Operational Gaze:
How to Run Payroll in Louisiana?

April 10th 2024

In Louisiana, executing payroll demands adherence to state-specific tax laws. This article aims to demystify the process for employers, outlining essential steps such as registering with state tax agencies, calculating withholdings, and adhering to filing deadlines. Designed for clarity, it will ensure that both employers and employees in Louisiana can approach payroll with confidence and compliance, avoiding common pitfalls and ensuring smooth operations.

This Article Covers

Laws That Affect Payroll Procedures in Louisiana
Worker Classifications in Louisiana
Payroll Forms and Relevant Bodies in Louisiana
Applicable Taxes in Louisiana
Key Pay Elements That Impact Payroll in Louisiana
Step-by-Step Guide to Payroll in Louisiana

Laws That Affect Payroll Procedures in Louisiana

Louisiana Laws

  • Minimum Wage: There is no state-specific minimum wage in Louisiana. Therefore, the federal minimum wage of $7.25 per hour is applicable to all non-exempt employees. Compliance with the Fair Labor Standards Act (FLSA) is required for minimum wage regulations​.
  • Labor Laws: Overtime, Work Hours, and Breaks: Non-exempt employees must receive 1.5 times the regular wage for hours worked beyond the standard 40 in a workweek. While there are no state laws for meal or rest breaks, any breaks under 20 minutes must be compensated​.
  • Paydays and Final Paychecks: Employers are to designate two paydays per month, no more than 16 days apart, with wages paid within ten days post the pay period. Upon termination or resignation, the final paycheck should be issued by the next payday or within 15 days​.
  • Medical, Military, and Other Leave: The state of Louisiana does not mandate employers to provide paid leave; however, they must comply with the federal Family and Medical Leave Act (FMLA) for up to twelve weeks of unpaid leave for certain conditions and the Uniformed Services Employment and Reemployment Rights Act (USERRA) for military leave​.
  • Penalties for Late or Unpaid Wages: In Louisiana, the Workforce Commission can enforce penalties on employers for late or unpaid wages. Consequences may include payment of overdue wages, covering the attorney’s fees, and in certain instances, levying additional financial penalties. These measures ensure compliance and protect workers’ rights to fair compensation.
  • Employee Wages and Work Hours: Employers must keep accurate records of wages and hours as per the FLSA requirements to ensure fair payment.
  • Child Labor Laws: There are specific restrictions for minors regarding work type, hours, and conditions. Compliance with both federal and state youth employment laws is required​.
  • Vacation Pay: Paid vacation is not mandated in Louisiana, but employers who offer it must adhere to FLSA guidelines if they choose to provide such benefits.

Federal Laws

As compared to state-mandated laws, federal laws provide a nationwide framework for payroll procedures that must be adhered to by employers in Louisiana and across the United States.

  • Fair Labor Standards Act (FLSA): The FLSA is a federal law that sets standards for minimum wage, overtime pay, recordkeeping, and youth employment. As of the last update, the federal minimum wage is $7.25 per hour, although employers in Louisiana must comply if state minimum wage laws dictate a higher amount. Overtime must be paid at a rate of at least one and one-half times the employee’s regular rate for hours worked beyond 40 in a workweek.
  • Family and Medical Leave Act (FMLA): The FMLA sets out provisions for leave entitlement. Eligible employees have the right to take up to 12 weeks of unpaid leave for events such as childbirth, adoption, or the care of a family member with a serious health condition.
  • Federal Insurance Contributions Act (FICA): The FICA requires that employers deduct Social Security and Medicare taxes from paychecks and also make a matching contribution. As of the current information available, the Social Security tax rate was 6.2% for the employer and 6.2% for the employee on earnings up to the applicable taxable maximum amount. Medicare tax was 1.45% each for both employer and employee, with an additional 0.9% for high earners.
  • Federal Unemployment Tax Act (FUTA): FUTA imposes a federal payroll tax on employers to help fund state unemployment agencies. Employers pay this tax annually, and it is calculated at 6% of the first $7,000 paid to each employee as wages during the fiscal year. Significantly, employers can receive a credit of up to 5.4% for making timely and full payments of state unemployment taxes, effectively reducing the FUTA rate to a more manageable 0.6%.

