overall relationship to decide if a worker is truly independent. Misclassification can trigger back wages, unpaid overtime, tax assessments, interest, and civil penalties at both federal and state levels.

Kentucky follows federal definitions for most purposes, but your business is still responsible for accurate unemployment insurance and workers’ compensation classifications. If you are unsure, you should review the IRS guidance and Kentucky Labor Cabinet resources, and consider the risks outlined in Playroll’s employee misclassification guide: https://www.playroll.com/blog/employee-misclassification-guide.

Verify Employee Work Eligibility

For every new hire in Kentucky, you must complete federal Form I-9 within 3 business days of the employee’s start date. You must examine original identity and work authorization documents from the employee, such as a U.S. passport or a combination of driver’s license and Social Security card, and record the details on the form.

Kentucky does not mandate E-Verify for all private employers, though certain federal or state contracts may require it, so you should confirm any contract-specific obligations. You must retain I-9 forms for at least 3 years after the hire date or 1 year after termination, whichever is later, and store them separately from general personnel files to protect privacy.

Create an Employee Onboarding Process

Your onboarding process in Kentucky should include a written offer letter, collection of Form W-4 and Kentucky Form K-4 for tax withholding, and direct deposit authorization if the employee opts in. You should also provide your employee handbook, obtain signed acknowledgments of key policies, and issue required notices such as wage rate, pay schedule, and workers’ compensation information.

Make sure you set up each hire in your payroll and timekeeping systems before their first day so you can track hours, overtime, and leave accurately. Clear documentation and upfront communication will help you control hiring costs and maintain full visibility into what each Kentucky employee truly costs your business.

Pay Frequency & Methods

In Kentucky, you must pay employees at least twice per month, with no more than roughly 18 days between paydays, unless you qualify for and use a different approved schedule. When employment ends, you must pay final wages by the next regular payday or within 14 days, whichever is later, and failure to pay on time can result in wage claims, penalties, and attorney’s fees.

Payment Methods (How You Can Pay)

Your company can choose from several payment methods in Kentucky, but you must always ensure employees receive full wages on time and a clear wage statement each pay period.

• Payroll Check: You may pay by check drawn on a Kentucky-accessible bank, and you must allow the employee to receive the full value without fees.
• Cash: You may pay in cash as long as you keep accurate payroll records and give the employee a written statement of hours, rates, and deductions.
• Direct Deposit (EFT): You may use direct deposit only if the employee voluntarily authorizes it in writing and can choose the financial institution.
• Paycards: You may use paycards if employees can access full wages at least once per pay period without fees and you provide clear disclosures and an alternative option.
• Outsourced Payroll: You may outsource payroll to a third-party provider, but your company remains legally responsible for accurate wage payments, tax withholding, and filings.

When you hire employees in Kentucky, you must withhold and remit federal and state payroll taxes and pay several employer-only contributions. You will need to register with both the Kentucky Department of Revenue and the Office of Unemployment Insurance before running payroll.

Employer Tax Contributions

Your company is responsible for employer-side payroll taxes, including Social Security, Medicare, federal unemployment (FUTA), Kentucky unemployment insurance, and any applicable local occupational license taxes. You must file returns and pay these taxes on the schedules assigned by each agency.

Employee Payroll Tax Contributions

You must withhold federal income tax, Kentucky state income tax, and the employee share of Social Security and Medicare from each paycheck. Some Kentucky cities and counties also require you to withhold local occupational taxes from employee wages.

Minimum Wage in Kentucky

Kentucky’s minimum wage is currently $7.25 per hour, matching the federal rate under the Fair Labor Standards Act. You must pay at least this rate to most non-exempt employees, with limited exceptions such as certain tipped workers and students under specific conditions.

Working Hours in Kentucky

Kentucky generally follows federal rules on working hours, including requirements for tracking all hours worked by non-exempt employees. State law also requires a reasonable meal period between the third and fifth hour of work and a paid rest period of at least 10 minutes for every 4 hours worked, unless an exemption applies.

Overtime in Kentucky

Non-exempt employees in Kentucky must receive overtime pay at 1.5 times their regular rate for all hours worked over 40 in a workweek. Your company must correctly determine who is exempt under federal and state law and ensure that all overtime hours are recorded and paid in the next regular payroll.

