Hiring a new employee is a great way to grow your business, but becoming an employer for the first time requires a lot of upfront effort. If you’re not sure about the employment laws and hiring process in Arkansas, we’re here to help.
Keep reading for five steps to hiring employees in Arkansas:
Step 1: Take care of new employer logistics
Before you become an employer in Arkansas, you need to register with the required federal and state departments. Make sure you do the following:
Apply for a federal employer identification number (EIN) on the IRS website
Have you ever applied for a federal employer identification number (EIN) with the Internal Revenue Service (IRS)? If not, you need to get one in order to hire employees.
If your business is registered as a partnership, multi-member limited liability company (LLC), C corporation, or S corporation, rest assured that you probably already have your federal tax ID. However, if your business is a sole proprietorship or single-member LLC, it’s time to apply for an EIN on the IRS website.
Once you fill out an application, you’ll get your EIN immediately.
Register with the Arkansas Department of Finance and Administration
As an Arkansas employer, you’ll withhold income from each of your employee’s wages to pay state withholding taxes. To pay those, you need to register with the Arkansas Department of Finance and Administration (DFA).
Complete this withholding registration form or register at ATAP.Arkansas.gov, the Arkansas Taxpayer Access Point portal.
Register with the Arkansas Department of Workforce Services
Arkansas’ unemployment insurance program requires all Arkansas employers to pay unemployment insurance taxes. Those contributions help financially support Arkansas workers who need unemployment assistance.
Before you can pay unemployment insurance taxes, you have to register with the Arkansas Department of Workforce Services. You can register online here with Arkansas.gov’s Arkansas Division of Workforce Services (DWS).
For additional information, read the DWS unemployment insurance information for employers.
Register for workers’ compensation insurance
Almost all Arkansas employers with three or more employees need to obtain workers’ compensation insurance. This type of coverage gives employees financial and medical assistance if they get injured at work; plus, it provides some liability protection for the employer.
Your best option for getting workers’ compensation coverage is to apply with a private commercial insurance carrier. Learn more about workers’ compensation on the Arkansas Workers’ Compensation Commission website.
Once you get workers’ compensation insurance, learn how to optimize your policy.
Step 2: Understand your hiring costs and tax liability
It’s a good idea to create a hiring budget before you begin the process of recruiting, hiring, and training employees. In addition to paying for your employee’s compensation package (which should include wages, health insurance, and paid time off at minimum), you also have to account for federal and state employer taxes.
Here are the core Arkansas employer taxes you’ll be paying:
- FICA taxes: The Federal Insurance Contributions Act (FICA) puts the Social Security tax rate at 6.2% for an employer and 6.2% for an employee. The rate for Medicare taxes is also split: 1.45% for an employer and 1.45% for an employee.
- SUI taxes: Every state also imposes annual state unemployment insurance (SUI) taxes. The tax rate for new employers in Arkansas is 3.1% on a wage base of $7,000.
- FUTA taxes: The Federal Unemployment Tax Act (FUTA) works in conjunction with state unemployment insurance programs. The FUTA tax rate is 6% on the first $7,000 of employee wages. But if you pay SUI taxes on time and in full, you can get a credit on FUTA taxes of up to 5.4%, which puts your FUTA tax liability at just 0.6%.
- Federal income withholding taxes: As an employer, 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.
- State income withholding taxes: As an Arkansas employer, you also have to withhold income from each employee’s wages and pay it to the state. Learn more about withholding tax rates and filing deadlines on the DFA’s website.
Need help calculating paychecks and withholdings for your employees? Use Gusto’s Arkansas hourly paycheck and payroll calculator and the Arkansas salary paycheck and payroll calculator.
Step 3: Check Arkansas labor laws
It’s critical to understand federal and state employment laws when you hire new employees in Arkansas. Start by reviewing the most common federal labor laws, including the differences between full-time employees and independent contractors.
Then take a look at Arkansas’ labor laws. Here are some highlights:
- The minimum wage in Arkansas is $11/hour. The Arkansas Minimum Wage Act applies to employers with four or more employees. You can gather more information about wage and hour laws in Arkansas here.
- Per federal law (specifically, the Fair Labor Standards Act), non-exempt Arkansas employees who work more than 40 hours in a workweek must be paid overtime pay.
- The state of Arkansas is an employment-at-will state. As an employer, that means you have the right to fire employees at any time without reason or cause. Arkansas employees also have the right to quit their jobs at any time without reason or warning.
- Arkansas does not generally require employers to provide employees with meal times or breaks (except for minors, in some circumstances), holiday pay, sick leave, vacation, jury duty pay, or severance. What you offer employees is up to you as an individual employer. However, research shows that employee benefits are important and can result in better business results, too.
- Arkansas has a Nursing Mothers Breaks law that requires employers to provide nursing employees with reasonable unpaid break time to express milk at work.
- Under federal law, Arkansas employers have to allow employees unpaid time off for jury duty and voting.
- Under the Equal Employment Opportunity Commission’s federal anti-discrimination law, Arkansas employers cannot discriminate against job candidates or employees on the basis of age, race, sex, religion, national origin, disability, or genetic information.
- Arkansas’ Equal Pay Law makes it illegal for employers to pay an employee less than another employee of the opposite sex for the same work.
- Arkansas has no statewide “ban the box” laws, but the city of Pine Bluff and Pulaski County have local laws that apply to public sector employees. Under these laws, employers in Pine Bluff and Pulaski County can’t inquire about a job candidate’s criminal history on an initial job application.
For more information, review the Department of Labor and Licensing’s labor laws FAQs.
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 Arkansas new hire reporting form and other hiring documents
Whenever you hire new employees in Arkansas, you need to report information about those employees to the state. New hire reporting is nationwide; its main purpose is to help track down parents who are late on their child support payments.
In Arkansas, employers need to report new hires within 20 days of the employee’s official date of hire. The hiring date is usually the first date an employee performs services you’ll pay them for, or the first day an employee is eligible to earn commission. You have to report newly hired employees as well as rehired employees.
It’s important to note that the Arkansas New Hire Reporting Center is no longer functional—the site has officially moved to the DWS portal. Register or sign in here to report new hires or rehires, or download the new hire reporting form.
You’ll provide your employee’s name, address, Social Security number, date of birth, and work start date. For more information, check out the DWS’ employer handbook.
Once you’re finished, complete these other essential hiring documents, including:
- Employment contract: Consider working with an employment attorney to provide an employment contract for your new employees. In it, make sure you list 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. But you don’t have to file Form I-9 with the USCIS or Immigration and Customs Enforcement (ICE). Instead, just hold onto the form as a record for at least three years from the date of hire or from one year after employment ends. You can 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.
- Form AR4EC: You also need to give employees Form AR4EC, the Arkansas Employee’s Withholding Exemption Certificate, to fill out.
Save both paper and digital copies of the above documents as part of your business’s records.
Step 5: Display labor law posters and required notices
Every state requires employers to post federal and state labor laws posters in the workplace. These signs help inform employees of their rights and obligations when working.
You can see the Arkansas posting requirements here. After you download those, check out the required federal labor law posters from the US Department of Labor.
Use Gusto for your small business payroll
Hiring an employee for the first time is a great reason to update your payroll system. A simple, automated payroll system frees you up to focus on growing your business and investing in new hires. If you’re looking for an intuitive all-in-one payroll platform, consider Gusto’s small business setup. Get started by creating an account today.
