Adding a new employee is often a thrilling time for a business—it’s generally a sign of growth and optimism for the future. But it also comes with various legal requirements that shouldn’t be lost in the excitement. Here’s what you need to know when hiring new employees in the Mount Rushmore State.

1. Register as an employer

If you haven’t already done so, you need to register as an employer with the IRS and obtain a federal employer identification number (FEIN). You can apply for that using IRS Form SS-4, “Application for Employer Identification Number.”


South Dakota doesn’t impose individual income taxes, so there’s no need to register as an employer with the Department of Revenue. However, businesses must register with the Reemployment Assistance Tax Unit, which administers the program commonly known as unemployment insurance (see below for more details).

You can register online or download and print the application form. Submit the form by mail or fax:

Reemployment Assistance Division – Tax Unit
South Dakota Department of Labor and Regulation
P.O. Box 4730
Aberdeen SD 57402-4730

Fax: (605) 626-3347

2. Check employee eligibility

Every new employee must complete the U.S. Citizenship and Immigration Services’ Form I-9, “Employment Eligibility Verification.” Under federal law, the employee is required to fill out Section 1 of the form by their first day of employment. Employers must complete Section 2 by the end of the third business day after the employee begins work and keep it on file for three years after the date of hire or one year after the employment ends, whichever is later.

South Dakota isn’t among the states that require employers to use the federal E-Verify system.

3. Submit a new hire report

Under the federal Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), all employers must report certain information on their newly hired employees to the state’s New Hire Reporting Center. The information is primarily used to track down people who are delinquent on their child support obligations. South Dakota also uses it to prevent fraudulent reemployment assistance and benefit assistance claims.

You must submit information for:

  • New employees who reside or work in South Dakota to whom you expect to pay earnings. Employees must be reported even if they work only one day and are terminated before you satisfy the new hire reporting requirement.
  • Re-hires or employees who haven’t been paid for the past 30 days, including employees who have been on medical leave, lay-off, or termination, regardless of whether a new IRS Form W-4, “Employee’s Withholding Certificate,” isn’t completed.

All employees must be reported, including family members, temporary employees, seasonal workers, students, and rehired employees. But you needn’t report independent contractors.

The information must be reported within 20 days of an employee’s hire (or rehire) date. You can report it online or by calling (888) 827-6078. You can also print the form and mail or fax it:

New Hire Reporting Center
P.O. Box 4700
Aberdeen, SD 57402-4700

Fax: (888) 835-8659

You may submit employees’ W-4 forms if they include the employee’s Social Security Number (SSN), name as it appears on their SSN card, address, date of hire, and your name, FEIN, address, and phone number.

4. Prepare for your federal payroll tax obligations

While South Dakota has no state income tax, employers in the state are still subject to federal payroll tax withholding obligations. You should collect a W-4 from each new hire on or before the day they start work. The form is used to determine how much of their pay should be withheld 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. The form serves as verification that you’re withholding federal income tax according to the employee’s instructions and must be available for inspection if the IRS ever requests it. 

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 2024 tax rates for both employees and employers are 6.2% of the first $168,600 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 may also be required to withhold the Additional Medicare Tax, which is 0.9% of an individual’s wages exceeding $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.

You’ll also need to pay federal unemployment taxes (FUTA) if you:

  • 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, as well as on your deposits, for 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 Jan. 31, but if you deposited all FUTA tax when due, you have until Feb. 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:

  • 1st quarter: April 30
  • 2nd quarter: July 31
  • 3rd quarter: Oct. 31
  • 4th quarter: Jan. 31

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 every quarter (i.e., three months), regardless of whether you have any taxes to report—unless you’re a seasonal employer or are filing your final return.

You must also file IRS Form W-2, “Wage and Tax Statement,” to report each employee’s annual wages, deductions, and tax withholding to the IRS and furnish a copy 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.

