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Kentucky Payroll Tax and Labor Laws

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Did you know that out-of-state employers may voluntarily withhold Kentucky tax from the wages paid to a Kentucky resident who is working outside of Kentucky?

Kentucky Wage and Hour Laws

Employees covered by Kentucky's minimum wage law must be paid $7.25 an hour. If the federal minimum wage increases, the state minimum wage will increase by the same amount.

All employees are covered except for:

  • agricultural workers;
  • employees of retail stores, hotels, motels, and restaurants with average annual sales of less than $95,000 for the preceding five years;
  • individuals employed by a third party or agency that provides in-home companionship services for a sick, convalescing or elderly person; and
  • certain emergency employees.

Kentucky Payroll for Employers

Employers covered by Kentucky's wage payment law must pay wages at least semimonthly and not more than 18 days after the wages were earned. Employees absent on payday must be paid within six days after they demand payment.
Kentucky Unemployment:

Taxable Wage Base ($000s):                        11,100

New Employer Rate (% Taxable Wages)    2.625 or 8.925

Kentucky Income Tax Withholding

Kentucky's law requires employers to withhold state income tax from employees' wages and remit the amounts withheld to the Department of Revenue.

Any employer required to withhold federal income taxes is also required to withhold Kentucky income taxes, including agricultural employers. Certain corporate officers and officers of limited liability companies are held personally liable for taxes that are required to be withheld from wages paid to employees of the corporation.

Under reciprocal tax agreements, residents of certain states who work in Kentucky are not subject to withholding of Kentucky income tax if these states grant an exemption from the withholding of their income tax to Kentucky residents who earn income in these states. Kentucky has entered into such agreements with Illinois, Indiana, Michigan, Ohio, West Virginia, and Wisconsin. In addition, employees who reside in Virginia and commute daily to employment in Kentucky, or who reside in Kentucky and work daily in Virginia, are not subject to Kentucky withholding. Reciprocal agreements may vary from year to year as state laws change.

Kentucky Benefits

Kentucky Voting Rights:

Employer Right to Schedule Voting Hours         Yes

Pay Deduction for Voting Time Leave                 Time Off with Pay Limited to 4 Hours

Employees must be granted up to four hours of leave to vote or to apply for an absentee ballot. Employees selected to be election officers must be granted an entire day to attend training or serve as election officers.

Employers can specify the hours voting time leave may be taken.

Kentucky State Tax Resources

SurePayroll, Inc. and its subsidiaries assume no liability and make no warranties on or for the information contained on these state payroll pages. The information presented is intended for reference only and is neither tax nor legal advice. Consult a professional tax, legal or other advisor to verify this information and determine if and/or how it may apply to your particular situation.

This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.
Information accurate as of January 2021