How to Hire Employees in South Dakota: The Complete Guide for Small Businesses
South Dakota hiring guide for small businesses: reemployment tax registration, I-9, W-4, the 20-day new hire report, workers comp, and onboarding.
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 and its quarterly filings with the Department of Labor and Regulation (DLR), 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.
- Sign the offer letter
- Sign the employee handbook
- Workplace Safety course
South Dakota Hiring at a Glance: Every Deadline in One Place
Three deadlines in South Dakota carry a specific consequence if you miss them: the I-9 Section 2 deadline on the 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.
| When | Deadline | Exposure | Agency | |
|---|---|---|---|---|
| Get your federal EIN | Before Day 1 | Before the first payroll run | You cannot file employment tax returns or run payroll without one | IRS |
| Register with the Reemployment Assistance Tax Unit | Before Day 1 | When you become a covered employer; successors within 30 days of the change | $25 per month per delinquent report plus $25 per delinquent contribution, capped at $150 each and $300 in total, plus 1.5% monthly interest | SD DLR |
| Complete Form I-9 | Within 3 business days | Section 1 on or before Day 1, Section 2 within three business days of the first day of work | $288 to $2,861 per form for substantive violations | USCIS / ICE |
| Collect federal Form W-4 | Before the first paycheck | Before the first wage payment | You must withhold at the single, no-adjustments rate | IRS |
| File the new hire report | Within 20 days | 20 days from the first day of work | Petty offense, $25 per violation, up to $500 for a conspiracy not to report | SD DLR |
| Decide on workers compensation coverage | Before Day 1 | Before the employee performs any work | No fine, but an uninsured employer can be sued at law or owe double disability compensation | SD DLR |
| Post the required state and federal notices | Day 1 | Before employees begin work | Federal poster penalties apply; the safety notice is required by the comp law | DLR / US DOL |
| Run structured onboarding | Day 1 to Day 90 | Ongoing through the first 90 days | No legal penalty, but early turnover concentrates in the first weeks | Internal |
Read that timeline 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 offer and the first weeks. Step seven, the notices, should already be up by Day 1. 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 (DLR) administers the state unemployment program, which South Dakota calls Reemployment Assistance (RA), 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.
| Trigger | Threshold |
|---|---|
| General employment | One or more individuals, full or part time, in 20 different calendar weeks in the current or preceding calendar year |
| Wages paid | $1,500 or more in wages in a calendar quarter in the current or preceding calendar year |
| Federal coverage | You are covered under the Federal Unemployment Tax Act |
| Business acquisition | You acquired all or a portion of a covered business |
| Agricultural employment | $20,000 or more in a calendar quarter, or 10 or more individuals for some portion of a day in each of 20 different calendar weeks |
| Domestic employment | $1,000 or more in a calendar quarter in the current or preceding calendar year |
| 501(c)(3) nonprofits | Four or more individuals in 20 different calendar weeks in the current or 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 a first-time employer can easily 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.
| Component | New employer, year 1 | New employer, years 2 and 3 |
|---|---|---|
| RA tax, non-construction | 1.20% | 1.00% |
| RA tax, construction | 6.00% | 3.00% |
| Investment fee | 0.55% | 0.55% |
| Administrative fee | Not applicable | Not applicable |
| Combined, non-construction | 1.75% | 1.55% |
| Combined, construction | 6.55% | 3.55% |
| Taxable wage base | $15,000 per employee | $15,000 per employee |
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. Once experience rating applies, the contribution rates for 2026 run from 0.00% to 8.52%, according to the U.S. Department of Labor summary of state unemployment tax provisions (January 2026).
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 quarterly 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 can be treated as document abuse under federal anti-discrimination law, which reaches employers with four or more employees.
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 federal online system for confirming work eligibility), and the state adds no verification procedure on top of the federal I-9. House Bill 1209 came close in the 2026 session, passing the House as a mandate for every employer and the Senate as one for employers with more than fifty employees.
The final conference committee text, the compromise between the chambers, covered employers with more than twenty-five employees and required the check no later than the tenth day after the first day of work. The bill died when the Senate declined to adopt that conference committee report. Enrollment remains voluntary, and federal contractors with the relevant contract clause are the exception that already applied.
