How to Hire Employees in South Dakota: The Complete Guide for Small Businesses

South Dakota is one of the lightest regulatory states in the country for an employer, and that is exactly what trips people up. There is no state income tax, no state withholding account, no paid leave mandate, no meal break rule and no state E-Verify requirement. Founders read that list, conclude that hiring here is a formality, and then miss the three obligations that do carry hard deadlines.

Those three are the reemployment assistance tax registration with the Department of Labor and Regulation, the Form I-9 that has to be finished by the end of the third business day, and the new hire report that is due within 20 days of the first day of work. Everything else is either federal, optional or a matter of your own policy. That is the whole shape of it, and it is why a South Dakota first hire is genuinely manageable without an HR department.

I built FirstHR after running this sequence badly enough times to learn it properly. The order below is the order the work actually happens: the things you do before you have a candidate, the things you do the week you make the offer, the things you do on Day 1, and the ninety days that decide whether the hire works out. If this is your very first hire anywhere, the general version lives in our guide to hiring your first employee.

South Dakota Hiring at a Glance: Every Deadline in One Place

Three deadlines in South Dakota are enforceable with a specific consequence attached: the I-9 third business day, the 20-day new hire report, and the quarterly reemployment assistance filings that follow registration. The rest of the sequence is about doing things in an order that does not create rework.

Read that table as a sequence rather than a checklist. Steps one and two happen before you ever extend an offer. Steps three through six cluster around the first week. Step seven should already be done. Step eight is the part that determines whether you repeat this whole process again in six months.

Step 1: Get Your Federal Employer Identification Number

Before anything state-level happens, you need a federal Employer Identification Number from the IRS. The EIN identifies your business on employment tax returns, on your reemployment assistance registration, and on every new hire report you file. You apply online through IRS.gov, the application takes a few minutes, and the number is issued immediately at the end of the session.

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 with no employees and filing under your own Social Security number, you need an EIN now. You cannot report payroll taxes under a personal SSN once you have an employee.

Step 2: Register for Reemployment Assistance Tax with DLR

The South Dakota Department of Labor and Regulation administers the state unemployment program, which South Dakota calls Reemployment Assistance, and its Tax Unit is the agency you register with. DLR states that all newly established businesses are required to register with the Reemployment Assistance Tax Unit. You can register online or submit Form 1 by mail or fax, with Form 1NP for 501(c)(3) nonprofits and Form 1PS for political subdivisions.

This is the only state-level employer account most South Dakota businesses ever open. Because the state has no personal income tax, there is no withholding registration to file alongside it, which is why the payroll setup here is shorter than in almost any other state.

When You Become a Covered Employer

The DLR employer handbook lists the triggers for liability. Any one of them makes you a covered employer required to report wages and pay contributions, and the test looks at both the current and the preceding calendar year.

Successors to a business already subject to the reemployment assistance laws must register within 30 days of the change, and the same 30-day rule applies when the ownership structure of your business changes. There is no equivalent hard day count for a brand new employer, which is exactly why so many first-time employers register late.

What You Will Pay

Your state unemployment tax rate in South Dakota has two pieces while you are new: the reemployment assistance tax itself and a flat investment fee. The separate administrative fee applies only once you are experience-rated, so a first-year employer does not pay it. Construction employers start much higher.

The reduced second and third year rate is conditional. DLR states that you must maintain a positive reemployment assistance account balance to receive the 1.0% rate, or the 3.0% construction rate, in years two and three. The taxable wage base has been $15,000 per employee since 2015, and the statewide rate range runs from 0% to 9.5% once experience rating applies.

Quarterly reports and contributions are due by the last day of the month following the end of each quarter: April 30, July 31, October 31 and January 31. A report is required even in a quarter with no employment. Late filings draw $25 per month per delinquent report and another $25 for each delinquent contribution, capped at $150 each and $300 in total, with interest of 1.5% per month running from the due date.

Step 3: Verify Employment Eligibility with Form I-9

Every employee hired in the United States must complete Form I-9, and the two halves have different deadlines. The employee completes Section 1 on or before their first day of work. You complete Section 2 by the end of the third business day after work begins, after physically examining original documents from the acceptable documents list that establish identity and work authorization.

You cannot tell the employee which documents to present. Choosing from the list is the employee decision, and steering that choice is itself a document abuse violation. Substantive I-9 violations carry civil penalties of $288 to $2,861 per form under the current federal penalty schedule, charged per form rather than per inspection.

