How to Hire Employees in Alabama: The Complete Compliance Sequence
Alabama hiring guide for small businesses: ADOW and revenue registration, mandatory E-Verify, Form A-4, the seven-day new hire report, and workers’ comp.
The first time I helped a founder hire in Alabama, we lost two days to a single sentence in a state statute. This guide runs the whole Alabama hiring sequence in order, from the federal employer identification number (EIN) to the first ninety days on the job, so you do not lose the same two days.
Alabama requires every employer in the state to run every new hire through E-Verify, the federal online work-eligibility check. Not employers over a certain size. Not state contractors. Every employer. The offer was signed, the I-9 was ready, and there was no E-Verify account, while the three business day verification clock was already running.
Alabama looks like a light-touch state on paper. No state minimum wage law. No statute telling you how often to run payroll. No state deadline for a final paycheck. That surface simplicity is exactly what catches people out, because the obligations Alabama does impose are unusual, front-loaded, and spread across three different agencies.
I built FirstHR because this is a documents and deadlines problem rather than a knowledge problem. Founders almost always know the I-9 exists. What they miss is that Alabama wants the new hire report in seven days, not twenty.
- Sign the offer letter
- Sign the employee handbook
- Workplace Safety course
Every Alabama Deadline in One Place
Alabama hiring compliance is a chain of eleven dated obligations, and the registrations alone run through four agencies: the IRS, the Alabama Department of Workforce (formerly the Alabama Department of Labor), the Alabama Department of Revenue and the Department of Homeland Security. The table below shows the whole chain in step order, with what happens when a link breaks.
| When | Task | Deadline | If you miss it | Agency |
|---|---|---|---|---|
| Before any hire | Get your federal EIN | Before the first payroll run | No payroll, no tax deposits, no state accounts | IRS |
| Once wages are paid | Register for Alabama unemployment tax (Form SR-2) | As soon as liability is established | Late filing interest and penalties on unpaid contributions | Alabama Department of Workforce |
| Before any hire | Register for Alabama income tax withholding | Before the first wage payment | Cannot remit withheld tax; exposure for unremitted amounts | Alabama Department of Revenue |
| Before any hire | Enroll in E-Verify | Before the first employee starts | State enforcement suit; license sanctions if you knowingly employ unauthorized workers | US DHS / State of Alabama |
| Day 1 to Day 3 | Form I-9 Section 1 and Section 2 | Section 2 by end of the third business day | $288 to $2,861 per form for substantive violations | USCIS / ICE |
| Day 1 to Day 3 | Create the E-Verify case | By the third business day after the start date | Loss of the state E-Verify safe harbor for that hire | DHS |
| Day 1 | Collect Form W-4 and Alabama Form A-4 | On or before the day work begins | Alabama tax withheld at the highest rate, with zero exemptions | IRS / Alabama Dept. of Revenue |
| Within 7 days | File the Alabama new hire report | 7 days from the date of hire or rehire | Up to $25 per violation | Alabama Department of Workforce |
| Day 1 | Secure workers’ compensation coverage if you meet the threshold | Before the employee starts work | Double compensation on any claim, plus fines | Alabama Dept. of Workforce, Workers’ Comp Division |
| Day 1 | Post the required state and federal notices | Before employees begin work | Citations and penalties by posting agency | Alabama Dept. of Workforce / US DOL / DHS |
| Day 1 to Day 90 | Onboarding: handbook, training, check-ins | Ongoing through the first 90 days | No fine, but this is where new hires quit | Internal |
Two items on that list are the ones that catch newcomers. E-Verify is mandatory for every employer in Alabama, which is unusual. And the new hire report is due in seven days, not the twenty days most national checklists quote. Get those two right and the rest of the sequence is ordinary federal work with a state account number attached.
Step 1: Get Your Federal EIN
Every state account in this guide depends on a federal Employer Identification Number, so it comes first. Apply online through IRS.gov, and an approved application gets its number immediately at the end of the session. It takes minutes and costs nothing.