Enrolling has one practical upside for the I-9 itself: an employer enrolled in E-Verify and in good standing may examine documents remotely under the Department of Homeland Security alternative procedure instead of in person.
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.
Nick Anisimov, FirstHR founderStep 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 every new hire and every rehire who has not been paid for the past 30 days, 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
Under SDCL 62-3-11, 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.
The injured employee or the dependents may instead 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.
Whichever way you go, write the decision down. A choice with a date, a reason and a review trigger attached to it is a decision. The same choice made by not getting around to it is the thing that surprises you two years later.
Who Is Outside the System Anyway
| Category | Coverage status |
|---|---|
| Domestic servants | Exempt unless working more than 20 hours in a calendar week and more than six weeks in any 13-week period |
| Farm and agricultural laborers | Exempt |
| Work outside the usual course of business | Exempt when the employment is not in the usual course of the trade, business, occupation or profession of the employer |
| Certain elected officials | Exempt |
| Workfare participants | Exempt |
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 record every injury within seven calendar days (not counting Sundays and legal holidays) after learning of it, and to keep that record 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.
| Notice | Level | Source | Notes |
|---|---|---|---|
| Reemployment Assistance Employee Notification | State | DLR | Post it, and also give it to each worker individually at separation |
| Safety on the Job | State | DLR | Required by the workers compensation law; no set format, three design options offered free |
| Employee Rights Under the FLSA | Federal | US DOL | All covered employers |
| Employee Polygraph Protection Act | Federal | US DOL | Most private employers |
| Know Your Rights: Workplace Discrimination Is Illegal | Federal | EEOC | Employers with 15 or more employees |
| Job Safety and Health Protection | Federal | OSHA | Most private employers |
| Family and Medical Leave Act | Federal | US DOL | Employers with 50 or more employees |
| USERRA | Federal | US DOL | All employers |
The Reemployment Assistance notification is the one people get wrong, because the wall copy is only half of it. DLR specifies that the notice must also be provided to workers individually and at the time of separation, by letter, email, text message or flyer.
The Reemployment Assistance notice is therefore an offboarding step as well as a break-room poster, so put it in your poster frame and in your termination checklist.
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. 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.
| Timeline | What happens | Owner |
|---|---|---|
| Offer stage | Offer letter with e-signature, I-9 Section 1, W-4, direct deposit authorization and handbook acknowledgment collected digitally | Founder or hiring manager |
| Day 1 | Welcome, introductions, workspace and tool access, role expectations. Complete I-9 Section 2 and examine documents. | Founder or hiring manager |
| Within 3 business days | Finish I-9 Section 2 within three business days of Day 1. File the new hire report (due within 20 days). Confirm workers comp status and safety notice. | Founder or hiring manager |
| Week 1 | Role-specific training, buddy assignment, first manager check-in | Manager and buddy |
| Day 30 | First formal check-in. Review 30-day goals and close any gaps. | Manager |
| Day 60 | Second check-in. The employee should be contributing independently. | Manager |
| Day 90 | Formal review. Transition from onboarding to ongoing performance management. | Manager |
This is the part FirstHR was built for. The offer goes out with e-signature. Form I-9 and W-4 go on the first-day list as tasks for the new hire, and completed forms are kept in their employee file; the forms themselves are completed outside the platform.
The twentieth-day new hire report gets a task with its own due date rather than living in your memory, 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.
Wages and Pay Timing
The state minimum wage is $12.30 an hour effective January 1, 2027, with a tipped cash wage of $6.15 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. The first, 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. The second, 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.
| Topic | South Dakota rule | Statute or source |
|---|---|---|
| State income tax withholding | None | No state personal income tax |
| Minimum wage | $12.30 per hour from January 1, 2027, CPI-indexed each January 1 | SDCL 60-11-3, 60-11-3.2 |
| Tipped cash wage | $6.15 per hour from January 1, 2027, tips must close the gap | SDCL 60-11-3.1 |
| Opportunity wage (under twenty) | $4.25 per hour for the first 90 consecutive calendar days | SDCL 60-11-4.1 |
| Pay frequency | At least once each calendar month on agreed paydays | SDCL 60-11-9 |
| Final pay after termination or resignation | Next regular payday, or when employer property is returned | SDCL 60-11-10, 60-11-11 |
| Rest breaks and meal periods | No state requirement | DLR employment law guidance |
| Paid leave and holiday pay | No state requirement | DLR employment law guidance |
| Workers compensation | Elective for private employers | DLR workers compensation guidance |
| Anti-discrimination coverage | Applies to any employer who hires an employee in the state | SDCL 20-13 |
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.