In Kentucky, you decide which benefits to offer beyond what federal and state law require, but competitive packages often include health insurance, retirement plans, and paid time off. If you average 50 or more full-time employees nationwide, the Affordable Care Act requires you to offer affordable, minimum-value health coverage or face potential penalties.

Mandatory Leave Policies in Kentucky

Paid Time Off in Kentucky

Kentucky does not require private employers to provide paid vacation or general PTO, so you can design your own policy. Once you promise PTO in a written policy or contract, you must follow your stated rules on accrual, caps, and payout at separation, as Kentucky treats earned vacation as wages if your policy so provides.

Your company should clearly explain eligibility, accrual rates, carryover, and approval procedures in your handbook. Transparent PTO rules help you manage staffing while keeping your Kentucky team engaged and reducing disputes over balances and payouts.

Maternity & Paternity Leave in Kentucky

Kentucky relies primarily on the federal FMLA for job-protected maternity and paternity leave, which can provide up to 12 weeks of unpaid leave for eligible employees of covered employers. State and federal anti-discrimination laws also require you to treat pregnancy and childbirth-related conditions the same as other temporary disabilities.

You are not required to offer paid parental leave, but many Kentucky employers choose to provide some paid time or short-term disability benefits to remain competitive. Make sure your parental leave policy coordinates with FMLA, any disability coverage, and your PTO program so employees understand how income replacement works.

Sick Leave in Kentucky

Kentucky does not mandate paid sick leave for private-sector employees, so you may decide whether to offer separate sick time or a combined PTO bank. If you do provide sick leave, you should define accrual, carryover, and documentation requirements clearly and apply them consistently.

Even without a state paid sick leave law, you must comply with federal laws such as the Americans with Disabilities Act, which may require reasonable accommodations, including unpaid time off, for qualifying medical conditions. A thoughtful sick leave policy can help reduce presenteeism and protect productivity in your Kentucky workforce.

Military Leave in Kentucky

Your company must comply with the federal Uniformed Services Employment and Reemployment Rights Act (USERRA), which applies in Kentucky and protects employees who perform covered military service. This includes granting unpaid leave for service, preserving benefits as required, and reinstating employees to their positions or equivalent roles when they return.

Kentucky law also provides protections for members of the National Guard and state defense forces, so you should verify obligations when an employee is called to duty. You are not generally required to pay employees during military leave, but you may choose to offer differential pay as a benefit.

Jury Duty in Kentucky

In Kentucky, you must allow employees time off to serve on a jury and may not threaten, coerce, or penalize them for fulfilling this civic duty. State law does not require you to pay employees for jury service, but many employers choose to pay regular wages for some or all days to support employees.

You can request proof of jury service, such as a summons or attendance slip, and you may require employees to report to work for any part of the day they are not needed in court. Your policy should explain whether jury duty is paid or unpaid and how employees should notify their managers.

Voting Leave in Kentucky

Kentucky law requires employers to provide employees a reasonable amount of time, up to several hours, to vote on Election Day or during in-person absentee voting if they request it in advance. You may decide whether this time is paid or unpaid, but you cannot penalize or discipline employees for using authorized voting leave.

You may schedule voting leave to minimize disruption to operations, as long as employees still have a fair opportunity to vote. Include your expectations for notice and scheduling in your handbook so Kentucky employees know how to request time off.

Bereavement Leave in Kentucky

Kentucky does not require private employers to provide bereavement leave, paid or unpaid. You are free to design a policy that offers a set number of days for the death of an immediate family member and possibly less time for extended relatives or close friends.

Clear bereavement rules help managers respond consistently and compassionately during difficult times. Many Kentucky employers offer at least 3 days of paid bereavement leave for close family to support employee well-being and retention.

Termination Process

Kentucky is an at-will employment state, meaning you or the employee may end the relationship at any time for any lawful reason, unless a contract states otherwise. When you terminate an employee, you should document the reason, collect company property, provide required notices, and communicate the final pay date and benefits status.

Notice Period

Private employers in Kentucky are not required to give advance notice of termination or resignation, unless an employment contract or collective bargaining agreement requires it. Large layoffs or plant closings may trigger federal WARN Act obligations, which can require 60 days’ notice for covered employers and events.

Severance

Severance pay is not mandated by Kentucky law, so you may choose whether to offer it and under what conditions. If you provide severance, clearly outline eligibility and formulas in a written policy or agreement, and ensure any release of claims complies with federal and state requirements.