If you formed an LLC or corporation and already have an EIN, you do not need a second one. If you have been operating as a sole proprietor using your Social Security number, you need an EIN now, because you cannot report employment taxes under a personal SSN. Have the EIN in hand before you touch either Alabama registration, since both applications ask for it.
Step 2: Open an Alabama Unemployment Tax Account
Unemployment compensation tax in Alabama is administered by the Alabama Department of Workforce, and you register using Form SR-2, the Application to Determine Liability. File it as soon as liability is established rather than waiting for a notice, and manage the account afterward through the department eGov portal, where quarterly wage and tax reports and your annual rate notice both live.
Liability generally attaches when you pay $1,500 or more in wages in a calendar quarter, or when you employ at least one worker for some part of a day in each of twenty different weeks during the current or preceding calendar year. That is the test the department's employer FAQ sets out for non-farm businesses.
The Department of Workforce takes the application once wages have been paid for work performed in Alabama, so this account follows the first payroll rather than preceding the hire. Most first hires trigger the wage test within a quarter or two, so registering right after the first payroll is the simpler path.
The taxable wage base matters more than the rate for a small employer. Because only the first $8,000 per person is taxed, unemployment cost is effectively a fixed amount per head rather than a percentage of total payroll, and it front-loads into the first months of the year.
Step 3: Open a Withholding Account and Collect Form A-4
Alabama has a state income tax, so you also need a withholding account from the Alabama Department of Revenue. Register through the My Alabama Taxes portal and read the employer requirements on the department withholding tax page before your first payroll run. This is a separate agency and a separate account number from the unemployment registration in Step 2.
Alabama income tax runs on three brackets, and because the thresholds are compressed at the bottom, nearly every full-time employee reaches the top rate. That has a practical consequence: the exemptions an employee claims on Form A-4 matter far more than the bracket math.
| Filing status | 2 percent applies to | 4 percent applies to | 5 percent applies above |
|---|---|---|---|
| Single or married filing separately | First $500 of taxable income | Next $2,500 | $3,000 |
| Married filing jointly | First $1,000 of taxable income | Next $5,000 | $6,000 |
| Head of family | First $500 of taxable income | Next $2,500 | $3,000 |
Form A-4 Is Due Before the First Shift
Form A-4 is the Alabama Employee's Withholding Tax Exemption Certificate. Every employee must furnish it on or before the date employment commences, not within some grace period afterward. If it is missing, the Department of Revenue tells the employer to withhold using zero exemptions, the highest rate, which produces a visibly wrong first paycheck for anyone with dependents.
Put Form A-4 in the same pre-start packet as the federal W-4, the I-9 and the direct deposit authorization.
Step 4: Enroll in E-Verify Before You Make an Offer
This is the step that makes Alabama different. The Beason-Hammon Alabama Taxpayer and Citizen Protection Act, codified at Ala. Code 31-13-15, has required every business entity or employer in Alabama to enroll in E-Verify and verify each new hire since April 1, 2012. There is no size exemption and no phase-in. If you employ anyone in Alabama, you are covered.
Enroll at e-verify.gov and sign the memorandum of understanding. Do it before you extend an offer, because a case cannot be created until an offer has been accepted and Form I-9 is complete, and E-Verify rules bar a case for anyone whose first day of work came before your memorandum took effect.
Alabama law also contemplates help for the smallest employers. Ala. Code 31-13-25 directs the state to run a free E-Verify employer agent service for any employer with 25 or fewer employees, enrolling the business and creating its cases on its behalf.
Section 31-13-25 names an agency that has since been folded into the Alabama Law Enforcement Agency, whose E-Verify page now sends employers to the federal enrollment process. Ask that agency whether the service still operates before you count on it. Enrolling directly is the reliable path.
Step 5: Complete Form I-9 and Create the E-Verify Case
Form I-9, the federal employment eligibility form, applies everywhere, but in Alabama it feeds directly into a second mandatory step, so the two deadlines run together.
Section 1 of the form is completed by the employee on or before the first day of work. Section 2 is completed by you, after examining the employee's original documents, by the end of the third business day after the start date.
The E-Verify case must be created no later than the third business day after the employee starts work for pay. Same clock, different system. You cannot create the case earlier than the accepted offer and the completed I-9, so in practice both land on day one or day two.