5. Determine your liability for state unemployment insurance

Employers finance South Dakota’s Reemployment Assistance, or unemployment insurance, program through payroll taxes. You generally must contribute for South Dakota residents who work in South Dakota (regardless how long they work for you) and out-of-state employees working in South Dakota more than 90 days, if you:

  • Employed one or more individuals (full- or part-time) in 20 different calendar weeks in the current or preceding calendar year,
  • Paid wages of $1,500 or more in a calendar quarter in the current or preceding calendar year,
  • Are covered by FUTA and unemployment insurance laws of another state,
  • Acquired all or a portion of a covered business, or
  • Paid wages for agricultural employment of $20,000 or more in a calendar quarter or employed ten or more individuals for some portion of a day in each of 20 different calendar weeks in the current or preceding calendar year.

The wage base for 2024 is $15,000. Rate notices are generally mailed to established employers on the Oct. 31 preceding the applicable year.

For non-construction new employers, the rate is 1.20% in the first year; for construction new employers, it’s 6.00%. A 0.55% “investment fee” also applies. In their second and third years, the rate is 1.00% for non-construction employers with a positive account balance, and 3.00% for construction employers with a positive account balance—plus the investment fee.

After three years, each employer’s rate is calculated annually, taking into account prior wages reported and reemployment assistance claims. The rate is based on the reserve ratio, which is determined by dividing the balance in the experience rating account by the total taxable payroll for the three prior fiscal years ending on June 30. (Employers with an experience rating account with a negative balance may be assessed interest.)

Quarterly wage reports are due by the last day of the month following the end of the quarter.

Note: If you’re current with your state reemployment assistance reports and tax payment, you can take a credit against your FUTA. This credit reduces the federal unemployment you pay from 6.0 percent to 0.6 percent.

6. Obtain workers’ compensation insurance

South Dakota law doesn’t require employers to carry workers’ compensation insurance, but it’s “highly recommended” because an injured employee can sue their uninsured employer. The state runs an opt-in program that pays medical and disability benefits for work-related injuries and diseases. It includes over 500 insurance rating classifications for South Dakota employers, primarily based on South Dakota claims experience.

South Dakota also offers several plans that reward employers for maintaining a safe worksite and making few or no claims for work-related injuries:

  • Merit Rating Plan. Designed for small businesses that aren’t currently experience-rated or pay a premium of less than $3,750 per year, it provides premium discounts up to 10% based on the immediate past three years’ claims experience. This plan is available for both voluntary and assigned risk policies.
  • Experience-Rated Plan. This plan is designed for larger South Dakota employers that pay more than $3,750 per year in premiums and is specific to your individual experience. Premiums may be credited or debited based on past claims and the cost of those claims. It’s applicable to both voluntary and assigned risk policies.
  • Scheduled Rating Plan. Experience-rated employers insured in the voluntary insurance market receive premium discounts of up to 24% based on their willingness to participate in a safety plan prescribed by their insurance company. Insurers aren’t required to offer this plan, so you may need to shop around the more than 200 insurance companies providing coverage in the voluntary insurance market in South Dakota.

7. Display the mandatory labor law posters

South Dakota employers must display a variety of federal and state employment-related posters in a conspicuous location in the workplace. The posters generally inform employees of their rights and their employers’ responsibilities.

Federally mandated posters may include:

The U.S. Department of Labor has an online “poster advisor” to help employers determine which posters they need to display.

South Dakota employers must also post: 

8. Follow the applicable laws

Employers are subject to a wide range of federal and state employment laws, including the following:

Failure to comply with these laws can lead to costly fines, penalties, lawsuits, and reputational damage.

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Following the steps outlined above will help you to stay on the right side of the law and avoid administrative headaches, or worse, down the road. Gusto’s payroll service can simplify matters by making it easier to pay employees and automatically file your payroll taxes.

Barbara C. Neff has been writing about a variety of legal and other topics since 2001. She has a law degree and a master's degree in journalism.

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