E-Verify in South Dakota

South Dakota does not require private employers to use E-Verify. The state adds no verification procedure on top of the federal I-9. House Bill 1209 in the 2026 session came close: as amended it would have required employers with more than fifty employees to run E-Verify within 20 days of a new hire, and it passed both chambers before dying when the Senate declined to adopt the conference committee report. Enrollment remains voluntary, and federal contractors with the relevant contract clause are the exception that already applied.

Step 4: Collect Form W-4 Before the First Paycheck

Every employee completes the federal Form W-4 before their first wage payment. The W-4 determines federal income tax withholding, and if the employee has not submitted one by the time you run payroll, you are required to withhold as if they were single with no adjustments. That produces an unhappy first paycheck and a conversation you do not want to have in week one.

South Dakota adds nothing here. With no personal income tax, there is no state withholding certificate to collect and no state allowance system to explain. This is one of the few genuine simplifications the state gives you, and it means the full new hire paperwork stack is shorter than in a neighboring state like Minnesota or Nebraska.

Step 5: File the New Hire Report Within 20 Days

South Dakota employers must report every new hire to the state New Hire Reporting Center within 20 days of the first day of work. The requirement covers newly hired, rehired, reemployed and reinstated employees, and it applies to full-time, part-time, student and temporary workers with no exceptions for size of employer.

Seven data elements are required: employee name as it appears on the Social Security card, employee address, Social Security number and date of hire, plus employer name, address and federal identification number. You can file online through the DLR employer portal, or report by phone, fax or mail, and DLR accepts a copy of the employee federal W-4 as the report. DLR uses the data to enforce child support orders and to detect improper reemployment assistance claims.

An employer who intentionally fails to comply with the new hire law commits a petty offense carrying a monetary penalty of $25 for each violation. Where an employer and employee conspire not to report, the penalty can reach $500 per newly hired employee.

Step 6: Make the Workers Compensation Decision Deliberately

South Dakota does not require private employers to carry workers compensation insurance. The Department of Labor and Regulation says so directly and adds the consequence in the same breath: an employer without coverage can be sued civilly. This is a real decision rather than a formality, and it is the single most consequential choice on this list.

When an employer does carry coverage, the trade is the familiar one. The injured employee gets medical and disability benefits as a matter of right, and gives up the right to sue the employer over the job-related injury. That exchange is what workers compensation insurance buys, and it is the reason to price a policy even though nothing in state law forces you to hold one.

What Happens If You Go Without Coverage

If an employer fails to provide coverage, an injured employee or the dependents of a deceased employee may proceed against the employer in an action at law to recover damages. Alternatively, they may elect to proceed in circuit court under the workers compensation law as if the employer had elected to operate under it. In that second path, the measure of benefits is all medical expenses plus twice the disability or death compensation the law would otherwise allow.

Read that clause carefully. The uninsured employer does not simply pay what an insurer would have paid. Double the disability compensation, plus every medical expense, plus your own defense costs, is the downside of a premium you decided to skip.

Who Is Outside the System Anyway

Your Reporting Duty After an Injury

Once you do carry coverage, a reporting duty comes with it. SDCL 62-6-1 requires every employer operating under the workers compensation title to keep a record of all injuries, completed within seven calendar days not counting Sundays and legal holidays after the employer has knowledge of the injury, and preserved for at least four years from the date of injury. DLR states that failing to report a work-related injury within seven days can result in a Class 2 misdemeanor charge and a $100 civil penalty. The employee is expected to give written notice within three business days or as soon as practicable, and you still have to file even if that notice never arrives.

Step 7: Put Up the Required State and Federal Notices

DLR states that South Dakota law requires only two workplace postings, and it identifies six federal postings that apply to most workplaces. All of them are free from the agencies that issue them, and DLR supplies a six-in-one federal compliance poster at no charge through its Job Service offices.

The Reemployment Assistance notification is the one people get wrong, because it is not really a wall poster. DLR specifies that it must be provided to workers individually and at the time of separation, which makes it an offboarding step rather than a break-room task. Build it into your termination checklist, not your poster frame.

Step 8: Onboard from Day 1 Through Day 90

Compliance gets an employee legally onto your payroll. Onboarding is what makes them productive, and it is the only step on this list with no government deadline and the largest financial consequence. The first weeks set whether a new hire stays, and that window is precisely the one most small employers leave unstructured because the paperwork felt like the finish line.