Storage and Retention
Keep I-9 forms separately from personnel files. They are subject to government inspection, and co-storing them exposes unrelated confidential employee information to an inspector who never had a right to see it. Retain each I-9 for three years from the date of hire or one year after the employment ends, whichever is later.
Step 6: File the New Hire Report Within Seven Days
Alabama requires you to report every newly hired or recalled employee to the Alabama Department of Workforce within seven days of the date of hire or reemployment. That is the deadline that catches employers out, because the federal floor is twenty days and almost every national hiring checklist quotes the federal number.
Reports go to the department's New Hire Center. The department uses the data to detect unemployment fraud, identify claimants who refuse suitable work, and support child support enforcement. Failing to report can bring a penalty of up to $25 per violation.
| Requirement | Detail |
|---|---|
| Deadline | 7 days from the date of hire or reemployment |
| Agency | Alabama Department of Workforce, New-Hire Unit |
| Employee data | Name, address, Social Security number, first day of work, new hire or recall status |
| Employer data | Business name, address, federal employer identification number, and the employer account number from your quarterly wage reports |
| Employers with five or more employees | Must report over the internet |
| Employers with fewer than five employees | May report online or send a copy of the employee W-4 |
| Internet upload filers | May batch twice monthly, not less than 12 and not more than 16 days apart |
| Penalty | Up to $25 per violation |
The easiest way to never miss this is to attach it to something you already do on day one. File the report in the same sitting where you complete Section 2 of the I-9. Both tasks use the same facts and the same folder, and one of them has a seven-day fuse.
Step 7: Decide on Workers' Compensation Coverage
Alabama sets a headcount threshold rather than a universal mandate. Under Ala. Code 25-5-50, the Workers' Compensation Act does not apply to an employer who regularly employs fewer than five employees in any one business. At five or more, coverage is required.
There is one important carve-out. The exemption does not extend to the business of constructing, or assisting on site in the construction of, new single-family detached residential dwellings. A residential builder needs coverage regardless of how few people it employs, which is a trap for a two-person framing crew.
Watch the word "regularly." Part-time staff count toward the total, so a business can cross into mandatory coverage through a seasonal hire without anyone making a decision about it. Re-check headcount before every offer, not once a year.
Make that re-check a piece of paper rather than a mental note. Run this before you extend the offer, file it with the hire, and you will have a dated record of the count, the construction question, and the coverage decision at the moment it was made.
Step 8: Post the Required State and Federal Notices
Alabama requires up to three state postings, depending on whom you employ, plus a child labor certificate if you hire minors. Because every Alabama employer participates in E-Verify, two federal E-Verify posters are effectively mandatory statewide as well. The posters are all free downloads. Do not buy a laminated poster kit for documents the agencies publish as PDFs.
| Poster | Source | Applies to |
|---|---|---|
| Alabama Child Labor Law | Alabama Department of Workforce | Any location where anyone under 19 is employed |
| Workers’ Compensation notice | Alabama Department of Workforce | Covered Alabama employers |
| Your Job Insurance (unemployment) | Alabama Department of Workforce | All liable Alabama employers |
| Child Labor Certificate, Class I or II | Alabama Department of Workforce | Any location employing minors, posted in public view |
| E-Verify Participation, English and Spanish | e-verify.gov | All E-Verify participants, meaning all Alabama employers |
| Right to Work, English and Spanish | e-verify.gov (US DOJ) | All E-Verify participants |
| Federal minimum wage under the FLSA | US Department of Labor | All covered employers |
| OSHA Job Safety and Health | OSHA | All covered employers |
| Know Your Rights: Workplace Discrimination is Illegal | EEOC | Employers meeting the Title VII threshold |
| Employee Polygraph Protection Act and USERRA | US Department of Labor | All covered employers |
Employing anyone under eighteen adds a licensing step, not just a poster. Alabama requires a Class I child labor certificate for fourteen and fifteen year olds and a Class II certificate for sixteen and seventeen year olds, at $15 per business location, posted in public view.
