Hiring Employees in Alabama

Classifying Your Workers Correctly

Your company must distinguish properly between employees and independent contractors under IRS common law tests and Alabama’s adoption of federal standards. You’ll need to consider behavioral control, financial control, and the overall relationship to decide if a worker belongs on payroll or should be treated as a contractor.

Alabama generally follows federal rules for exempt vs nonexempt status, so you should apply the FLSA salary basis, salary level, and duties tests when deciding who is overtime exempt. Misclassification can trigger back wages, unpaid overtime, tax liabilities, and penalties – review the IRS guidance and this resource on misclassification: https://www.playroll.com/blog/employee-misclassification-guide.

Verify Employee Work Eligibility

For every new hire in Alabama, you must complete Form I‑9 within 3 business days of the employee’s start date and review original identity and work authorization documents. You must retain I‑9s for at least 3 years after the hire date or 1 year after termination, whichever is later.

Alabama law requires most employers to use E‑Verify to confirm work authorization, so you should enroll and run each new hire through the system after the I‑9 is completed. Keep your E‑Verify confirmation records with your onboarding files and ensure your team understands anti‑discrimination rules when requesting documents.

Create an Employee Onboarding Process

Your onboarding in Alabama should include a written offer letter, a completed federal Form W‑4, and any state withholding forms your payroll provider requires. You’ll also want employees to sign direct deposit authorization if used, acknowledge your handbook and policies, and receive required notices such as workers’ compensation and unemployment information.

Build a checklist that also captures emergency contacts, benefit enrollment elections, and any job‑specific training or safety briefings. When you standardize onboarding, you gain clearer visibility into total hiring costs in Alabama and can budget more accurately for each new role.

Pay Frequency & Methods

Alabama does not prescribe a specific pay frequency, but you should set a regular schedule – such as weekly, biweekly, or semimonthly – and communicate it in writing. State law does not impose special final paycheck timing rules beyond federal standards, yet your company should pay all earned wages by the next regular payday to reduce risk of wage disputes or claims.

Payment Methods (How You Can Pay)

In Alabama, you can choose among several payment methods as long as employees receive full wages on the regular payday and a clear wage statement.

• Payroll Check: You may pay employees by check as long as it is payable at full face value on the stated payday and employees can cash it without unreasonable fees.
• Cash: You can pay wages in cash, but you must keep accurate records and provide a written statement of hours, rates, and deductions each pay period.
• Direct Deposit (EFT): You may use direct deposit in Alabama, but you should obtain written employee consent and offer an alternative for workers without bank accounts.
• Paycards: You can pay by payroll card if employees can access their full wages at least once per pay period fee‑free and you disclose terms clearly in advance.
• Outsourced Payroll: You may outsource payroll to a third‑party provider, but your company remains responsible for accurate wage payments, tax filings, and recordkeeping.

When choosing methods, consider your workforce’s access to banking, the cost of processing, and how easily you can document compliance with federal and Alabama wage laws.

When you hire employees in Alabama, you must withhold federal and state income taxes, pay employer payroll taxes, and contribute to state unemployment insurance. You’ll need to register with Alabama agencies, set up your payroll system correctly, and deposit taxes on the required schedules.

Employer Tax Contributions

Your company must register with the Alabama Department of Revenue for withholding and with the Alabama Department of Labor for unemployment insurance. Employer costs typically include Social Security, Medicare, federal and state unemployment taxes, and any local obligations that may apply.

Employee Payroll Tax Contributions

You must withhold Alabama income tax along with federal income tax and the employee share of FICA from each paycheck. Your payroll system should calculate these amounts using current IRS and Alabama Department of Revenue guidance and remit them on time.

Minimum Wage in Alabama

Alabama has no separate state minimum wage, so you must pay at least the federal minimum of $7.25 per hour to nonexempt employees. If you operate in a locality with a higher valid minimum, or your contracts specify higher rates, you must follow the higher standard.

Working Hours in Alabama

Alabama does not set daily hour limits for most private employers, so you should manage schedules under federal FLSA rules and general safety standards. You must track hours worked accurately for nonexempt employees and pay for all compensable time, including required training and certain travel.