The South Dakota Human Relations Act adds another layer: it reaches any employer who hires an employee in the state, with no headcount floor, so at-will is broad but not unlimited.
Nick Anisimov, FirstHR founderLocal 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 state floor, $12.30 from January 1, 2027, 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.
A municipal minimum wage or sick leave ordinance, the kind you would find in Minneapolis or Denver, is not something to expect here, but confirm with your city clerk before you assume.
| Jurisdiction | Local employment mandate | What to do |
|---|---|---|
| Sioux Falls | None beyond state and federal law | Follow the state rules; check city licensing for your industry |
| Rapid City | None beyond state and federal law | Follow the state rules; check city licensing for your industry |
| Aberdeen, Brookings, Watertown | None beyond state and federal law | Follow the state rules |
| Tribal lands | Tribal employment rights ordinances may apply to work performed on the reservation | Contact the relevant tribal employment rights office before starting work |
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 require a hiring preference for tribal members and impose other 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.
| Question | Employee (W-2) | Contractor (1099) |
|---|---|---|
| Who has the legal right to control the outcome of the work? | You do | The worker does |
| Does the worker run an established business of their own? | No | Yes, independently of and separate from your work |
| When must that independent business exist? | Not applicable | At the time the services are rendered, because the statute uses the present tense |
| Who sets schedule and methods? | You do | The worker does |
| Does payment method decide the answer? | No | No, commission or piecework does not make a contractor |
| Does a signed agreement decide the answer? | No | No, the actual relationship controls |
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.
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 in the timing mistakes. The employer knew the rule and ran out of the specific day on which it 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.
If that system is a spreadsheet for now, this is the spreadsheet. Fill in the first day of work and the two due dates fall out of it, so the deadline exists somewhere other than your memory. The second tab holds the quarterly filings that follow registration, including the quarters with no employment, which still need a report.
| A | B | C | D | E | F | G | H | I | J | K | L | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Employee | First day of work | I-9 Section 1 signed on | I-9 Section 2 due (third business day) | Section 2 completed on | W-4 collected on | New hire report due (20 days from first day) | New hire report filed on | Filed how | Workers comp status confirmed | Safety on the Job notice posted | Note |
| 2 | Example: name | Mon MM/DD | MM/DD | Thu MM/DD | MM/DD | MM/DD | MM/DD | MM/DD | DLR employer portal | Yes | Yes | W-4 copy used as the report |
| 3 | ||||||||||||
| 4 | ||||||||||||
| 5 | ||||||||||||
| 6 | ||||||||||||
| 7 | ||||||||||||
| 8 | ||||||||||||
| 9 |
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.
Frequently Asked Questions
Do I need to register with the state before hiring my first employee in South Dakota?
Yes, in practice. The one state-level registration a typical employer needs is a Reemployment Assistance tax account with the South Dakota Department of Labor and Regulation, and DLR says every newly established business is required to register with its Reemployment Assistance Tax Unit. Liability starts when you have one or more individuals working for you, full or part time, in 20 different calendar weeks of the current or preceding calendar year, or when you pay $1,500 or more in wages in a calendar quarter of either year. Being covered under the Federal Unemployment Tax Act, or taking over all or part of a covered business, also makes you liable. A successor to an existing liable business has 30 days from the change to register. Since South Dakota has no personal income tax, there is no state withholding account to set up.
Is workers compensation insurance required in South Dakota?