HR Laws

  • Workers’ Compensation Law: Employers must provide benefits to employees injured on the job, which includes medical care and wage replacement. Louisiana operates a no-fault system for workers’ compensation, with some exceptions. The law also changed in 2023 to improve the claims process and medical treatment guidelines​.
  • Pregnancy Discrimination: Both federal and state laws protect against pregnancy discrimination. Louisiana’s own Pregnancy Discrimination Act allows up to four months of leave for disabling pregnancies and six weeks for normal, with fewer restrictions than the FMLA​.
  • New Hire Reporting: In Louisiana, employers are mandated to report new hires and rehires to the state within 20 days of their employment commencement. This reporting aids in child support enforcement efforts and ensures adherence to state employment regulations. It’s a critical step in maintaining legal compliance and supporting state administrative processes.
  • Payroll Taxes: The Louisiana Department of Revenue requires employers to withhold state income tax and pay unemployment tax. There are no local city taxes in Louisiana, and tax rates can vary significantly depending on a company’s operational history and experience.
  • Personal Income Tax: Employees in Louisiana state are subject to both federal and state income tax withholdings, with variable rates based on individual or joint income levels.
  • Payroll Tax Due Dates: Tax withholding deadlines in Louisiana vary based on the total amount withheld by the employer. Less than $500 per month is paid quarterly, $500 to $5,000 monthly, and over $5,000 semi-monthly. Unemployment taxes are also due quarterly​.

Worker Classifications in Louisiana

Employees and Independent Contractors

In Louisiana, like other states, workers are classified as either employees or independent contractors. This classification is pivotal because it determines eligibility for various benefits and protections under state laws. Employees typically enjoy a broader range of workplace protections, including unemployment insurance, workers’ compensation, and state tax withholdings. Independent contractors, on the other hand, are considered self-employed and, as such, are excluded from these benefits and protections. They have more freedom in how they work but bear more responsibility for their own business expenses and tax obligations.

The ABC Test

The ABC test is a legal standard used to differentiate between employees and independent contractors. In Louisiana, under the Employment Security Law, a worker is presumed to be an employee unless the employer can satisfy all three parts of this test. The test requires that the worker is free from the company’s control or direction in performing the work, the work is outside the usual course of the company’s business or is performed outside of all the company’s places of business, and the worker is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the work performed.

Right to Control

The right to control is the most significant factor in determining a worker’s status in Louisiana. In simple words, it examines the degree of control an employer has over the performance of the work and the manner in which it is performed. If an employer dictates work hours, methods, and processes, the worker is more likely to be classified as an employee. 

Conversely, if the worker set their own hours, choose their methodology, and operate independently, this indicates they are an independent contractor. The Louisiana Worker’s Compensation Law and the rulings of the Louisiana Supreme Court, such as in Elmore v. Kelly, provides guidance on this factor, emphasizing its importance in the classification process.

To learn more about the rights of salaried and hourly employees, you can read our guides on your rights as a salaried employee in Louisiana and your rights as an hourly employee in Louisiana.

Payroll Forms and Relevant Bodies in Louisiana

Louisiana Payroll Forms

  • Form L-1 (Employer’s Quarterly Return of Louisiana Withholding Tax): Employers must file this form quarterly to report the state income tax withheld from employees’ wages. This filing requirement stands even if no taxes were withheld during the quarter​.
  • L-1V Payment Voucher: Not many individuals know but when not submitting Form L-1, employers in Louisiana use the L-1V voucher for remitting withheld taxes. Quarterly payments are mandated for withholding under $500 per month, monthly for $500-$5,000, and semimonthly for $5,000, with electronic payments required for amounts exceeding $5,000​.
  • Amended Form L-1 (Amended Employer’s Quarterly Return of Louisiana Withholding Tax): If discrepancies are found in past quarters, employers must file an amended Form L-1 for each affected quarter. This form corrects previously reported tax amounts and indicates any differences in actual withholdings versus amounts remitted​.
  • Form CIFT-620ES (Estimated Tax Voucher for Corporations): Corporations in Louisiana use Form CIFT-620ES to submit estimated tax payments. This voucher facilitates quarterly prepayments of state income tax, helping corporations manage cash flow and comply with state tax laws. Accurate estimation is crucial to avoid underpayment penalties.
  • Form L-3 (Transmittal of Withholding Tax Statements): Form L-3 is used by Louisiana employers to transmit annual statements of withheld taxes from employees’ wages. This form accompanies the W-2 forms sent to the state, reconciling withholdings with the state’s records.