This is the part FirstHR was built for. The offer goes out with e-signature, the I-9 and W-4 come back before Day 1, the third business day and the twentieth day both become tasks with reminders rather than things you hope to remember, and the AI onboarding wizard turns the job description into a 30-60-90 day plan instead of a blank page. Flat, predictable pricing, with no per-employee surcharge for growing.

South Dakota-Specific Rules Every Employer Should Know

South Dakota employment law is short, and most of what it says is that the state has chosen not to legislate. The rules that do exist tend to be statutory and specific, which makes them easy to comply with once you know they are there. The South Dakota compliance hub tracks the full picture; the items below are the ones that shape a first hire.

Wages and Pay Timing

The state minimum wage is $11.85 an hour effective January 1, 2026, with a tipped cash wage of $5.925 and a requirement that cash wages plus tips reach the full minimum. SDCL 60-11-3.2 indexes the rate to the Consumer Price Index each January, rounding any increase up to the nearest five cents and prohibiting any decrease. DLR publishes the rate for the following year by October 15, which gives you a full quarter to adjust pay bands.

Two wage rules catch new employers. SDCL 60-11-4.1 allows an opportunity wage of $4.25 an hour for employees under twenty during their first 90 consecutive calendar days of employment. And SDCL 60-11-9 sets the payment floor at once each calendar month, on regular paydays designated in advance, payable by check, cash or direct deposit unless you and the employee agree otherwise.

Termination and At-Will Employment

South Dakota is a strong at-will employment state. SDCL 60-4-4 provides that an employment having no specified term may be terminated at the will of either party on notice to the other. DLR names the usual exceptions: a contract for a set length of employment, discharge in retaliation for refusing to commit an unlawful act, and discharge for exercising a lawful right such as filing a workers compensation claim.

Two smaller protections surprise people. Employees cannot be fired for jury service in any South Dakota court, and SDCL 60-4-11 makes it a discriminatory practice to fire someone for off-duty use of tobacco products, with narrow exceptions. Layer on the South Dakota Human Relations Act, which reaches any employer who hires an employee in the state with no headcount floor, and the practical rule is that at-will is broad but not unlimited.

Local and Tribal Requirements in South Dakota

South Dakota sets wage and hour rules at the state level, and DLR publishes a single statewide rate rather than a patchwork of city rates. The $11.85 floor applies identically in Sioux Falls, Rapid City, Aberdeen, Brookings and Watertown, and for a small employer the local obligations that do exist are licensing and zoning matters rather than employment ones. Confirm with your city clerk before you assume, but do not expect a municipal sick leave or fair chance ordinance the way you would in Minneapolis or Denver.

The one genuine local layer in South Dakota is tribal. Employers performing work on reservation land may fall under a tribal employment rights ordinance administered by the tribe, which can impose hiring preference, registration and fee obligations that have nothing to do with state law. If your work takes crews onto tribal land, contact that tribe employment rights office before the crew arrives rather than after.

Employee or Independent Contractor: South Dakota Uses a Two-Part Test

South Dakota applies a two-part test that is stricter than the federal common-law analysis most founders have in mind. Under SDCL 61-1-11, a worker is an independent contractor only if the worker is both free from your control or direction and customarily engaged in an independently established business. Fail either part and the worker is your employee.

The DLR employer handbook is unusually direct about the shortcuts people try. Issuing 1099s and not withholding taxes does not make an individual an independent contractor. A written agreement does not either, because a worker cannot sign away their reemployment assistance rights. Both the contract and the actual working relationship get examined.

If DLR determines that you have misclassified workers, you may be subject to back taxes, penalty and interest, and you may also be liable for federal unemployment tax. DLR will issue a written determination on request through its worker relationship questionnaire, which is the cheapest insurance available on this question. Our broader breakdown of employee versus contractor status covers the federal tests that run alongside the state one.

The Five Mistakes That Cost South Dakota Employers the Most

These are the failures I see repeatedly at small South Dakota employers. Each one is a timing or assumption error rather than a knowledge gap, which is why process beats expertise at this scale.

Notice the pattern. Nobody in this list did not know the rule. They knew the rule and ran out of the specific day on which the rule mattered. That is the argument for putting the third business day and the twentieth day into a system that reminds you, rather than into the part of your brain that is currently thinking about revenue.

The second pattern is the elective workers compensation trap. South Dakota gives you a choice most states do not, and a choice framed as optional gets processed as unimportant. Write the decision down with a date and a reason, and revisit it every time the nature of the work changes. An employee handbook is a reasonable place to record what employees should expect either way.

Frequently Asked Questions