No. The Department of Labor and Regulation says state law does not make employers carry workers compensation insurance, but it warns that an employer without coverage can be sued civilly. That makes South Dakota one of the few states where the coverage decision is genuinely elective for private employers. The exposure is real, though. Under SDCL 62-3-11, an injured worker, or the dependents of a worker who died, can take an uninsured employer to court for damages. They may instead choose to claim under the workers compensation law as though the employer had elected coverage, and in that case the employer pays all medical expenses plus double the disability or death compensation the law would normally allow.
What is the deadline to report a new hire in South Dakota?
Twenty days. South Dakota requires you to report every new hire, and any rehire who has gone 30 days or more without being paid, to the New Hire Reporting Center within 20 days of the first day of work. The rule comes from federal welfare reform law and SDCL 25-7A-3.3, and it covers full-time, part-time, student and temporary workers alike. You report seven items: the employee name, address, Social Security number and date of hire, plus your own business name, address and federal identification number. File online through the DLR employer portal or by phone, fax or mail; a copy of the federal W-4 is accepted in place of a separate report. An intentional failure to comply is a petty offense with a $25 penalty for each violation.
What is the minimum wage in South Dakota and does it change every year?
The South Dakota minimum wage is $12.30 an hour effective January 1, 2027, and yes, it changes almost every year. Under SDCL 60-11-3.2 the rate moves each January 1 in line with the cost of living, using the August-to-August change in the Consumer Price Index for all urban consumers, and any increase is rounded up to the nearest five cents. The rate can go up but never down. DLR posts the next year rate on its website by October 15. Tipped employees have a cash wage of $6.15 an hour from the same date, and cash wages plus tips must add up to the full minimum. Workers under twenty can be paid a $4.25 opportunity wage during their first 90 consecutive calendar days.
Does South Dakota require E-Verify?
No. South Dakota does not make private employers use E-Verify, the federal online work-eligibility check, and the state adds no employment verification steps beyond the federal Form I-9. The nearest miss was House Bill 1209 in 2026. Its final version, the conference committee text, would have covered employers with more than twenty-five employees, but the Senate refused to adopt that report and the bill never became law. Enrolling in E-Verify is voluntary, although federal contractors whose contracts carry the relevant clause must still use it. Either way, the I-9 duties stay the same: the employee completes Section 1 on or before the first day of work, and you complete Section 2 within three business days of the start date.
How often must I pay employees in South Dakota, and when is the final paycheck due?
At least once each calendar month. SDCL 60-11-9 requires wages to be paid at least once each calendar month, or on regular agreed paydays designated in advance, and allows payment by check, cash or direct deposit unless the parties agree to another form. Most private employers use a biweekly or semimonthly cycle (about 63% of private establishments in Bureau of Labor Statistics data for February 2023), and either one comfortably satisfies the statute. Final pay follows the same rule whether the employee quits or is fired: under SDCL 60-11-10 and 60-11-11, unpaid wages are due by the next regular payday on which those hours would normally have been paid, or as soon after that as the employee returns all employer property in their possession.
What forms does every new hire in South Dakota need to complete?
Fewer than in most states. Every new hire completes Form I-9 to verify employment eligibility, with Section 1 on or before Day 1 and Section 2 within three business days of the start date, plus federal Form W-4 before the first paycheck. South Dakota has no personal income tax, so no state withholding certificate exists. On top of those, you will typically add a direct deposit authorization if you pay electronically, an employee handbook acknowledgment, and any role-specific agreements such as confidentiality terms. Store the I-9 apart from the personnel record, and keep it for three years from the hire date or one year after employment ends, whichever is later.
Can I hire an independent contractor instead of an employee in South Dakota?
You can, but the state test is stricter than most founders expect. Under SDCL 61-1-11, a contractor must meet two conditions at once: the worker is free from your control or direction, and the worker is customarily engaged in an independently established business. Failing either one makes the worker your employee. The DLR employer handbook warns that sending a 1099 and skipping withholding does not create a contractor, and that a worker cannot sign away reemployment assistance rights. If DLR reclassifies a contractor as an employee, you may owe back taxes, penalty and interest, plus federal unemployment tax. You can ask DLR for a written determination through its worker relationship questionnaire.
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