Hiring an employee, state by state
Hiring one person in another state usually means three or four separate registrations, with three or four different agencies, and none of them tells the others. A combined application, where a state offers one, almost never covers unemployment insurance, and it never covers workers compensation. The table below gives the figures that decide your first-year cost in each state, and each state page explains the traps behind them.
The single most misread field is workers compensation. It is not a headcount question everywhere: it is optional for most private employers in Texas, South Dakota and Wyoming, triggered by payroll size rather than employee count in Kansas, and required from your first employee in most of the rest.
What does each state require before your first payroll?
| State | Income tax withholding | New employer unemployment rate | Unemployment wage base | Workers compensation required | New hire report due |
|---|---|---|---|---|---|
| Alabama | Yes | 2.7% | $8,000 | From employee 5 | 7 days |
| Alaska | No state income tax | 1% | $54,200 | From employee 1 | 20 days |
| Arizona | Yes | 2% | $8,000 | From employee 1 | 20 days |
| Arkansas | Yes | 2% | $7,000 | From employee 3 | 20 days |
| California | Yes | 3.4% | $7,000 | From employee 1 | 20 days |
| Colorado | Yes | 3.05% | $30,600 | From employee 1 | 20 days |
| Connecticut | Yes | 1.9% | $27,000 | From employee 1 | 20 days |
| Delaware | Yes | 1% | $14,500 | From employee 1 | 20 days |
| District of Columbia | Yes | 2.7% | $9,000 | From employee 1 | 20 days |
| Florida | No state income tax | 2.7% | $7,000 | From employee 4 | 20 days |
| Georgia | Yes | 2.7% | $9,500 | From employee 3 | 10 days |
| Hawaii | Yes | 2.4% | $64,500 | From employee 1 | 20 days |
| Idaho | Yes | 1% | $58,300 | From employee 1 | 20 days |
| Illinois | Yes | 3.35% | $14,250 | From employee 1 | 20 days |
| Indiana | Yes | 2.5% | $9,500 | From employee 1 | 20 days |
| Iowa | Yes | 1% | $20,400 | From employee 1 | 15 days |
| Kansas | Yes | 1.75% | $15,100 | Above a payroll threshold | 20 days |
| Kentucky | Yes | 2.7% | $12,000 | From employee 1 | 20 days |
| Louisiana | Yes | Varies by industry | $7,000 | From employee 1 | 20 days |
| Maine | Yes | 2.54% | $12,000 | From employee 1 | 7 days |
| Maryland | Yes | Varies by industry | $8,500 | From employee 1 | 20 days |
| Massachusetts | Yes | 2.42% | $15,000 | From employee 1 | 14 days |
| Michigan | Yes | 2.7% | $9,000 | From employee 1 | 20 days |
| Minnesota | Yes | Varies by industry | $44,000 | From employee 1 | 20 days |
| Mississippi | Yes | 1% | $14,000 | From employee 5 | 15 days |
| Missouri | Yes | 2.376% | $9,000 | From employee 5 | 20 days |
| Montana | Yes | Varies by industry | $47,300 | From employee 1 | 20 days |
| Nebraska | Yes | 1.25% | $9,000 | From employee 1 | 20 days |
| Nevada | No state income tax | 2.95% | $43,700 | From employee 1 | 20 days |
| New Hampshire | No state income tax | 2.7% | $14,000 | From employee 1 | 20 days |
| New Jersey | Yes | 2.6825% | $44,800 | From employee 1 | 20 days |
| New Mexico | Yes | 1% | $34,800 | From employee 3 | 20 days |
| New York | Yes | 4.1% | $17,600 | From employee 1 | 20 days |
| North Carolina | Yes | 1% | $34,200 | From employee 3 | 20 days |
| North Dakota | Yes | 1% | $46,600 | From employee 1 | 20 days |
| Ohio | Yes | 2.85% | $9,000 | From employee 1 | 20 days |
| Oklahoma | Yes | 1.5% | $25,000 | From employee 1 | 20 days |
| Oregon | Yes | 2.4% | $56,700 | From employee 1 | 20 days |
| Pennsylvania | Yes | 3.822% | $10,000 | From employee 1 | 20 days |
| Rhode Island | Yes | 1.21% | $30,800 | From employee 1 | 14 days |
| South Carolina | Yes | 1.06% | $14,000 | From employee 4 | 20 days |
| South Dakota | No state income tax | 1.2% | $15,000 | Not for most employers | 20 days |
| Tennessee | No state income tax | 2.7% | $7,000 | From employee 5 | 20 days |
| Texas | No state income tax | 2.7% | $9,000 | Not for most employers | 20 days |
| Utah | Yes | Varies by industry | $50,700 | From employee 1 | 20 days |
| Vermont | Yes | 1% | $15,400 | From employee 1 | 10 days |
| Virginia | Yes | 2.5% | $8,000 | From employee 3 | 20 days |
| Washington | No state income tax | Varies by industry | $78,200 | From employee 1 | 20 days |
| West Virginia | Yes | 2.7% | $9,500 | From employee 1 | 14 days |
| Wisconsin | Yes | 3.05% | $14,000 | From employee 1 | 20 days |
| Wyoming | No state income tax | Varies by industry | $33,800 | Not for most employers | 20 days |
Which states are cheapest and most expensive to hire in?
The unemployment wage base matters more than the rate, because it is the ceiling on what you pay per employee. A state with a high rate on a low base can cost less than a state with a low rate on a high base. The spread is wide: Washington taxes the first $78,200 of each employee's wages and Hawaii the first $64,500, while California, Florida, Tennessee, Louisiana and Arkansas stop at $7,000. That is more than a tenfold difference in how much of a salary is exposed.
Nine states have no wage income tax at all, so there is no state withholding account to open: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. That is not the same as no payroll cost. Washington funds paid leave and long-term care from payroll instead, New Hampshire taxes payroll through its Business Enterprise Tax, Nevada charges employers a Modified Business Tax on their own wage bill, and Alaska is one of the few states where the employee also pays into the unemployment fund. Each of those pages explains what replaces the withholding.
Why does workers compensation vary so much?
Thirty-six states require coverage from the first employee. Eleven set a headcount first: three employees in Arkansas, Georgia, New Mexico, North Carolina and Virginia; four in Florida and South Carolina; five in Alabama, Mississippi, Missouri and Tennessee. Read the counting rules before assuming you are under the line, because owners, part-timers, family members and volunteers often count toward the total, and construction work usually drops the threshold to one regardless.
Four states are genuinely different. Texas, South Dakota and Wyoming do not require it of most private employers, and Kansas keys the duty to more than $20,000 of gross annual payroll rather than to any employee count, so a one-person business can owe coverage while a larger one with lower wages does not. In every one of those, going without forfeits the protection that workers compensation buys, which means an injured worker can sue you directly instead of being limited to a schedule of benefits.
How current is this?
Every figure was read on that state's own agency pages, its statute, or a current-year official form, and each state page carries the date its record was last reviewed. Where a state's own explainer page disagreed with its statute or its current form, we followed the statute or the form and said so on the page, because a state's consumer-facing pages are often the last thing updated when a figure changes. We found that conflict in the majority of states.
Unemployment rates and wage bases reset every January in almost every state, so a figure carried over from last year is usually wrong. Anything we could not confirm on a primary source is left blank rather than estimated.
This is general information, not legal or tax advice. Confirm anything you are about to act on with the agency named beside it.