Hiring Employees in South Dakota

Classifying Your Workers Correctly

Your company must decide whether each hire is an employee or an independent contractor using IRS common law tests focused on behavioral control, financial control, and the overall relationship. South Dakota generally follows federal guidance, so you should rely on IRS Form SS-8 factors and ensure your contracts and day‑to‑day practices align.

If you treat a worker as a contractor but control their schedule, tools, and methods, you risk misclassification, which can trigger back wages, unpaid overtime, tax liabilities, and penalties. You can review Playroll’s guidance on misclassification at https://www.playroll.com/blog/employee-misclassification-guide to benchmark your current arrangements.

Verify Employee Work Eligibility

For every new South Dakota hire, you must complete Form I‑9 within three business days of the employee’s start date and review original identity and work authorization documents. You must retain I‑9s for at least three years after the hire date or one year after termination, whichever is later.

South Dakota does not mandate E‑Verify for all private employers, but you may choose to use it voluntarily or be required by certain federal or state contracts. You should keep I‑9 and any E‑Verify records separate from personnel files to protect privacy and simplify audits.

Create an Employee Onboarding Process

Your onboarding process in South Dakota should include a written offer letter, federal Form W‑4, any direct deposit authorization, and signed acknowledgments of your handbook and key policies. You should also provide required federal notices, benefit enrollment materials, and any internal safety or confidentiality agreements on or before the first day.

By standardizing onboarding checklists and documenting each step, your company reduces compliance risk and creates a consistent employee experience. Clear upfront communication about pay, benefits, and policies also helps you manage hiring costs and forecast your total employment spend more accurately.

Pay Frequency & Methods

South Dakota requires employers to establish regular paydays and pay employees at least once per month, though many companies choose biweekly or semimonthly schedules for simplicity. If you terminate an employee, you must pay all earned wages on the next regular payday, and late payment can expose your company to wage claims and potential damages.

Payment Methods (How You Can Pay)

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

• Payroll Check: You may pay by check as long as employees can access full funds at face value without fees and you provide a detailed pay stub.
• Cash: You can pay wages in cash, but you must document each payment and give the employee a written statement of hours, rates, and deductions.
• Direct Deposit (EFT): You may use direct deposit, but you should obtain written consent and offer an alternative for employees who do not wish to participate.
• Paycards: You can use paycards if employees can access their full wages at least once per pay period without fees and you disclose terms clearly in advance.
• Outsourced Payroll: You may outsource payroll to a provider, but your company remains responsible for accurate wage payments, tax withholdings, and recordkeeping.

When you hire in South Dakota, you must handle federal payroll taxes and state unemployment insurance, even though the state does not levy a personal income tax. Your company should register with the appropriate agencies, withhold and remit taxes on schedule, and keep detailed payroll records for at least four years.

Employer Tax Contributions

As an employer in South Dakota, you must pay federal Social Security and Medicare taxes, federal unemployment tax (FUTA), and state unemployment insurance (SUI). You will register for SUI with the South Dakota Department of Labor and Regulation and file reports and payments according to your assigned schedule.

Employee Payroll Tax Contributions

Your company must withhold federal income tax and the employee portions of Social Security and Medicare from each paycheck, using the employee’s Form W‑4 and IRS withholding tables. South Dakota does not have a state personal income tax, so there is no state income tax withholding for employees.

Minimum Wage in South Dakota

South Dakota’s minimum wage for non‑tipped employees is $11.20 per hour as of January 1, 2024, and it is adjusted annually based on the cost of living. You must also follow federal and state rules for youth wages and tipped employees, ensuring tips plus cash wages meet at least the full minimum wage.

Working Hours in South Dakota

South Dakota does not set a daily maximum for adult working hours, but you must comply with federal Fair Labor Standards Act rules on recordkeeping and overtime. Your company should track all hours worked, including short rest periods that are counted as paid time, and clearly define work schedules in offer letters or policies.

Overtime in South Dakota

South Dakota follows federal overtime rules, requiring at least 1.5 times the regular rate of pay for non‑exempt employees who work more than 40 hours in a workweek. You should carefully classify exempt roles and maintain accurate time records to defend your overtime practices if audited or challenged.