Federal Payroll Forms

Alongside Louisiana-specific documentation, federal payroll forms are equally important:

  • Form W-4 (Employee’s Withholding Certificate): The Form W-4, or Employee’s Withholding Certificate, is a federal document that employees across the United States fill out to inform employers about how much federal income tax should be withheld from their wages. The Form W-4 takes into account various factors like marital status, dependents, and additional income to tailor the withholding to the employee’s unique tax situation. With periodic updates, especially after major life events or changes in financial circumstances, the W-4 ensures that employees neither overpay nor underpay the federal income taxes throughout the year.
  • Form W-2 (Wage and Tax Statement): Employers use the Form W-2, known as the Wage and Tax Statement, to report the annual wages paid to each of their employees and the specific amount of taxes withheld. This federal form, issued to every employee before the end of January each year, is vital for individuals when preparing their personal income tax returns. For the employee, it offers a clear summary of their earnings and tax withholdings, while for the IRS, it serves as a record of the individual’s employment-related earnings and tax obligations.
  • Form W-3 (Transmittal of Wage and Tax Statements): The Form W-3 is basically a document used by employers to submit the total of all W-2 forms to the Social Security Administration. This form summarizes the total earnings, Social Security wages, Medicare wages, and withholding for all employees for the year. The W-3, which must accompany the W-2 forms, is an essential tool for the SSA to verify an employee’s income and tax information.
  • Form 940 (Federal Unemployment Tax Act Return): Form 940 is a federal form that employers utilize to report the annual Federal Unemployment Tax Act (FUTA) tax. This tax provides funds for state unemployment agencies and supports unemployed workers. The form calculates the employer’s federal unemployment tax liability, considering any state unemployment tax they’ve already paid. By accurately completing and submitting this form, employers contribute to a system that offers financial support to individuals during periods of joblessness.
  • Form 941 (Employer’s Quarterly Federal Tax Return): Used by employers, Form 941, titled the Employer’s Quarterly Federal Tax Return, reports the wages they’ve paid and the corresponding taxes withheld every quarter. It captures details related to federal income tax, Social Security, and Medicare withholdings. By submitting this form quarterly, employers maintain a consistent record with the IRS, ensuring they meet tax obligations as required.
  • Form 944 (Employer’s Annual Federal Tax Return): Designed for smaller employers, Form 944 allows them to report income and FICA taxes withheld from employees’ paychecks just once a year instead of quarterly. This form simplifies the reporting process for eligible small businesses by reducing the number of times they must submit tax withholding information, easing the administrative burden and allowing them to focus on running their business.
  • Form 1099 (Miscellaneous Income): The 1099 forms are a series of documents the IRS uses to account for various types of non-employment income. There are many different types of 1099 forms, but one of the most common is the 1099-MISC, which is given to independent contractors or freelancers to report payments made to them for services rendered in the course of trade or business. This form is critical for the IRS to track income that might otherwise go unreported and for contractors to accurately report their income and calculate the taxes.

Federal and Louisiana Payroll/Tax Bodies

  • Louisiana Tax Commission: Ensures equitable property taxation by overseeing assessors and conducting ratio studies. They establish assessment guidelines, offer technical assistance, and ensure fair taxation through technology and unbiased tax law administration. The commission’s central role is to instill taxpayer confidence in the fairness of assessments​.
  • Louisiana Workforce Commission: Oversees workforce development and provides jobs that sustain families in LA. It monitors employment, manages unemployment compensation and tax funds, provides training resources, and oversees workers’ compensation benefits. Additionally, it collects labor market data and provides information on occupational sectors​.
  • Louisiana Department of Revenue: Collects state tax revenues to fund public services. It also regulates charitable gaming, alcohol, and tobacco sales, and supports state agencies in the effective collection of debts. The department is pivotal in maintaining fiscal order and ensuring strict tax compliance across the state, thus underpinning Louisiana’s economic health.
  • Internal Revenue Service (IRS): The IRS stands as the United States’ primary federal tax authority. Its mandate covers the vast spectrum of federal tax matters, inclusive of payroll taxes. By providing regulatory guidelines, tax codes, and essential resources, the IRS facilitates nationwide tax compliance. It is important to note that both employers and employees rely on the IRS’s directives to understand their federal tax obligations and ensure adherence.
  • U.S. Department of Labor (DOL): Believe it or not, the U.S. DOL has a broad role, impacting various facets of employment across the nation. Among its chief responsibilities are the formulation and enforcement of wage and hour standards. The DOL ensures fair labor practices, safeguards employee rights, and fosters a balanced work environment. This guidance assists employers in aligning their operations with federal employment norms and standards.
  • Social Security Administration (SSA): The Social Security Administration (SSA) runs programs for retirement, disability, survivor benefits, and family support. They also assist people in signing up for Medicare. The SSA is also the government body responsible for issuing Social Security Numbers— crucial for employment, finances, and accessing government services.
  • Wage and Hour Division (WHD): The WHD is a part of the U.S. DOL, whose main job is to ensure employers follow labor standards to protect workers’ rights. The WHD enforces laws like the Fair Labor Standards Act (FLSA), which covers things like minimum wage, overtime pay, recordkeeping, and child labor rules. It also enforces other laws like the Migrant and Seasonal Agricultural Worker Protection Act, Employee Polygraph Protection Act, and the FMLA.

