How to Do Payroll in Alaska

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Alaska is a state in the United States. It is known for its natural beauty, diverse wildlife, and active lifestyles. To do payroll in Alaska, you will need to follow specific steps that are outlined by the state of Alaska.

Alaska, unlike the majority of states, does not have a state income tax. It does, as is customary, impose state unemployment taxes (SUTA). Its payroll and HR rules are simple, however, the laws governing child labor should be revisited. There’s also legislation requiring employers to pay for transportation into and out of the state for work, which is unique to Alaska because of its remote location and seasonal nature. In this post, you’ll learn more about Alaska’s payroll and HR regulations.

How to Run Payroll in Alaska: A Step-by-Step Guide

Step 1:

Register your company as an employer. You’ll need your Employer Identification Number (EIN) and an account with the Electronic Federal Tax Payment System (EFTPS) at the federal level (EFTPS).

Step 2:

Register with the Alaska Department of Transportation. Online, via mail, or at one of the field tax offices, you may register your new company with the Alaska Department of Labor. After that, create a myAlaska online account. This is where you link to several agencies to file new hire reports, pay Unemployment Benefits (also known as ESA), and more.

Step 3:

Create a payroll system. Create a monthly or semimonthly compensation plan with your staff that you both agree on. Payroll may be done by hand (which is inefficient), using an Excel payroll template, or using a payroll service.

Step 4:

Collect employee payroll paperwork. These Forms for Payroll are best completed during the onboarding process for new employees. W-4, I-9, and Direct Deposit information are among the forms. There is no extra paperwork for workers to complete in Alaska.

Step 5:

Collect, evaluate, and approve timesheets. Employees who are paid on an hourly basis and nonexempt workers will need to keep account of their work hours.

Step 6:

Work out your payroll and pay your staff. Payroll may be calculated using software, a calculator, or even Excel. Employees may be paid lawfully in a variety of methods, including cheque, direct deposit, pay card, and even cash.

Step 7:

File payroll taxes with the federal government and the state of Alaska. For federal taxes, including unemployment, follow the IRS’s guidelines.

SUTA: By the conclusion of the quarter, the state sends you your contribution report. Even if you didn’t get a contribution report or owe no money, you must submit and pay (if appropriate) by the deadlines listed below. If you have 50 or more workers in a quarter, make more than $1 million in taxable wages in the current or previous calendar year, or have a payroll agency file for you, you must file online. Otherwise, you may use Form TQ01 to pay online or by mail.

Step 8:

Keep track of your payroll data. Employee records must be kept for at least three years in Alaska. Information from SUTA must be preserved for a period of five years. Name and Social Security number, start and finish dates for periods worked, total earnings for each period, and payroll information such as wages received, hours worked, and special payments should all be included.

Step 9:

Complete your year-end payroll tax returns. Before the end of the year following your reporting year, send the federal Forms W-2 (for employees) and 1099 (for contractors) to the IRS. There is no extra paperwork to fill out since there is no state income tax.

Alaska Payroll Laws, Taxes & Regulations

You must obey federal law for income taxes, Social Security, Medicare, and federal Unemployment Benefits, regardless of where you live (FUTA).

Taxes in Alaska

Alaska does not levy income taxes, although it does levy Unemployment Benefits levies ranging from 1.5 percent to 5.9 percent and requires all firms to have workers’ compensation insurance.

Income Taxes in the Different States

Be sure to file your federal income tax withholdings, however, which include 12.4% for Social Security (6.2% to be withheld from your employee’s paycheck and the other half from your bank account) and 2.9% for Medicare (1.45% to be withheld from your employee’s paycheck and the other half from your bank account).

Unemployment Benefits

Alaska charges state Unemployment Benefits taxes (SUTA), which it calls Employment Security Tax (ES). While most states base this on your direct benefits costs, Alaska measures changes in your payrolls to approximate benefits costs. It says this method keeps the unemployment fund solvent and is simpler and cheaper to administrate.

SUTA is calculated using the taxable wage base for that year, which is 75 percent of the statewide average yearly earnings of program participants. In 2021, that figure will be $43,600.

Your tax rate is determined by your experience factor, which is based on the kind of employer you are and the amount of payroll you have lost over the previous 12 quarters. There are 21 different levels, ranging from 1.5 percent to 5.9%. On the Alaska Department of Labor’s website, you can find the rates as well as a detailed explanation of how unemployment is determined.

Did you know? You may be eligible for a 5.4 percent rebate on your FUTA taxes if you pay SUTA.

Alaska’s SUTA excludes some large, stable businesses like state and municipal governments and some nonprofits. Sole proprietors, partners, and LLC members are exempt from ES, but you may choose to have your excluded employees included so that they may be eligible for UI benefits. However, there are some rules to follow. See the Alaska Unemployment Benefits Tax Handbook for details.

Insurance for Workers’ Compensation

If you have one or more employees in Alaska, you must carry workers’ compensation insurance. The Alaska Department of Labor’s website has a list of insurance firms.