Alabama also requires you to keep an employee information form, proof of age, and daily time records for every employee eighteen and under.
Step 9: Onboard From Day One Through Day Ninety
Steps one through eight make the hire legal. Step nine makes it worth the money. Every form the new hire fills in should be signed before day one arrives, so the first day is about the person and the work rather than a stack of paper across a table.
This is the part of the sequence FirstHR was built for. The offer letter goes out with e-signature. Form I-9, W-4, and Form A-4 go on the new hire's first-day list as tasks, and completed forms are kept in their employee file. The forms themselves are completed outside the platform.
The seven-day new hire report becomes a task with a due date instead of a memory, and the AI onboarding wizard builds a role-specific onboarding plan from the new hire's position, which you can extend into a 30-60-90 day plan. A written employee handbook closes the loop, since Alabama leaves pay frequency and final pay to your own policy.
Alabama Rules That Surprise Employers From Other States
Alabama employment law is defined as much by what it does not regulate as by what it does. There is no state minimum wage law, no pay frequency statute, no final paycheck deadline and no state paid sick leave mandate. What Alabama does regulate, it regulates in ways that do not match neighboring states.
Two of those deserve extra attention when you write the offer letter. Alabama employment is at will unless a contract says otherwise, and the state has a codified restrictive covenant framework that gives you real, if bounded, enforceability.
| Topic | Alabama position | What you should do |
|---|---|---|
| Minimum wage | No state law; federal $7.25 floor applies; no indexing | Set pay by market, not by a state floor that will not move |
| Local wage or benefit mandates | Preempted by Ala. Code 25-7-41 | Do not budget for a city wage ordinance; it cannot take effect |
| Pay frequency | No state statute | Fix the schedule in writing and follow it exactly |
| Final paycheck | No state deadline | Set your own rule in the handbook before a dispute arises |
| Meal and rest breaks | No state mandate for adult employees | Follow federal rules on paid short breaks; child labor rules govern minors |
| Paid sick leave | No state mandate | Offer it as a competitive choice, not a compliance obligation |
| Age discrimination | State act covers employers with twenty or more employees | Train managers early; the state act allows a direct lawsuit |
| Non-compete duration | Two years presumptively reasonable for employees | Do not overreach; courts reform rather than rewrite in your favor |
Nick Anisimov, FirstHR founderCity and County Requirements: The Occupational Tax Layer
Alabama preempts local wage and benefit mandates, so cities cannot set a minimum wage or a sick leave rule. What they can do is tax wages. About two dozen municipalities, by the Alabama League of Municipalities' count, levy an occupational tax under Ala. Code 11-51-90, and the employer withholds and remits it.
The rule that trips people up is the situs rule: the tax attaches to where the work is physically performed, not where the employee lives and not where your business is registered. A crew working three job sites in a week can touch three jurisdictions.
| Jurisdiction | Rate on wages earned in the jurisdiction | Employer duty |
|---|---|---|
| Birmingham | 1 percent | Withhold and remit monthly, by the 20th |
| Bessemer | 1 percent | Withhold and remit quarterly |
| Gadsden | 2 percent | Withhold and remit to the city |
| Auburn | 1 percent of gross earnings | Withhold and report quarterly |
| Opelika | 1 percent of gross wages, reduced from 1.5 percent in April 2025 | Withhold and remit quarterly |
| Macon County | 1 percent | Withhold and remit to the county |
| Other Alabama municipalities | Generally 0.5 to 2 percent | Confirm rate and cadence with the city before the first payroll run |
The set of jurisdictions is small and it changes rarely, but that is where the comfort ends. Each city sets its own rate, its own filing cadence and its own definition of taxable earnings, and none of it is collected in one place. Confirm the rate and the remittance schedule with the city itself before you run payroll.
