South Dakota is one of the easiest states in which to run payroll as calculating South Dakota payroll taxes is a straightforward process. The state doesn’t collect income tax or require a state income deduction form—one less thing for you and your employees to worry about. There are no local taxes in South Dakota, either. As such, learning how to do payroll in South Dakota should come easily.
Key Takeaways:
- South Dakota’s minimum wage is $10.80 per hour, set to increase to $11.20 per hour on Jan. 1, 2024
- The state tipped minimum wage is always 50% of the non-tipped minimum wage
- South Dakota does not levy personal income taxes
Step-by-Step Guide to Running Payroll in South Dakota
South Dakota makes payroll easy for businesses by generally following federal guidelines. However, attempting to calculate South Dakota payroll taxes by hand could result in costly errors. Here are the basic steps you should follow to run payroll in South Dakota.
Step 1: Set up your business as an employer. New companies may need to access the federal Electronic Federal Tax Payment System (EFTPS) to create a new Federal Employer Identification Number (FEIN). Your FEIN is required to pay federal taxes.
Step 2: Register your business with the State of South Dakota. If your business is new, you need to register on the South Dakota Secretary of State’s website. Any company that pays employees in South Dakota must also register with the South Dakota Department of Revenue.
Step 3: Create your payroll process. Determining how and when you pay employees and tax agencies is crucial to creating a standard payroll process. You’ll also need to determine how you’ll collect employee payroll forms and documents you need for your records. You can opt to process payroll by hand (not recommended), set up an Excel payroll template, or sign up for a payroll service to help you handle your South Dakota payroll.
Step 4: Collect employee payroll forms. Every company that hires employees in South Dakota must collect certain forms during the onboarding process. Each employee must complete I-9 verification within their first three days on the job. New employees must also have a completed W-4 on file.
Step 5: Collect, review, and approve time sheets. You must collect and approve time sheets before submitting payroll. You can use paper time sheets, but we recommend time tracking software that can save you time and ensure the accuracy of reported hours.
Step 6: Calculate employee gross pay and taxes. You’ll need to compute each employee’s total pay, deductions, tax withholdings, etc. You’ll also owe employer taxes that will need to be remitted to the federal government. Learn more about how to calculate payroll if you need help.
Step 7: Pay employee wages, benefits, and taxes. Most companies today pay all employees through direct deposit, but cash and paper checks are also options. South Dakota has a minimum wage of $10.80 per hour, higher than the federal minimum wage of $7.25 per hour.
Step 8: File payroll taxes with the federal and state government. All South Dakota state taxes need to be paid to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the South Dakota Department of Revenue website.
To pay federal taxes, you can make those payments online using the EFTPS on one of the following two schedules:
- Monthly: When the IRS assigns you a monthly schedule, you need to deposit employment taxes on payments made during a calendar month by the 15th of the following month.
- Semiweekly: When the IRS assigns you a semiweekly schedule, you must deposit employment taxes for payments made Wednesday, Thursday, and Friday by the following Wednesday, and for payments made Saturday, Sunday, Monday, and Tuesday, by the following Friday.
Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule that you are on, you only report taxes quarterly on Form 941 or annually on Form 944.
Step 9: Document and store your payroll records. Keeping your company’s business records is good practice. South Dakota does not have any laws requiring businesses to keep employee payment or company payroll records, but federal law requires you to maintain payroll records for at least three years and payroll tax documents for four years. Learn more in our article on retaining payroll records.
Step 10: Complete year-end payroll reports. Every year, you will need to complete payroll reports, including all W-2 Forms and 1099 Forms. You must provide these forms to employees no later than Jan. 31 of the following year.
Download our free checklist to help you stay on track while you’re working through these steps:
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Learn more about doing payroll yourself in our guide on how to do payroll. It even has a free checklist you can download to make sure you don’t miss any steps.
South Dakota Payroll Laws, Taxes & Regulations
Knowing how to calculate South Dakota payroll taxes and ensure compliance with all federal and state employment laws is crucial to making sure your payroll is accurate every time. To help you maintain compliance with payroll regulations, review the specific steps of doing payroll in South Dakota below.
With few exceptions, most employers in the US must pay Federal Insurance Contributions Act (FICA) taxes. The current FICA tax rate for Social Security is 6.2% and 1.45% for Medicare. Both the employer and the employee will pay these taxes, each paying 7.65% for the combined Social Security and Medicare taxes.
South Dakota Taxes
Like most states, South Dakota has certain taxes that companies must pay. South Dakota does not levy local taxes or a state income tax.
Employer Unemployment Taxes
All businesses in South Dakota must pay State Unemployment Tax Act (SUTA) taxes. The current wage base is $15,000, and rates range from 0% to 9.45%. All new non-construction employers in South Dakota will pay a SUTA rate of 1.2% for their first year and 1.0% for years two and three. New construction companies pay 6.0% in their first year and 3.0% for years two and three.
Businesses that pay SUTA in full and on time can claim a tax credit of up to 5.4% on their Federal Unemployment Tax Act (FUTA) taxes—FUTA is 6% on the first $7,000 of an employee’s earnings.
Workers’ Compensation
South Dakota does not require that businesses carry workers’ compensation insurance, though it does recommend it. Workers’ compensation insurance provides benefits to employees who suffer on-the-job injuries and can help protect businesses from lawsuits.
For more information on workers’ compensation, providers, and costs, check out our workers’ comp guide.
Income Taxes
South Dakota does not have state income tax, so you’ll only need to withhold federal income taxes unless the employee is exempt.