In South Dakota, most private‑sector benefits such as health insurance, retirement plans, and paid time off are driven by federal law and market expectations rather than state mandates. If you average 50 or more full‑time employees across the U.S., the Affordable Care Act requires you to offer affordable, minimum‑value health coverage or face potential penalties.

Mandatory Leave Policies in South Dakota

Paid Time Off in South Dakota

South Dakota law does not require private employers to provide paid vacation or general PTO, so you can design your own policy to match your talent strategy. Once you adopt a PTO or vacation policy, you should follow its terms consistently, including how time is accrued, carried over, or forfeited.

Clearly stating PTO rules in your handbook and offer letters helps you avoid disputes and ensures employees understand how to request and schedule time off. Many employers in the state offer at least 10–15 days of PTO per year to stay competitive in recruiting.

Maternity & Paternity Leave in South Dakota

South Dakota does not have a separate state‑level paid parental leave program, so maternity and paternity leave are generally covered under the federal FMLA for eligible employees of covered employers. Under FMLA, qualifying employees may take up to 12 weeks of unpaid, job‑protected leave for birth, adoption, or foster placement.

Your company can choose to offer paid parental leave or to allow employees to use accrued PTO or short‑term disability benefits during leave. Make sure your policies apply equally to all parents to comply with federal anti‑discrimination rules.

Sick Leave in South Dakota

There is no statewide requirement for private employers in South Dakota to provide paid or unpaid sick leave beyond what federal law requires. However, if you choose to offer sick leave, you must administer it according to your written policy and any applicable collective bargaining agreements.

Many employers combine sick and vacation time into a single PTO bank to simplify administration and give employees more flexibility. You should also consider how sick leave interacts with FMLA or disability accommodations for longer‑term health issues.

Military Leave in South Dakota

Employees in South Dakota who serve in the armed forces, National Guard, or reserves are protected by federal USERRA and state law, which generally provide unpaid leave and reinstatement rights. Your company must restore returning service members to the same or a comparable position with the same seniority, status, and benefits, subject to eligibility rules.

You are not required to pay employees during military leave, but some employers voluntarily offer differential pay to remain competitive. Keep detailed records of orders and leave dates to ensure accurate reinstatement and benefits administration.

Jury Duty in South Dakota

South Dakota law requires you to allow employees time off to serve on a jury and prohibits you from disciplining or terminating them for doing so. The state does not require you to pay employees for this time, but if you do pay, you may not require them to turn over jury fees unless your policy clearly states otherwise.

To minimize disruption, ask employees to provide jury summonses as early as possible and update you on expected service length. Document jury duty absences separately from vacation or sick leave to maintain clear records.

Voting Leave in South Dakota

In South Dakota, if an employee does not have two consecutive hours free from work while the polls are open, you must provide paid time off to vote. You may specify when during the workday the employee can be absent, but you cannot deduct wages for this time.

Your company should communicate voting leave procedures before major elections so employees know how to request time and supervisors apply the rule consistently. Keeping a simple log of voting leave helps you track compliance without creating unnecessary administrative burden.

Bereavement Leave in South Dakota

South Dakota does not mandate bereavement leave for private employers, so any time off for a death in the family is governed by your internal policy. Many employers offer between one and five days of paid or unpaid leave depending on the relationship to the deceased.

Clearly defining eligibility, duration, and documentation requirements in your handbook helps managers respond compassionately while maintaining consistency. You may also allow employees to use PTO or unpaid leave if they need additional time beyond your standard bereavement allowance.

Termination Process

South Dakota is an at‑will employment state, meaning you or the employee may end the relationship at any time for any lawful reason, absent a contract stating otherwise. Your company should still follow a consistent process that includes documenting performance issues, collecting company property, and issuing final pay on the next regular payday.

Notice Period

South Dakota law does not require employers or employees to give advance notice before termination, unless a contract or policy promises notice. Even without a legal requirement, providing some notice or pay in lieu can reduce disruption and support smoother transitions for key roles.

Severance

Severance pay is not required under South Dakota law, but you may choose to offer it in layoffs or negotiated separations. If you provide severance, put the terms in a written agreement that addresses release of claims, payment timing, and any ongoing obligations such as non‑disparagement or confidentiality.