Because nothing collects this in one place, you have to build the register yourself. One row per person or crew per worksite, with the date you confirmed the rate and the cadence with the city itself, and a remittance sheet behind it so a missed filing is visible before the city notices it.
| A | B | C | D | E | F | G | H | I | |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Employee or crew | Worksite address where the work is performed | City or county | Occupational tax applies | Rate confirmed with the city | What counts as taxable earnings | Filing cadence | Account number | Confirmed by and date |
| 2 | [Name or crew] | [Street address] | Birmingham | Yes | 1 percent | [Confirm with the city] | [Confirm with the city] | [Account number] | [Name, date] |
| 3 | [Name or crew] | [Street address] | [City or county] | [Yes, no, or still to confirm] | [Rate] | [Confirm with the city] | [Monthly or quarterly] | [Account number] | [Name, date] |
| 4 | |||||||||
| 5 | |||||||||
| 6 | |||||||||
| 7 | |||||||||
| 8 | |||||||||
| 9 |
Employee or Independent Contractor: What Alabama Puts at Risk
Calling a worker a contractor does not make them one, and in Alabama a misclassification finding unwinds several of the steps above at once. Unemployment tax liability is reassessed retroactively, the new hire report was never filed, the E-Verify case was never created, and the person may count toward your workers' compensation threshold after all.
Alabama applies common-law control principles that track the federal test closely. The controlling question is not what the agreement says or how the person is paid. It is who directs the manner and means of the work.
| Question | Points to employee | Points to contractor |
|---|---|---|
| Who sets the schedule? | You do | The worker does |
| Who supplies tools and equipment? | You do | The worker does |
| Can the worker lose money on the engagement? | No, wages are fixed | Yes, they bear real financial risk |
| Is the relationship open-ended? | Yes, continuous | No, it ends when the project ends |
| Can the worker serve competing clients? | No, or restricted | Yes, freely |
| Who decides the method of the work? | You dictate the process | The worker chooses the method |
| Is the work core to your business? | Yes, it is what you sell | No, it is a specialized service |
When the answer is genuinely unclear, classify as an employee. The cost of running someone through payroll correctly is always smaller than the cost of a reclassification with back contributions and interest attached.
The Mistakes That Cost Alabama Employers the Most
Most of the mistakes below are timing failures rather than knowledge failures. The employer knew the requirement existed. It just did not happen on the day it needed to happen, because nothing was tracking it.
The pattern is consistent across every small employer I have worked with. Compliance does not break because a founder cannot read a statute. It breaks in week three, when a customer emergency eats the day the new hire report was supposed to be filed.
Tasks with due dates and a document checklist that will not close until every form is signed solve more of this than any amount of legal reading.
Nick Anisimov, FirstHR founder
Frequently Asked Questions
Do I have to use E-Verify to hire employees in Alabama?
Yes. Under the Beason-Hammon Alabama Taxpayer and Citizen Protection Act (Ala. Code 31-13-15), every business entity or employer operating in Alabama must be enrolled in E-Verify and must run each new hire through it. That has been the rule since April 1, 2012, with no small-business exemption and no phase-in size. Most other states limit E-Verify to public employers or state contractors, so Alabama is an outlier. Enforcement runs through business licensing rather than a simple fine. Ala. Code 31-13-25 also promises a free employer agent service for employers with 25 or fewer employees, but the agency named in that section was later folded into the Alabama Law Enforcement Agency, and that agency’s E-Verify page now points employers to the federal enrollment process. Ask that agency before relying on the service. Whichever route you take, enroll before your first hire, because E-Verify will not let you open a case until the offer is accepted and Form I-9 is complete.
How many days do I have to report a new hire in Alabama?
Seven days, counted from the date of hire or reemployment. That is far shorter than the twenty-day federal limit that most national checklists repeat, so it is an easy deadline to miss. You file with the Alabama Department of Workforce. For each person, include the name, address, Social Security number, first day of work, and whether this is a new hire or a recall. For your business, include its name, address and federal employer identification number, plus the account number from your quarterly unemployment wage reports. The format depends on size: employers with five or more employees must file online, while smaller ones may mail or fax a copy of the W-4 marked with the start date and new hire or recall status. Employers filing by internet upload may submit batches twice a month, no fewer than 12 and no more than 16 days apart. The penalty for not reporting is up to $25 per violation.
What is the minimum wage in Alabama and is it indexed?
