Hiring your first employee is a milestone moment as a business owner. Bringing more support to your operation can help you grow and raise revenue, but the hiring process can be intimidating.
That’s why we’re breaking down the steps you need to know about when hiring in Alaska, from new hire paperwork to employer taxes. Keep reading to learn more.
Step 1: Take care of logistics
Get the administrative stuff out of the way by handling these four tasks:
Apply for a federal employer identification number (EIN) on the IRS website
Before you can hire a new employee, you need to get a federal employer identification number (EIN) from the Internal Revenue Service (IRS). The good news is that if you’re registered as a partnership, multi-member limited liability company (LLC), C corporation, or S corporation, you already have an EIN, also known as your federal tax ID.
But if you just started your business and haven’t registered yet—or if you have a sole proprietorship or single-member LLC—you may still need to apply for an EIN. Complete an EIN application on the IRS website. It just takes a few minutes and you’ll get your number immediately.
Register with the Alaska Department of Labor and Workforce Development
Alaska employers are required to register with the Alaska Department of Labor and Workforce Development to pay Alaska’s Employment Security Tax (EST), also known as the unemployment insurance tax. Employers who pay EST help support Alaskan workers who need unemployment assistance.
You can register online using MyAlaska.gov, and then make payments directly through the portal. For additional information, check out these instructions or read the Alaska Unemployment Insurance Tax Guide.
Register for workers’ compensation insurance
The Alaska Workers’ Compensation Act requires all Alaska employers with at least one employee to carry workers’ compensation insurance. Workers’ compensation insurance gives employees financial and medical assistance if they get injured at work; plus, it provides some liability protection for the employer.
Alaska doesn’t have a state fund for workers’ compensation insurance, so your best option is to search for a private commercial insurance carrier within the state.
For more resources and information on workers’ compensation, review the Department of Labor and Workforce Development’s website.
Find out how to optimize your workers’ comp policy.
Step 2: Understand your hiring costs and tax liability
As an employer, your main hiring expense will be your employee’s compensation package. However, you also have to account for taxes. Unlike many other states, Alaska doesn’t have state income tax, so employers do not need to withhold state income taxes for their employees. That’s one less payroll tax to worry about, but here are the other ones to consider:
- FICA taxes: Under the Federal Insurance Contributions Act (FICA), the Social Security tax rate is 6.2% for an employer and 6.2% for an employee. The rate for Medicare taxes is 1.45% for an employer and 1.45% for an employee.
- SUI taxes: The annual state unemployment insurance (SUI) tax rate for new employers in Alaska is 2.37% on a wage base of $47,100.
- FUTA taxes: The Federal Unemployment Tax Act (FUTA) works alongside state unemployment insurance programs. The FUTA tax rate is 6% on the first $7,000 of employee wages. However, if you pay SUI taxes on time and in full, you can get a credit on FUTA taxes of up to 5.4%, dropping your FUTA tax liability to 0.6%.
- Federal income withholding taxes: You’ll use Form W-2 to file federal income tax withholding reports to the IRS. You’ll also file Form 941 on a quarterly basis and Form 940 annually.
Need help calculating federal withholdings for your employees? Use Gusto’s Alaska Hourly Paycheck and Payroll Calculator and Alaska’s Salary Paycheck and Payroll Calculator.
Step 3: Check Alaska labor laws
It’s a good idea to brush up on state and federal labor laws before hiring new employees in Alaska. You’ll need to know the classification differences between full-time employees and independent contractors, the state’s hour and wage laws, pay equity laws, pay transparency and reporting requirements, and more.
Here are a handful of key Alaska labor laws:
- The minimum wage in Alaska is $10.85/hour. For more wage and hour questions, check out the Employment Practices and Working Conditions wage and hour pamphlet.
- Per federal law (the Fair Labor Standards Act), non-exempt Alaska employees who work more than 40 hours in a workweek must be paid overtime pay.
- Alaska is an employment-at-will state, meaning employers have the right to fire employees at any time without reason or cause. Employees also have the right to quit their jobs at any time without reason or warning.
- Alaska employers are not required to provide employees with meal times or breaks (unless the worker is a minor), bonus holiday pay, sick leave, vacation, or severance. What you offer employees is up to you as an individual employer. Keep in mind that employee benefits help increase employee satisfaction and retention rates.
- Alaska law protects employees who need to take time off work for jury duty and voting; as an employer, you’re required to offer unpaid voting leave and jury duty leave.
- The Alaska Human Rights Law prevents Alaska employers from discriminating against job candidates or employees based on race, sex, religion, national origin, and physical or mental disability.
Check out Gusto’s state-by-state guide to pay equity laws and our state-by-state guide to salary history laws.
Step 4: Fill out the Alaska new hire reporting form and other hiring documents
Each time you hire new employees in Alaska, you need to report information about those employees to the Alaska Department of Revenue’s Child Support Enforcement Division. New hire reporting is a nationwide requirement that helps locate parents who are late on their child support obligations.
In Alaska, you need to report new hires within 20 days of the employee’s official date of hire. The hiring date is generally considered to be the first date an employee performs services you’ll pay them for, or the first day an employee on commission is eligible to earn commission. You have to report both newly hired employees as well as rehired employees.
Register with MyAlaska and click “CSED New Hire Submissions” to begin the new hire reporting process. You’ll provide your employee’s name, address, Social Security number, date of birth, and work start date. For more information, check out the employer’s guide to new hire reporting.
From there, complete these other important hiring documents, including:
- Employment contract: It’s a good idea to write an employment contract detailing the job responsibilities your employee will have, the wages you’ll pay, and the workplace policies available in your employee handbook.
- Form I-9: The US Citizenship and Immigration Services (USCIS) uses Form I-9, the Employment Eligibility Verification Form, to verify that employees are able to work in the US. As an employer, you have to complete the I-9 form for every employee you hire, and each employee must attest to their employment authorization. You don’t have to file Form I-9 with the USCIS or Immigration and Customs Enforcement (ICE). Instead, you hold onto the form as a record for at least three years from the date of hire or from one year after employment ends. Download Form I-9 and read the completion instructions here.
- Form W-4: Each new employee you hire needs to complete IRS Form W-4, The Employee’s Withholding Certificate, on or before the date of their employment. Form W-4 determines how much federal income tax will be withheld from the employee’s paychecks. Download the form.
Don’t forget to keep copies of all the above documents as part of your business’s records.
Step 5: Display labor law posters and required notices
Alaska requires employers to post federal and state labor law signs in the workplace, so employees know their rights, benefits, and obligations on the job.
Take a look at Alaska’s posting requirements to see which notices you’re obligated to post and how to download them. While you’re at it, gather and download all the required federal labor law posters from the US Department of Labor to display as well.
Improve your payroll with Gusto
Hiring an employee is the perfect opportunity to set up or update your payroll system. Gusto’s all-in-one payroll platform makes it easier to pay your employees on time and stay compliant with federal and Alaska state taxes. Want to get started? Create an account today.
