Employer of Record for Kentucky

Do I Need an EIN or Payroll Tax Number To Employ in Kentucky?

To hire employees in Kentucky, you’ll need a Federal Employer Identification Number as well as a Kentucky Withholding Tax Account Number from the Department of Revenue. These registrations allow you to run payroll compliantly and ensure wages and state income taxes are reported and remitted correctly.

Working Hours in Kentucky

A standard workweek in Kentucky is 8 hours per day and 40 hours per week. Hours worked beyond that threshold are generally considered overtime and must be paid at 1.5 times the employee’s regular rate of pay, in line with both federal and state labor requirements.

What Is Considered Full-Time Employment in Kentucky?

Kentucky law does not set a strict definition of full-time employment. However, working 30 hours or more per week is widely recognized as the standard and is the benchmark many employers use when determining eligibility for benefits such as healthcare.

Probation Period in Kentucky

There is no legal requirement for probation periods under Kentucky or federal law. Employers may still implement them as a best practice to evaluate new hires, but the terms should be clearly outlined in the employment contract so expectations are transparent from the start.

Minimum Wage in Kentucky

The minimum wage in Kentucky as of 2025 is:

• $7.25 per hour, matching the federal minimum.
• Tipped employees must be paid a cash wage of at least $2.13 per hour, as long as their tips bring total earnings to at least $7.25 per hour. If tips fall short, employers are required to make up the difference.

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Read our Kentucky average salary guide for more.

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Working Hours in Kentucky

Kentucky has specific employment and labor laws governing working hours, designed to protect employees’ rights and ensure fair compensation. Whether you’re hiring local employees or working with an Employer of Record (EOR), it's essential to understand the state's regulations around working hours to ensure compliance.  

1. Standard Workweek and Overtime

• A standard workweek in Kentucky typically consists of 40 hours.
 
• Employees working beyond 40 hours in a workweek are entitled to overtime pay.

2. State-Specific Working Hour Regulations

• Employers are required to pay overtime at a rate of 1.5 times the regular pay for hours worked over 40 in a workweek.
 
• Certain exemptions apply for specific job categories and industries.

3. Meal and Rest Breaks

• Employees working 7.5 hours or more must be provided with a reasonable meal period, typically 30 minutes, between the third and fifth hour of work.
 
• Meal breaks are unpaid if the employee is relieved of all duties.
 
• Employees are entitled to a paid 10-minute rest period for every four hours worked.

Kentucky Anti-Discrimination Laws

Kentucky law prohibits employers from discriminating against employees or applicants based on certain protected characteristics. Employers can’t make decisions about hiring, firing, promotions, pay, or other job conditions based on certain personal characteristics.

At the state level, employers and employees are protected from discrimination based on:

• Race or color
• Religious beliefs
• National origin or ancestry
• Sex
• Age (40 and older)
• Disability (a physical or mental condition that significantly limits major life activities)

But Kentucky goes a step further in many places. More than 20 cities and counties, including Louisville/Jefferson County, Lexington-Fayette, Covington, Bowling Green, and Frankfort, have local fairness ordinances that also protect employers and employees from discrimination based on:

• Sexual orientation
• Gender identity

What does this mean in practice? If you’re an employer, you need to make sure your policies and decisions are bias-free, and that you’re offering reasonable accommodations for employees’ religious practices or disabilities, unless doing so would cause serious difficulty or expense for the business.

Overtime in Kentucky

Kentucky overtime laws follow the federal Fair Labor Standards Act (FLSA), requiring that eligible employees be paid 1.5 times their regular rate of pay for all hours worked over 40 in a single workweek. There is no daily overtime requirement, so an employee can work more than 8 hours in a day without overtime pay as long as total weekly hours stay at 40 or fewer.

Under the FLSA and Kentucky state law, employees are generally (but not always) exempt from overtime if they meet both of the following:

• Salary Threshold: As of 2025, due to ongoing federal litigation, the applicable salary threshold remains at $684 per week ($35,568 annually). A proposed increase to $844/week was blocked in court, so employers should continue to use the $684/week figure unless a new rule takes effect.
• Duties Test: The employee’s primary duties must be executive, administrative, or professional in nature, such as managing other staff, exercising independent judgment on significant matters, or applying advanced knowledge in a specialized field.