There are a few exceptions to this rule.

Sole proprietors, partners, LLC members, or executive officers having a minimum of 10% ownership, as well as nonprofit executive officers
Babysitters
Housekeepers
Harvesting or temporary assistance
A contract entertainer
In certain circumstances, taxi drivers
Hockey players and coaches on the professional level
In certain circumstances, real estate agents are involved.
Work-study students in high school
Volunteers

You may also choose to insure yourself. You must have been in business in Alaska for at least five years, have a safety/loss control program, employ at least 100 people in Alaska and abroad, and have a net worth of at least $10 million to qualify for this. (These standards might be met by a parent corporation.) If you meet the requirements and are interested, fill out Form 07-6129.

Special funds have also been established in Alaska for workers who do not have an insured employer, commercial fishers, and employees who are permanently disabled.

Alaska’s Minimum Wage Laws

The minimum wage in Alaska for 2021 is $10.34 per hour. This rate has been gradually rising, but no future rates are listed.

Did you know that school bus drivers are required to be paid at least twice the federal minimum wage?

The Alaska Wage and Hour Act specifies 19 exemptions from the state’s minimum wage rules. The following are a few of the most common:

Executives
Nonprofit staff or volunteers
Students who are full-time employees of the institution they are attending.
A computer systems analyst, a computer programmer, a software engineer, or another individual with a comparable set of skills
Part-time workers who look after the employer’s children at home
Minors under 18 employed part-time (<30 hours a week)
Certain automotive dealership staff

Overtime Regulations in Alaska

Employers that have more than four workers in their usual course of business are subject to overtime rules. Overtime pays 1.5 times the standard rate for hours worked above 40 in a workweek, but Alaska law states that you should only hire someone for more than 40 hours if it is absolutely required. Comp time cannot be used to “pay” for overtime.

Employees in canning, minor mining activities, agricultural, switchboard operations, sailors, some forestry, line-haul trucks, community health, mechanics in certain instances, and flying crew are excluded from the law.

Employees Can Be Paid in a Variety of Ways

Employees must be paid in legal US money or “negotiable checks, drafts, or orders receivable upon presentation without discount by a bank or depository inside the state,” according to Alaska Statute 2020, Sec. 23.10.040. With employee approval, direct deposit and paper checks are permitted, but the bank or depository institution cannot charge the employee a fee to access their funds. You may also pay staff in cash, but only if you follow best practices. Pay cards aren’t mentioned expressly.

Pay Stub Regulations

You must submit a pay stub to an employee every payday that details the rate of pay, hours worked, gross and net earnings, starting and ending pay dates, deductions, advances, and overtime hours.

Minimum Pay Period

Employees may choose whether they want to be paid monthly or semimonthly, according to Alaska legislation. It does not specify a particular payday, however, the first and/or 15th of the month are the most common dates.

Payroll Deduction Regulations

You may deduct pay for the following items in addition to retirement contributions, health benefits, and judicially enforced garnishments:

Unworked days
Disciplinary measures that are not compensated, as well as fines imposed for safety or significant rule violations
Payment for stolen goods or services, as well as cash register shortages
Damages
To settle a debt with a creditor (at the written consent of the employee)
When it comes to uniforms and equipment, a security deposit is acceptable as long as it does not exceed the cost of the item and does not bring the salary below the minimum wage.
Calculated at a fair price for room and board

Jury duty and other deductions: You may deduct from your employee’s salary any money paid by the court for jury duty, witness costs, or military pay for that week. However, the employee must consent to sign it over to you.

Laws Regarding Final Paychecks

If you fire someone, you must give them their last salary within three days after firing them. If an employee resigns, the last payment is due on the following normal payday, which must be at least three days after the employer receives notice of the resignation.

There are no severance compensation regulations in Alaska. These should be set explicitly in the contract of employment.

Paychecks for Layoffs, Strikes, and Lockouts

You must pay an employee’s earned wages by their usual payday if they go on strike, are laid off, or are subject to an employer lockout during a pay period.

Payroll Regulations for Government Contracts

If you have an Alaska Department of Labor contract for public construction, you must submit your personnel rosters and payroll data in Excel format weekly or biweekly, depending on how often you process payroll. This will be done via myAlaska. For further information, see the online payroll instructions.

HR Laws in Alaska That Affect Payroll

Alaska’s human resources rules are simple and, in most circumstances, rely on an agreement between the employer and the employee. For everything that the state of Alaska does not specify, you must still observe federal laws.

Reporting of New Hires in Alaska

Within 20 days of employment or rehire, new employees must report online using myAlaska. Your employee’s name, address, and Social Security number, as well as your employer’s name, address, and EIN, must be submitted. If you work in more than one state, you may record your hires and rehires in Alaska or another state with the rest of your hires and rehires. If you do, you must tell the Secretary of HHS, Multistate Employer Notification, P.O. Box 509 Randallstown, MD 211330509; fax: (410) 2779325.

