Bringing on new employees is usually an exciting time for a business—after all, it’s generally a sign of growth and strong prospects. But it also brings a mountain of federal and state legal obligations, including some that are unique to Louisiana. Read on to learn about a dozen measures you can take early on to stay on the right side of the laws.
1. Register for tax identification numbers
You may already have registered as an employer with the Internal Revenue Service (IRS) and the Louisiana Department of Revenue (DOR). If not, now’s the time.
First, you’ll obtain a federal employer identification number (FEIN) by applying with IRS Form SS-4, “Application for Employer Identification Number.” Then you can register online with the Louisiana Department of Revenue for a business account. Complete Form R-16019, Application for Louisiana Revenue Account Number and mail It to:
The Louisiana Department of Revenue
P.O. Box 201
Baton Rouge, LA 70821-0201
2. Complete employee eligibility verification
Every new employee must complete the US Citizenship and Immigration Services’ Form I-9, “Employment Eligibility Verification.” The employee is required to fill out Section 1 of the I-9 form by their first day of employment.
You’ll need to complete Section 2 by the end of the third business day after the employee begins work. You should keep this form on file for three years after the date of hire or one year after the employment ends, whichever is later.
Louisiana isn’t among the states that require employers to use the federal E-Verify system. But employers that use the system to determine an employee’s employment eligibility are presumed to have acted in good faith and therefore won’t be subject to any penalty that results from relying on the system’s accuracy.
3. Provide the requisite wage and payday notification
Louisiana requires all employers to provide employees with the following information at the time of hire:
- The amount of wages they’ll be paid,
- The method by which they’ll be paid, and
- The frequency of payment.
You also must inform employees of any subsequent changes to the above. Generally, employers that don’t designate paydays must pay employees on the first and 16th days of the month or as close as practicable.
4. Proceed with caution on restrictive covenants
Many businesses require employees to sign different kinds of restrictive covenants, such as non-compete and non-solicitation agreements. Louisiana limits employers’ ability to impose such restrictions on their employees.
Under Louisiana law, you can only restrict employees from competing with your business or soliciting customers for two years after the date of termination and only in places where you conduct your business. The agreement must specify the names of the parishes (counties) where you operate.
5. Submit new hire reports
Under the federal Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), all employers must report certain information on their newly hired and re-hired employees to the state Department of Children and Family Services New Hire Directory. A rehired employee includes any individual who has been separated from employment for 60 consecutive days.
In Louisiana, you must report the:
- Employer’s FEIN
- Employer’s State Identification Number
- Employer’s name
- Employer’s address (where an Income Withholding Order should be sent)
- Employee’s Name
- Employee’s address
- Employee’s Social Security Number
- Employee’s date of hire (the first day the employee works for pay)
- Employee’s occupation
The information is used to locate parents who owe child support.
You must report this information within 20 days of a new employee’s hire date. Employers that submit their new hire reports magnetically or electronically are required to submit the reports in two monthly transmissions, not fewer than 12 days nor more than 16 days apart. Submitting quarterly wage reports to the Louisiana Department of Labor (see below) doesn’t satisfy the obligation to submit timely new hire reports.
Reporting options include:
- Online reporting
- Creating your own electronic new hire reports
- Submitting a printed list created by your software
- Mailing the new hire reporting form to:
Louisiana Directory of New Hires
P.O. Box 138078
Sacramento, CA 95813-8078
- Faxing the new hire reporting form to (888) 223-1462
- Submitting an IRS Form W-4, “Employee’s Withholding Certificate”·
Failure to comply with the new hire reporting requirement can result in a penalty of $25 per employee not reported or up to $500 for collusion between an employer and worker.
6. Keep up with your Louisiana withholding obligations
Employers located in Louisiana must withhold state income tax from all employee wages earned in the state, regardless of whether the employee is a Louisiana resident. To comply, you’ll need every new employee to complete Form L-4, “Employee Withholding Exemption Certificate.”
The amount of Louisiana income tax to be withheld is based on the state’s income tax withholding tables and the withholding exemptions and dependent credits reported on Form L-4. If the employee doesn’t fill out the certificate, you should withhold state income tax on all wages paid without any exemptions.
Withholding taxes are remitted according to the amount of total state income tax withheld from employees:
- Less than $500 monthly must be remitted quarterly.
- Equal to or greater than $500, but less than $5,000, monthly must be remitted monthly.
- Equal to or greater than $5,000 monthly must be remitted semi-monthly via electronic funds transfer.
You’ll use Form L-1, “Employer’s Return of Louisiana Withholding Tax,” to report and reconcile state income tax withheld for each quarter. (Monthly filers should attach payments to Form L-1V, “Withholding Payment Voucher.”) Note that income taxes withheld in the last month of a quarter (March, June, September, December) should be submitted with the L-1 return for the respective quarter.
Each Form L-1 covers one period and must be filed by the last day of the month following the close of the period—except for semi-monthly payers. Semi-monthly payers must file Form L-1 by the 15th day of the month after the close of the quarter.