South Dakota Minimum Wage
South Dakota has a state minimum wage of $10.80 per hour, which is set to rise to $11.20 per hour on Jan. 1, 2024. Businesses must pay tipped employees at least $5.40 per hour, provided that their tips get them to the hourly minimum wage. If not, the company must make up the difference. On Jan. 1, 2024, the tipped minimum wage will increase to $5.60 per hour. South Dakota’s non-tipped minimum wage will be adjusted annually based on the Consumer Price Index, and will be rounded up to the nearest five cents. The new minimum wage will be announced no later than Oct.15 each year and it cannot decrease. South Dakota law requires that the tipped employee minimum wage is at least 50% of the regular minimum wage. Anytime the minimum wage increases, so does the tipped minimum wage.
Calculating Overtime
South Dakota overtime rules follow the Fair Labor Standards Act requirements. Under the FLSA, all employers must pay employees 1.5 times their regular hourly wage for hours worked over 40 in a workweek. Failure to comply will result in underpayment of taxes and potential penalties and fees down the road.
Paying Employees
South Dakota law requires employers to pay employees at least once per month and on a regularly scheduled day. For example, if your company pays workers once per month on the 15th of the month, you need to pay every 15th of the month.
South Dakota also requires employers to pay workers by one of the following methods:
This law also allows employers to pay employees by any other agreed-upon means, including a payroll card. If you need help keeping track of your payroll periods and dates, use one of our free pay period calendars.
Pay Stub Laws
South Dakota has no law requiring an employer to provide employees with a pay stub, but we recommend it as a best practice. If you do not use a payroll service, download one of our free pay stub templates to help you get started quickly.
South Dakota Paycheck Deductions
South Dakota does not prohibit an employer from deducting wages from an employee’s paycheck, nor is there any law stating what deductions are allowable. Because there is no law, it may be safe to assume that you can deduct wages from an employee’s paycheck for:
- Cash shortages
- Damages, lost, or stolen company property
- Required work uniforms or tools
Please note that, according to the Department of Labor, a company cannot make deductions to an employee’s pay if those deductions would cause the employee to earn less than the federal minimum wage ($7.25 per hour) for that pay period. Because South Dakota has a higher minimum wage, however, you would need to ensure that the employee is not receiving less than $10.80 per hour.
Terminated Employees’ Final Paychecks
South Dakota law requires employers to pay recently separated employees their last paycheck on the next regular payroll run after the employee’s last day. This applies to employees who:
- Were fired, discharged, terminated, or laid off
- Quit or resigned
- Were suspended or resigned due to a labor dispute
If you need to pay an employee right away and aren’t currently using a service, use one of our recommended ways to print a free payroll check.
South Dakota HR Laws That Affect Payroll
South Dakota does not have many state-specific HR laws, but you still need to ensure that you follow the federal guidelines, which South Dakota law mostly adopts.
South Dakota New Hire Reporting
Every employer in South Dakota must report new hires and any rehired employees to the South Dakota Department of Labor within 20 days of their start date. This report is used to enforce child support orders and must include the employee’s name, address, and Social Security number.
Meals & Breaks
South Dakota has no law requiring employers to provide meal periods or breaks to employees. This means the federal rule applies, which does not require meal periods or breaks. If a company provides meal or break periods, however, they must be at least 30 minutes to qualify to be unpaid.
South Dakota Child Labor Laws
Under South Dakota law, children aged 14 and 15 can work up to 40 hours per non-school week and 20 hours per school week. They may not work in a job that is considered dangerous to life, health, or morals. And per federal law, working hours must fall between 7 a.m. to 7 p.m. on school days and between 7 a.m. to 9 p.m. on non-school days. There are no federal restrictions on hours or days that minors 16+ can work.
Check out our guide to hiring minors for more information on child labor laws.
Time Off & Leave Requirements
South Dakota doesn’t provide any laws specifically governing time off. Federal law does dictate instances when unpaid time off must be allowed.
South Dakota Family Leave
South Dakota follows the Family and Medical Leave Act (FMLA), which requires that all eligible employers provide up to 12 weeks of unpaid leave for employees who fall under a covered disability. This can include pregnancy and caring for an ill family member. The FMLA does not require that companies pay employees for this time out of work, but it does require that employers keep the employee’s job, or a substantially similar one, available to them when they return. South Dakota does not provide for any additional family leave under state law.
Paid Time Off
South Dakota has no laws requiring employers to provide employees with paid time off (PTO). Companies in South Dakota are free to create PTO policies and may include whether they pay out accrued and unused PTO when an employee leaves. South Dakota does not require that companies do, so it’s a good practice to have this clearly defined in your company policy. The important thing is to follow the guidelines in your policy, or you can be held liable.
To see South Dakota’s other leave regulations, click on each leave type below:
Payroll Forms
South Dakota does not have any state payroll forms because the state has no income tax.
Federal Payroll Forms
Here is a complete list and location of all the federal payroll forms you should need.
- W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state income taxes
- W-2 Form: Used to report total annual wages for each employee
- W-3 Form: Used to report total annual wages for all employees; summary form of W2
- Form 940: To calculate and report unemployment taxes due to the IRS
- Form 941: Used to file quarterly income tax
- Form 944: Used to file annual income tax
- 1099 Forms: Provides information for non-employee contract work
For a more detailed discussion of federal forms, check out our guide on the federal payroll forms you may need.
South Dakota Payroll Tax Resources
- South Dakota Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information.
- South Dakota Division of Business Services has many great resources for new and existing businesses to help them navigate licensing, taxes, and employer requirements.
- South Dakota Labor Cabinet offers support and resources to help businesses ensure compliance with unemployment and workers’ compensation plus other labor laws.
Bottom Line
South Dakota is one of the easiest states to run payroll. There are no local taxes and no state income tax or state tax forms. For the most part, South Dakota HR laws follow federal regulations, making your job simple and straightforward.
Other State Payroll Guides
Need to know how to pay employees in another state? Click on the state in our interactive map below to learn more:
