Key figures
Alabama payroll
2026, with sources
- SUI taxable wage base
- $8,000Per employee per calendar year, as the Department of Workforce publishes it.
- New hire reporting
- Within 7 daysRecalled workers separated 60 days or more count; fines up to $25 per violation.
- Minimum wage
- Federal $7.25 an hourAlabama has no state minimum wage.
- Paid leave program
- None
State withholding and unemployment
Alabama taxes wages at 2%, 4% and 5%, reaching the top rate at $3,000 of taxable income for a single filer, and employees deduct their federal income tax on their state return. Employers register with the Department of Revenue for withholding and with the Alabama Department of Workforce, which took over the former Department of Labor’s functions, for unemployment compensation.
New employers pay unemployment tax at 2.7% on the first $8,000 of each employee’s wages, about $216 per employee a year, until they qualify for an experience rate. The Department of Workforce sends each employer its rate notice.
Seven days to report a hire
Alabama gives employers seven days, not twenty, to report each new or recalled employee. A two-founder startup in Birmingham that hires an engineer on a Monday reports the hire by the following Monday, and if the company has five or more employees it must report online.
Local occupational taxes
Some Alabama cities, Birmingham among them, levy occupational license taxes on wages earned within their limits, withheld by the employer and remitted to the city on its schedule. Payroll setup in Alabama therefore needs each employee’s work location and the list of cities that levy the tax, which the cities themselves publish.
Deadlines
- Within 7 days of hire or recallNew hire report
- Last day of the month after the quarterQuarterly unemployment compensation contribution and wage report
The federal baseline
This page covers what Alabama adds. The federal rules underneath it apply here too.
Common questions
How quickly do we report new hires in Alabama?
Within seven days of the hire or recall date, much faster than the 20 days most states allow. Employers with five or more employees must report online through the New Hire Center; smaller employers can report online or send a copy of the W-4.
Are there local payroll taxes in Alabama?
In some cities, yes. Several Alabama cities, Birmingham the best known, levy an occupational license tax on wages earned within the city, which the employer withholds and remits to the city. It applies on top of state withholding and is based on where the employee works.
Payroll next door
- FLFlorida payrollFlorida payroll has no state income tax withholding; the obligations are reemployment tax at 2.7% on $7,000 for new employers, new-hire reporting, a $15.00 minimum wage, and workers’ comp from four employees.
- GAGeorgia payrollGeorgia payroll is flat 4.99% withholding for 2026 through the Department of Revenue and unemployment tax at 2.70% on $9,500 through the Department of Labor; there is no paid leave program or local wage tax.
- MSMississippi payrollMississippi payroll is 4.0% withholding on income over $10,000 for 2026, unemployment insurance through MDES, new-hire reports within 15 business days, and workers’ comp from five employees.
- TNTennessee payrollTennessee payroll has no state income tax or local wage tax; it is unemployment premiums on the first $7,000 of wages, new-hire reports in 20 days, and workers’ comp from five employees counting officers.
How Alabama compares
- No tax on wagesStates with no state income tax on wagesAlabama: withholds state income tax. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programAlabama: no state program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesAlabama: city, county or district taxes on wages. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Alabama guide
- AccountingAccounting and state tax in AlabamaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in AlabamaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in AlabamaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- ComplianceCompliance and filings in AlabamaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in AlabamaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.