Other exemptions may apply for:

• Certain certified or licensed professions (lawyers, accountants, architects, engineers, and some highly skilled computer professionals)
• Agricultural workers
• Seasonal amusement or recreational employees
• Commissioned sales employees
• Certain domestic workers

If both state and federal overtime rules apply, employers must follow whichever provides the greater benefit to the employee. In Kentucky, failure to comply can result in back pay, civil penalties, and possible legal fees, making accurate timekeeping and proper employee classification critical.

When it comes to running payroll in Kentucky, both local and global employers have flexibility in choosing a payroll schedule that fits their operational needs. Kentucky doesn’t mandate a specific payroll frequency, though certain industries may have tailored rules. The bottom line? Whatever schedule you choose, consistency and timely payment are key.

Payroll Cycle in Kentucky

Employers in Kentucky can generally choose their payroll cycle, provided it meets state minimum frequency requirements stating paydays be scheduled no more than 18 days apart. Most Kentucky employers pick from the following common payroll cycles:

• Weekly: Paychecks are issued to employees every week.
• Bi‑Weekly: Paychecks are issued every two weeks. This is very common across all industries in the U.S.
• Semi‑Monthly: Paychecks are distributed twice a month, often on fixed dates like the 1st and 15th.
• Monthly: Issuing monthly paychecks isn’t common in the U.S., but is considered acceptable if the industry rules allow it.

Types of Payroll Taxes in Kentucky

Employers must manage several payroll-related taxes to stay compliant. Here's what should be on your radar:

• Federal Income Tax: Withheld from employee wages based on their IRS Form W-4; amount depends on filing status, earnings, and any extra withholding requested.
• Kentucky State Income Tax:  Flat 4.0% rate with a $3,270 standard deduction in 2025; calculated from the employee’s Form K-4 and remitted via the Kentucky Online Gateway (KOG).
• State Unemployment Insurance (SUI): Paid entirely by the employer on the first $11,100 of each employee’s wages. The rate will depend on your employer experience rating.
• Social Security Tax (FICA): Employer and employee each pay 6.2% on wages up to the federal wage base of $168,600.
• Medicare Tax (FICA): Employer and employee each pay 1.45% on all wages; employees earning over $200,000 also pay an extra 0.9%. Employers are not required to match this amount.
• Workers’ Compensation Insurance: Required for nearly all employers in Kentucky to cover medical expenses and lost wages for employees injured on the job.
• Local Ordinances: There are no local income taxes in Kentucky, though some municipalities may have separate business license fees or reporting requirements.

How to Comply with Kentucky Payroll Taxes

Here’s a straightforward checklist to help you stay compliant when you start building your team in Kentucky:

• Withhold Kentucky State Income Tax: Use the standard deduction and apply the 4% rate accurately.
• Pay SUI: Calculate employer contributions based on experience ratings.
• Ensure Workers' Comp Coverage: Required from day one in most industries.
• Calculate FICA Taxes Correctly: Apply Social Security and Medicare rates as required.
• Report and Remit Taxes Promptly: Submit federal (Form 941) and state payroll filings on time.
• Stay Updated: Tax shifts like the planned 2026 income tax drop (to 3.5%) are coming so keep an eye on legislative updates.
• Use Payroll Tools: HR Solutions like Playroll to simplify calculations and help you avoid costly mistakes.

Employment taxes and statutory fees affect both your payroll and your employees’ paychecks in Kentucky. Understanding the tax obligations for both employers and employees is crucial when operating in Kentucky's business landscape.  

Employer Tax Contributions

Employers in Kentucky are responsible for several employment taxes, including State Unemployment Insurance (SUI) and federal taxes such as Social Security and Medicare.  Employer payroll contributions are generally estimated at an additional 7.65% on top of the employee salary in Kentucky.  Here's a quick summary of employer-specific payroll contributions:

Employee Tax Contributions

Employee tax contributions are generally estimated at 7.65% of employee salary in Kentucky.  Here's a snapshot of what employee payroll tax contributions you need to be aware of:  

Tax Due Dates in Kentucky

Here’s a breakdown of key tax due dates for Kentucky:

• Withholding Tax Filing (Forms W-2, W-2G, 1099 series)
  Employer withholding statements are due January 31, 2025. Pop everything into the MyTaxes portal to file electronically.

Pension in Kentucky

Kentucky offers both public pension systems for government employees and common retirement savings options in the private sector.

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Public Sector Pensions

Public employees typically participate in the Kentucky Employees Retirement System (KERS) or the County Employees Retirement System (CERS). These are defined benefit plans, where employer contribution rates are set by state law or actuarial review.

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Private Sector Retirement Plans

While traditional pensions are less common in the private sector, many U.S. employers offer defined contribution plans like 401(k)s. Kentucky also supports private retirement through tax-favorable structures, such as a $31,110 deduction on retirement income from qualified plans.

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In Kentucky, employers are mandated to provide certain benefits, such as workers' compensation insurance and unemployment insurance. While not required by state law, many employers choose to offer additional employee benefits to attract and retain talent.  

Employee Benefits for Kentucky

Competitive benefits are essential for attracting and retaining top talent in Kentucky. Offering the right package helps employees feel valued and motivated. Our benefits experts understand the local labor market's trends, requirements, and expectations, ensuring your employees feel valued and supported. Common benefits in our Kentucky packages include:

• Pension or 401(K)
• Vision Insurance
• Life Insurance
• Medical Insurance
• Dental Insurance
• Health Savings Plan (HSA)
• Flexible Spending Account (FSA)
 

Kentucky’s leave laws are a mix of federal requirements and state-specific rules. While the state does not mandate as many paid leave benefits as some other states, employers still need to be aware of the benefits that are mandated. Plus offering more than the legal minimum can go a long way toward attracting and retaining talent.

Is Vacation Leave Mandatory in Kentucky?

Kentucky does not require employers to provide paid or unpaid vacation leave. However, if an employer chooses to offer it, they must follow the terms outlined in their own policy or employment contract. Many employers in Kentucky use vacation leave as a key benefit to remain competitive, especially for remote or in-demand roles.

Mandatory Leave Policies in Kentucky

The only leave types mandated by Kentucky law or federal law are:

• Family and Medical Leave (FMLA): Up to 12 weeks of unpaid, job-protected leave for eligible employees
• Voting Leave: At least four hours to vote on Election Day
• Adoption Leave: Unpaid leave for adopting a child under age 10
• Jury Duty Leave: Unpaid leave with job protection
• Military Leave: Job-protected leave for military service in accordance with USERRA

Paid Time Off (PTO)

There is no state requirement for paid time off in Kentucky. Employers can combine vacation, sick leave, and personal days into a single PTO bank if they choose. The policy should clearly state how PTO accrues, how it can be used, and whether unused time is paid out at termination.

Maternity Leave

Kentucky does not have a separate state-level maternity leave law. Eligible employees may take up to 12 weeks of unpaid maternity leave under the FMLA for childbirth and bonding. Some employers voluntarily offer paid maternity leave as a way to stand out from competitors.

Paternity Leave

There is no specific paternity leave requirement under Kentucky law. Eligible employees can use FMLA leave to take up to 12 weeks unpaid family leave for the birth of a child or to bond with a newborn.

Paid Sick Leave

Kentucky does not mandate paid sick leave for private employers. But your company may choose to offer it as part of their benefits package, often as part of a combined PTO policy.

Military Leave

Kentucky follows federal USERRA guidelines, which require employers to provide job-protected unpaid leave for employees called to active duty, military training, or other service obligations. Employees must be reinstated to their job after returning from service, with the same seniority, status, and pay they would have earned if they had not been called away.

Jury Duty Leave

Employers must grant unpaid leave for jury service and cannot penalize employees for serving, and naturally employees are entitled to return to their position without losing their benefits or seniority.

Parental Leave

Kentucky law requires employers to provide unpaid leave for the adoption of a child under the age of 10. Parental leave for biological parents falls under the FMLA’s 12-week unpaid leave provision, assuming all of the eligibility requirements are met.