Overtime in Alabama

Because Alabama follows federal law, you must pay at least 1.5 times the regular rate for all hours over 40 in a workweek to nonexempt employees. You should define your fixed workweek in writing and ensure bonuses, commissions, and different hourly rates are properly included when calculating the regular rate.

Alabama does not mandate many private‑sector benefits beyond federal requirements, so your company’s health, retirement, and paid leave offerings are key to staying competitive. If you average 50 or more full‑time employees nationwide, you must comply with the federal ACA employer mandate and offer affordable, minimum‑value health coverage or face potential penalties.

Mandatory Leave Policies in Alabama

Paid Time Off in Alabama

Alabama law does not require you to offer paid vacation or general PTO, so you can design your own policy to fit your budget and talent strategy. If you choose to provide PTO, clearly state accrual rates, carryover rules, and whether unused time is paid out at termination in your handbook or employment agreements.

Courts in Alabama typically look to your written policy to decide whether unused PTO is owed when employment ends, so precise language is important. Competitive employers often offer at least 10–15 days of PTO per year for full‑time staff to attract and retain talent.

Maternity & Paternity Leave in Alabama

Alabama does not have a separate state parental leave program, so you’ll rely on federal FMLA if you have 50 or more employees and the worker meets eligibility criteria. Under FMLA, eligible employees can take up to 12 weeks of unpaid, job‑protected leave for birth, adoption, or foster placement of a child.

Many Alabama employers enhance this baseline by offering some paid parental leave or allowing parents to use accrued PTO during bonding time. You should define eligibility, pay levels, and coordination with short‑term disability coverage in your written policies.

Sick Leave in Alabama

There is no statewide requirement for private employers in Alabama to provide paid or unpaid sick leave beyond federal FMLA where applicable. You may, however, choose to offer a separate sick bank or a combined PTO policy that employees can use for illness, medical appointments, or family care.

Whatever approach you take, document how sick time is accrued, when medical notes are required, and how leave interacts with FMLA or disability accommodations. Consistent application of your policy will help you avoid discrimination or retaliation claims.

Military Leave in Alabama

Employees in Alabama who serve in the National Guard or U.S. armed forces are protected by federal USERRA and state statutes. Your company must provide unpaid leave for qualifying service, protect reemployment rights, and maintain benefits as required by law.

Alabama law offers additional protections for state National Guard duty, so you should track orders carefully and coordinate leave with your benefits and payroll teams. Make sure managers understand they cannot retaliate against employees for taking military leave.

Jury Duty in Alabama

Alabama employers must allow employees time off to serve on a jury and may not discharge or penalize them for complying with a summons. While state law does not always require you to pay for this time, many employers choose to provide some paid jury leave as a goodwill gesture.

You can require employees to provide a copy of the summons and to report back to work if they are excused early, consistent with your written policy. Clarify whether any juror pay received must be turned over or may be kept by the employee.

Voting Leave in Alabama

Alabama law generally entitles employees to up to 1 hour off to vote in primary or general elections if they do not have at least 2 hours of non‑working time while the polls are open. You may specify when during the shift the employee can be absent, as long as it does not interfere with their ability to vote.

State law does not always require this time to be paid, but you should check current statutes and align your policy accordingly. Communicate your voting leave rules before election days so supervisors and employees share the same expectations.

Bereavement Leave in Alabama

Alabama does not mandate bereavement leave for private employers, so any time off for a death in the family will come from your internal policy. Many employers provide 3–5 days of paid leave for immediate family members and may allow additional unpaid time at management’s discretion.

Define who qualifies as “immediate family,” how much leave is available, and what documentation you may request. A clear, compassionate bereavement policy can support employees while also giving your managers consistent guidance.

Termination Process

Alabama is an at‑will employment state, so you can generally terminate employment at any time for any lawful reason, provided you do not violate discrimination or retaliation laws. To reduce risk, you should document performance issues, follow your disciplinary procedures, and provide a final wage statement showing all earnings and deductions.

Notice Period

Alabama law does not require employers or employees to give advance notice before ending employment, unless a contract or collective bargaining agreement says otherwise. Even without a legal requirement, giving reasonable notice when possible can support smoother transitions and reduce disruption to your operations.

Severance

Severance pay is not required under Alabama 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‑compete or non‑solicitation clauses.