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4 Ways to Hire Employees In Tennessee

Hiring in Tennessee for the first time can be challenging, especially with the state's complex employment laws. Whether you're hiring independent contractors, setting up a legal entity, partnering with a PEO, or using an Employer of Record (EOR), it's essential to understand the local employment landscape. Playroll's comprehensive guide is here to help, whether you're onboarding local talent or relocating team members.

Here are four primary ways companies can hire employees in Tennessee:

Establishing a local entity: Creating a legal entity in Tennessee allows for direct hiring, but it can be costly and time-consuming. However, it gives you full control over employment and reduces risk exposure.
Partnering with an Employer of Record (EOR): An EOR, like Playroll, takes on the legal responsibilities of employment, acting as the employer on your behalf. This option streamlines hiring, payroll, and compliance with Tennessee’s labor laws, helping you hire in Tennessee without navigating the complex legal landscape yourself.
Working with a Professional Employer Organization (PEO): A PEO, such as Playroll, co-employs your team, managing essential HR functions like payroll, benefits, and compliance. Partnering with a PEO ensures you meet Tennessee’s labor regulations while offering competitive employee benefits.
Hiring independent contractors: Hiring independent contractors can be more cost-effective, but Tennessee has strict contractor classification rules. Proper classification is essential to avoid penalties for misclassification when hiring in Tennessee.

Complying with Tennessee specific employment regulations and federal laws is critical to avoiding legal risks and costly fines. Our guide focuses on hiring in Tennessee, employment compliance, and how Playroll’s services can support your business as you navigate the complexities of hiring in the state.

Good to Know

As of 2023, Tennessee's population is approximately 7 million, with a diverse workforce contributing to various sectors.

Tennessee boasts a robust economy with key industries including manufacturing, healthcare, and agriculture.

Tennessee is a right-to-work state, meaning employees are not required to join a union or pay union dues as a condition of employment.

Employers in Tennessee must comply with the Tennessee Lawful Employment Act, which requires verification of employees' legal work status.

Key Things to Know About Hiring in Tennessee

Employment and Labor Laws in Tennessee

Working Hours in Tennessee

Tennessee 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

The standard workweek typically consists of 40 hours.
Overtime is governed by the FLSA, requiring pay at 1.5 times the regular rate for hours worked beyond 40 in a workweek.
Executive, administrative, and professional employees may be exempt from overtime pay under specific criteria.

2. Meal and Rest Breaks

Employees scheduled for six consecutive hours are entitled to a 30-minute unpaid meal or rest break.
This break should not occur during or before the first hour of work unless exempt due to the nature of the business.

Minimum Wage in Tennessee

As of 2024, the minimum wage in Tennessee is $7.25 per hour, consistent with the federal minimum wage. There are no regional variations within the state.

Overtime in Tennessee

Overtime pay is regulated by the FLSA, which mandates a rate of 1.5 times the regular hourly wage for hours worked over 40 in a week for non-exempt employees. Exempt employees include those in executive, administrative, and professional roles, as well as certain agricultural and seasonal workers.

Onboarding New Hires in Tennessee

We can help you get your new employee started in Tennessee fast, with a minimum onboarding time from just 1-2 working days. Note that the timeline is dependent upon registration with the local authorities, and begins after the employee has submitted all the required information on the Playroll platform.

For non-citizens of the US, a work eligibility assessment may be required, and can add three extra days to the onboarding time. If a follow-up is needed, there may be additional delays.

Please note that payroll cut-off dates can impact the actual first day of employment. Playroll’s payroll cut-off date is the 10th of the month, unless otherwise specified.

Payroll Taxes For Tennessee

Payroll taxes in Tennessee are deductions employers must take from employees’ wages and remit to the state. These taxes fund various state programs and services, including unemployment benefits and disability insurance.

Federal Income Tax: Withheld based on IRS tax tables, varying according to earnings and allowances
‍Social Security Tax: 6.2% withheld from wages, matched by the employer, up to a certain income limit.‍
Medicare Tax: 1.45% withheld from wages, matched by the employer, with no income limit.‍
Federal Unemployment Tax (FUTA): 6% on the first $7,000 of earnings, with a potential credit reducing it to 0.6%.‍
State Unemployment Insurance (SUI): Employer rates vary based on experience rating.

Payroll Cycle in Tennessee

Employers must pay employees at least once per month. Monthly wages must be paid by the 5th day of the following month, while semi-monthly payments have additional specific requirements. Industry-specific regulations may also apply.

Looking to grow your team in Tennessee?

Stay Compliant: Navigate Tennessee’s complex labor laws with ease.

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Tennessee Employment Taxes

Employer Tax Contributions

Employers in Tennessee are responsible for several employment taxes, including federal payroll taxes and state unemployment insurance. These contributions fund federal and state programs.

Employer payroll contributions are generally estimated at an additional 7.65% on top of the employee salary in Tennessee.

Employment Tax Type	Tax Rate
Social Security Tax	6.2%
Medicare Tax	1.45%
Federal Unemployment Tax (FUTA)	0.6% - 6%
State Unemployment Insurance (SUI)	Varies

Employee Tax Contributions

Employee tax contributions are generally estimated at 7.65% of employee salary in Tennessee.

Employee Payroll Tax Contribution	Tax Rate
Social Security Tax	6.2%
Medicare Tax	1.45%

The tax-related information provided in this guide is intended for general guidance and informational purposes only. Reach out to our dedicated team for insights on remote hiring in Tennessee tailored to your needs.

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Employee Benefits Requirements in Tennessee

Employers in Tennessee must provide specific benefits, such as workers' compensation insurance for businesses with five or more employees, and unemployment insurance taxes to support unemployment benefits. Explore employee benefits for a comprehensive solution.

Employee Benefits for Tennessee

Competitive benefits are essential for attracting and retaining top talent in Tennessee. 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 Tennessee packages include:

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

Paid and Unpaid Leave Policies in Tennessee

Family and Medical Leave

Eligible employees are entitled to 12 weeks of unpaid leave under the federal Family and Medical Leave Act (FMLA).

Sick Leave

Tennessee does not mandate paid sick leave, but employers may offer it voluntarily.

Voting Leave

Employees are entitled to reasonable paid leave to vote if their work schedule does not provide three hours of voting time.

Jury Duty Leave

Employers must provide unpaid leave for jury duty service.

Military Leave

Employees have reinstatement rights and unpaid leave for military service, per federal law.

It’s Easy To Manage Benefits For Employees In Tennessee With Playroll

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Employment Termination Protocols in Tennessee

Hiring Employees in Tennessee with an employer of record

An Employer of Record makes it easy to hire in Tennessee if you don’t have your own entity set up, by handling the heavy-lifting for you. They take care of compliant employment contracts, all required taxes, and benefits administration for you, so you can focus on growth instead

The employer of record is responsible for:

Employment Compliance: Ensure all employment contracts comply with Tennessee's labor laws and regulations, including proper classification of employees.
Payroll Management: Calculate, process, and distribute employee salaries in accordance with Tennessee's payroll laws, including deductions for taxes and social security contributions.
Tax Filing and Contributions: Handle the registration, filing, and payment of employer taxes and social security contributions to the relevant authorities.
Employment Contracts: Draft and maintain compliant employment agreements, detailing salary, benefits, working hours, and termination terms in line with Tennessee's legal requirements.
Benefits Administration: Provide mandatory employee benefits as required by Tennessee's labor laws, such as health insurance, pension contributions, and statutory leave.

Employer of Record for Tennessee

How to Hire Employees in Tennessee