Requirements for Lunch and Other Breaks

Employees beyond the age of 18 are not required to take breaks in Alaska. If your breaks are less than 20 minutes, you must pay for the time. You do not have to pay for lunchtime that lasts more than 20 minutes if the employee is not working.

If a minor works six straight hours, he or she is entitled to a 30-minute lunch break. They must do this before or at the five-hour mark.

Paid Vacation (PTO)

While Alaska regulations provide that companies should not require workers to work more than 40 hours per week (save in particular sectors), they make no provisions for paid or unpaid time off. However, providing workers with paid time off is a sound business strategy. Whatever you decide, make sure you have your employee’s approval in writing.

The Alaska Family Leave Act

The federal Family and Medical Leave Act, offers up to 12 weeks of unpaid leave in a 12-month period for bonding with a new child, coping with significant health concerns, or, in certain situations, dealing with crises from a family member on military service, must be followed by most companies. Employers with at least 50 workers in the current or preceding year are covered by the federal FMLA. In our post on federal labor laws, we go through the FMLA in greater detail.

The Alaska Family Leave Act is a law that allows Alaskans to provide slightly different benefits, but that only applies to employees of the state, the University of Alaska, the Alaska Railroad, and political subdivisions of the state.

Minors in the Workforce

Children aged 16 and younger are required by Alaska law to get a work permit. If the institution offers alcohol, anyone above the age of 16 must get permission. Only minors under the age of 14 are permitted to work as babysitters, in newspaper delivery or sales, or in the entertainment business.

Minors under the age of 19 are not permitted to sell cigarettes, and no one under the age of 21 is permitted to operate in the cannabis/marijuana sector.

Minors under the age of 18 are not permitted to work in occupations that require:

Explosives handling
Mining
Logging, sawmills, and power-driven woodworking machines
Hoisting, metal shaping, and baking equipment powered by electricity
Excavation and roofing
Electrical work with voltages greater than 220
Pathogens that are transmitted via the blood
Solicitation or sales outside

Minors 14 and 15 are largely restricted to office jobs. On the Alaska Department of Labor’s website, you can find a comprehensive list of forbidden vocations organized by age.

Working hours for minors in general: When it comes to children, Alaska and federal laws vary, so you’ll need to follow the toughest standards to stay in compliance.

No kid under the age of 18 may work more than six days a week, according to Alaska law.
For minors aged 16 to 18, there are no time limits.
Minors 14 and 15 cannot work more than 23 hours per week, or nine hours per day, during the school week (including school time). Work must be completed between the hours of 5 a.m. and 9 p.m.
Minors 14 and 15 may work up to 40 hours during their holidays, between the hours of 5 a.m. and 9 p.m.

Federal law restricts 14- and 15-year-olds to only working between 7 a.m. and 7 p.m. on school days and 7 a.m. to 9 p.m. when school is out. They also aren’t allowed to work more than three hours on school days.

Costs of Transportation

Employers in Alaska are unusual in that they often pay to have their workers transported to and from the state, for example, for seasonal employment. If you provide this transportation, pay for it, or loan the cost of transportation to an employee’s place of work in or out of Alaska, you must return it when the employee’s job expires.

If an employee is dismissed for violence, drunkenness, lying on a job application, or having three or more days of unexcused absences, you are not required to pay. If the employee departs for health or safety concerns, or because you misrepresented salary, housing, or working circumstances, you are not required to pay.

Forms for Payroll

The majority of Alaska’s payroll tax forms must be submitted online through myAlaska. However, there are various SUTA forms to choose from. These may be found on the Alaska Department of Labor’s website. TQ01A, B, and C are used to file quarterly contributions and changes, TSUP is used to file supplementary contributions, and TOPT 1-4 is used to file modifications or other payments.

The option to self-insure for workers’ compensation is requested using Form 07-6129.

Federal Forms for Payroll

W-4 Form: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
W-2 Form: This form is used to report total yearly earnings (one per employee)
W-3 Form: Reports all workers’ total pay and taxes.
Form 940: This form is used to report and compute the amount of unemployment taxes owed to the IRS.
Quarterly income and FICA taxes deducted from paychecks are reported on Form 941.
Annual income and FICA taxes deducted from paychecks are reported on Form 944.
1099 Forms: Information on non-employee remuneration that assists the IRS in collecting taxes on contract labor.

Conclusion

Alaska is one of the states with the simplest payroll tax system. There is no state income tax, and the employment security taxes are less complicated to compute than in other states. Workers’ compensation insurance is provided by private firms. The majority of labor laws are governed by government regulations or employee contracts. In your recruiting contract, be sure to include time off and breaks. Another important factor to consider is that if you pay to send an employee to Alaska for work, you must be prepared to reimburse them when their job expires.

Frequently Asked Questions

Is there payroll tax in Alaska?

Alaska does not have any payroll taxes.