A quarterly return must be filed even if no taxes are withheld during the quarter. If wages paid to employees weren’t sufficient to require withholding, an L-1 return should be submitted with zero dollar amounts.
The due dates for reports for taxpayers with a quarterly or monthly payment frequency are:
- 1st Quarter: April 30
- 2nd Quarter: July 31
- 3rd Quarter: October 31
- 4th Quarter: January 31
The due dates for taxpayers with a semi-monthly payment frequency are:
- 1st Quarter: April 15
- 2nd Quarter: July 15
- 3rd Quarter: October 15
- 4th Quarter: January 15
Any employer that fails to withhold and pay amounts required to be withheld is liable for such amounts.
You can file Form L-1 on paper if you are not mandated to file electronically. To file on paper, you may use the Form L-1 that was mailed to you, the version available online, or one printed through approved third-party software.
You can file electronically through the Louisiana Department of Revenue’s online service, Louisiana Taxpayer Access Point (LaTAP), or approved third-party software.
7. Understand your federal payroll responsibilities
In addition to Louisiana state income tax, you generally must withhold federal income tax from an employee’s paycheck. Collect IRS Form W-4, “Employee’s Withholding Certificate,” from each new hire on the day they start work. Like its Louisiana counterpart, the form is used to determine how much of their pay you should withhold for federal income taxes. Make sure your employees complete it properly.
You aren’t required to submit Form W-4 to the IRS, but you must keep a copy on file for at least four years. It provides verification that you’re withholding federal income tax according to the employee’s instructions and must be available for IRS inspection upon request.
You must also withhold each employee’s share of Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA). FICA is a federal tax that employers and employees split.
The 2023 tax rates for both employees and employers are 6.2% of the first $160,200 of an employee’s earnings for Social Security (for a total tax of 12.4%) and 1.45% of all wages for Medicare (a total of 2.9%).
You also may be required to withhold the Additional Medicare Tax, which is 0.9% of an individual’s wages paid in excess of $200,000 in a calendar year.
You must deposit federal income tax withheld and both the employer and employee portions of Social Security and Medicare taxes. You should determine which schedule you’re required to use—monthly or weekly—before the beginning of each calendar year.
- Paid wages of $1,500 or more to employees in any calendar quarter during the current or previous tax year, or
- Had one or more employees for at least some part of a day in any 20 or more different weeks in the previous year or 20 or more different weeks in the current tax year, counting all full-time, part-time, and temporary employees.
The tax due is 6% of the first $7,000 of an employee’s wages during the year.
Deposits for the federal unemployment tax are required for the quarter within which the tax due exceeds $500. Deposits must be made by the end of the month following the end of the quarter.
You’ll want to stay on top of your reporting, in addition to your deposits, on all of these. You do that on IRS Form 940, “Employer’s Annual Federal Unemployment Tax Return,” and IRS Form 941, “Employer’s Quarterly Federal Tax Return.”
Form 940 is due by January 31, but, if you deposited all FUTA tax when due, you have until February 10 to file.
File your initial Form 941 for the quarter in which you first paid wages that are subject to Social Security and Medicare taxes or subject to federal income tax withholding. The form is due by the last day of the month that follows the end of the quarter.
If you made timely deposits in full payment of your taxes for the quarter, you can file Form 941 by the 10th day of the second month that follows the end of the quarter. For example, you may file it by May 10 for the 1st quarter (as opposed to April 30 if you didn’t).
Going forward, you must file Form 941 for every quarter (every three months), regardless of whether you have any taxes to report—unless you’re a seasonal employer or are filing your final return.
Additionally, employers must furnish a completed wage and tax statement (IRS Form W-2, “Wage and Tax Statement”) to each employee by the last day of January each year. Form W-2 shows the amounts of income, Social Security, and Medicare taxes you withheld in the prior year. You’re also required to send copies to the Social Security Administration and the Louisiana Department of Revenue.
8. Obtain workers’ compensation insurance
Employers in Louisiana are required to maintain workers’ compensation insurance even if they only have one employee, including part-time, full-time, temporary, or seasonal employees.
You can obtain insurance by:
- Purchasing a workers’ compensation insurance policy through a private insurer authorized to operate in the State of Louisiana,
- Applying to the Assistant Secretary of the Office of Workers’ Compensation to become an approved self-insured employer, or
- Joining an approved Group Self-Insurance Fund.
Workers’ compensation premiums are determined by several factors, including your total annual payroll, the type of work your employees engage in, and your business’s accident history.
Under Louisiana law, you may not have to carry workers’ compensation insurance in certain circumstances, including if your business is:
- Owned by one individual with no employees, leased employees, borrowed employees, part-time employees, unpaid volunteers (including family members), or subcontractors—and isn’t a corporation,
- A partnership under Louisiana law, with no employees, leased employees, borrowed employees, part-time employees, unpaid volunteers (including family members), or subcontractors, or
- A one- or two-person-owned corporation with no employees, leased employees, borrowed employees, part-time employees, unpaid volunteers (including family members), or subcontractors. If two people own the business, each person must own at least 10% of the stock and between them own all the shares of stock. They also must both be corporate officers and between the two of them hold all the offices of the corporation.