Alabama has no state minimum wage law at all, so the federal minimum of $7.25 an hour applies to covered employers. Because there is no state statute, there is no indexing mechanism, no scheduled increase and no cost-of-living adjustment. The rate changes only if Congress changes the federal floor. Cities and counties cannot fill the gap either: Ala. Code 25-7-41, enacted by Act 2016-18, preempts local ordinances that require employers to provide wages or employment benefits beyond what state or federal law mandates, and voids any local rule that conflicts. Birmingham adopted a local minimum wage ordinance and the Legislature preempted it in 2016. Tipped employees follow the federal cash wage and tip credit rules rather than a separate Alabama standard.
Is workers’ compensation insurance required in Alabama?
It depends on how many people you regularly employ. Alabama’s Workers’ Compensation Act, under Ala. Code 25-5-50, exempts an employer that regularly has fewer than five employees in any one business. Two things change that picture. The first is the work itself: a business that builds, or helps on site to build, new single-family detached homes needs coverage at any size. The second is the count: at five or more employees coverage is mandatory, and the Alabama Department of Workforce counts full-time staff, part-time staff, corporate officers and LLC members toward that total. Under five, coverage is a choice, and you opt in by sending the department written notice that you are coming under the Act. Because part-time workers count, a seasonal hire can push you over the line without anyone deciding anything, so re-check your headcount before every hire.
Do I need to register with the state before hiring my first employee in Alabama?
Yes for income tax withholding. The unemployment tax account comes later, once you have paid wages. Start with the Alabama Department of Revenue: it issues your withholding account through the My Alabama Taxes portal, and you want it open before the first payroll run, since you cannot send in the tax you hold back without it. The unemployment account is a separate one with the Alabama Department of Workforce. You apply with Form SR-2, the Application to Determine Liability, in the department’s eGov portal, which a new employer can use only after its first Alabama wages have been paid. You generally become liable when you pay $1,500 or more in wages in a calendar quarter, or when you have had at least one worker for part of a day in each of 20 different weeks in the current or preceding calendar year. Apply as soon as you meet either test.
What is Alabama Form A-4 and what happens if I do not collect it?
Form A-4 is the Alabama Employee’s Withholding Tax Exemption Certificate, the state equivalent of the federal W-4. The employee gives it to you showing a filing status and the exemptions claimed, and it is due by the date employment begins. If the employee never hands one in, the Alabama Department of Revenue tells you to withhold as though they claimed zero exemptions. That is the highest withholding rate, so anyone supporting dependents is over-withheld. Because Alabama’s income tax has only three brackets and the top rate starts at a low income, the gap shows up on the first paycheck. The simple way to avoid it is to send the form alongside the W-4 and the I-9 ahead of the first day, and to collect both tax forms before the start date instead of chasing them afterward.
Does Alabama have a final paycheck deadline or a required pay frequency?
No. Alabama has not enacted a statute setting how often private employers must pay wages, and it has no state deadline for issuing a final paycheck after a separation. That puts Alabama in a small group of states that leave both questions to federal wage law and to the employer’s own established practice. In practice, that means your written pay schedule becomes the enforceable standard, so put it in the offer letter and the handbook and follow it consistently. Federal rules still require that wages actually earned be paid, and accrued vacation is governed by your written policy and contract principles rather than by a state payout statute. Document the policy before the first hire, not after the first dispute.
Which Alabama cities charge an occupational tax on wages?
About two dozen Alabama cities and towns levy an occupational tax on wages, authorized by the municipal license statute at Ala. Code 11-51-90, and it is the employer who withholds and remits it. Birmingham and Bessemer each charge 1 percent and Gadsden charges 2 percent. Auburn takes 1 percent of gross earnings for services performed inside city limits. Opelika also takes 1 percent, after lowering its rate from 1.5 percent effective April 1, 2025. What matters is where the work is physically done, not where the employee lives or where your company is registered, so a crew that moves between job sites in a single week can owe tax to several places. Filing schedules differ as well: Auburn, Opelika and Bessemer collect quarterly, while Birmingham expects monthly payment by the 20th. Check each city’s rate, schedule and definition of taxable earnings before your first payroll run.
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