Business owners and certain officers of a corporation can exempt themselves from a workers’ compensation insurance policy only if they own at least 10% of the company. This exemption must be done in writing to the insurance company; Louisiana doesn’t issue exemption forms or certificates.
Employers that fail to carry workers’ compensation insurance can be fined up to $250 per employee for a first violation and $500 per employee for subsequent violations, up to $10,000.
9. Determine your unemployment insurance liability
Every employer operating in Louisiana must complete and submit an employer application to receive an official determination of liability or non-liability for unemployment insurance from the Louisiana Workforce Commission. After the application is reviewed, you should receive one of the following, usually within two to four weeks of the application submission:
- Liability Notification: If you’re liable for unemployment tax, you’ll receive an unemployment tax Employer Account Number (EAN), also known as a State Identification Number (SID), that you’ll use to file and pay your unemployment taxes.
- Non-Liability Notification: No state account number is assigned.
Unemployment insurance taxes are due no later than the last day of the month immediately following the end of each quarter (the exception is for annual domestic filers, whose taxes are due January 31):
1st Quarter: April 30
2nd Quarter: July 31
3rd Quarter: October 31
4th Quarter: January 31
All employers must file wage reports and pay taxes electronically. Late taxes are assessed for penalties and interest.
A new employer liable for Louisiana unemployment taxes is assigned a tax rate based on the average rate for employers in the same industrial classification (NAICS code) according to the latest rate computation. After you serve the eligibility period, you’ll receive a rate based on your individual experience rating record. Your tax rate percentage is applied quarterly to your taxable payroll to determine your contribution amount.
The rates for 2023 range from .09% to 6.20% of the wage base for each employee. The taxable wage base for 2023 is $7,700, meaning you only pay unemployment insurance taxes on the first $7,700 of an employee’s wages.
These contributions, except social charge deductions (these are charges applied to all employers, regardless of individual experience), are credited to your account. Tax rates are issued to all taxable employers on an annual basis, showing the contribution, payroll, and benefit charge amounts.
Benefit charges are the sum of your percentage of the unemployment insurance benefits paid to your former employees by the Louisiana Workforce Commission. Each quarter, you’ll receive a Quarterly Statement of Benefit Charges against your account.
For example, if 50% of the funds necessary for a claimant’s eligibility were earned from you, you’d be charged 50% of the benefits paid to the claimant each quarter.
Louisiana also accepts “Voluntary Contributions.” This is a one-time, non-mandatory payment allowed each year that may reduce your tax rate. You can contribute any amount. A Voluntary Contribution has no social charge assessment withheld, so it’s a totally “creditable contribution” payment option offered to employers solely to increase an account’s reserve.
Voluntary Contributions must be made within 30 days from the issue date of the rate notice. After the rate recalculation is processed based on the contribution, the employer is notified of the modified rate. Note, though, that if your account has a delinquent balance, then a Voluntary Contribution payment will not be applied and the Louisiana Workforce Commission won’t recalculate your rate.
10. Hang required posters in a conspicuous location
Federal and state laws require employers to hang a variety of posters in areas where employees will see them. Failure to comply can lead to fines.
On the federal level, you may need to post the following posters:
- Fair Labor Standards Act
- Know Your Rights: Workplace Discrimination is Illegal
- Job Safety and Health: It’s the Law
- Your Employee Rights Under the Family and Medical Leave Act
- Your Rights Under USERRA
The US Department of Labor has an online poster advisor to help employers determine which posters they need to display.
Louisiana requires employers to hang the following:
- Age Discrimination Poster
- Genetic Discrimination Poster
- Minor Labor Law Poster
- Out-of-State Motor Vehicles Posters
- National Guard (ESGR) Poster
- Pregnancy Rights of Employees
- Sickle Cell State Poster
- Timely Payment of Wages
- Independent Contractor or Employee?
- Unemployment Insurance Poster
- Workers’ Compensation Poster
- Earned Income Credit (EIC) 2023 Poster
11. Review potentially relevant employment laws
As an employer, you’ll be regulated and restricted under numerous labor laws. Below are seven important federal laws that might apply to your business:
Fair Labor Standards Act (minimum wage, etc.)
- Title VII
- Americans with Disabilities Act
- Age Discrimination in Employment Act
- Pregnancy Discrimination Act
- Affordable Care Act (health insurance)
- Family and Medical Leave Act
- Occupational Safety and Health Act
Louisiana doesn’t have a state minimum wage law, so the federal rate of $7.25 per hour applies. It also doesn’t have a state equivalent to the Family and Medical Leave Act. But it does have the following (among others) that may apply to your business:
- Pregnancy Accommodation law
- Creating a Respectful and Open World for Natural Hair Act (CROWN Act)
- Sickle cell trait anti-discrimination law
The steps above might seem daunting, but automation makes it easier to stay in compliance with the many obligations. You can rely on Gusto’s products and services to can help.