Applicable Taxes in Louisiana

State Taxes

  • Louisiana State Income Tax Withholding: Employers in Louisiana are required to withhold state income tax from the employee’s regular wages. It’s important to note that this type of withholding is based on each employee’s exemption certificate, which indicates the amount to withhold. Employers must consider the state’s graduated income tax rates in this process. Compliance is monitored by the Louisiana Department of Revenue, and proper withholding is crucial to avoid underpayment penalties for both the employer and employee.
  • Unemployment Insurance Tax: Louisiana employers fund the state’s unemployment compensation program through this tax. Rates are not static; they vary based on the employer’s claim history with the state’s unemployment insurance program. This experience-rated tax encourages employers to maintain stable employment records. Timely and accurate contributions are vital for ensuring that funds are available for unemployed workers.
  • Employer’s Quarterly Return of Louisiana Withholding Tax (Form L-1): As discussed in the previous section, every quarter, Louisiana employers must file Form L-1 to report the total income tax withheld from employees’ wages. This form reflects the cumulative withholding for the quarter and must be submitted by the deadline, even if no tax was withheld. The form ensures state tax authorities can reconcile employer withholdings with employee tax liabilities.

Federal Taxes

  • Federal Income Tax: Employers are obligated to withhold federal income tax from employees’ paychecks. The amount withheld is determined by the information the employee furnishes on Form W-4 and is calculated according to the IRS-provided tax tables. This tax is progressive, with the applicable rate escalating as the employee’s taxable income increases.
  • Social Security and Medicare Taxes (FICA): Both employers and employees are mandated to contribute to Social Security and Medicare through the Federal Insurance Contributions Act (FICA) tax. Employers are responsible for accurately withholding the specified amount from their employees’ wages and also for contributing a corresponding matching amount.
  • Federal Unemployment Tax Act (FUTA): Employers pay this federal tax separately from other taxes, and it is not withheld from employees’ wages. FUTA, working in conjunction with the state unemployment system, provides critical funds for workers who are unemployed.

Key Pay Elements That Impact Payroll in Louisiana

Minimum Wage

Louisiana adheres to the federal minimum wage standard, lacking a state-specific minimum wage law. Employers must compensate employees at least $7.25 per hour, as mandated by the Fair Labor Standards Act (FLSA). On the other hand, employers are required to follow this wage floor for both resident and nonresident employees who render services in Louisiana​​​.

Overtime

Louisiana follows federal guidelines for overtime pay. Non-exempt employees are entitled to 1.5 times their regular rate for hours worked beyond 40 in a workweek. This ensures employees are fairly compensated for longer work hours. The state aligns with the Fair Labor Standards Act, which sets the salary threshold for overtime exemption at $684 per week, or $35,568 annually​.

Pay Stub Laws

In Louisiana, there is no state mandate for employers to issue pay stubs. Employers are not obligated to provide detailed wage statements at the time of payment. However, despite the absence of a state law, many employers still choose to provide pay stubs for utmost clarity and record-keeping purposes, ensuring transparency in payroll and compliance with best practices.

Workers’ Compensation Insurance

Louisiana law requires employers to carry workers’ compensation insurance for every employee, covering medical expenses for job-related injuries. The Louisiana Workforce Commission governs this through the Office of Workers’ Compensation Administration (OWCP). Noncompliance can result in substantial fines and even criminal charges for employers​.

Wage Garnishments

Louisiana permits wage deductions under specific conditions, such as willful or negligent damage to goods or employer/company property, or if the employee is guilty of theft. This protects employers from losses due to employee actions but also ensures that deductions are not made arbitrarily or unfairly from employees’ regular wages, fostering fair labor practices.

Final Paycheck

When employment ends, Louisiana employers must provide the final paycheck by the next regular payday or within 15 days. This applies regardless of whether the employee was terminated or resigned. Timely final wage payment is essential to comply with state labor laws​.

Step-by-Step Guide to Payroll in Louisiana

Below is a step-by-step guide for running payroll in Louisiana that you can follow to get started:

  • Step 1: Understanding State Payroll Laws: In Louisiana, employers must adhere to federal and state payroll laws. The first step is to register your business/company with the Louisiana Workforce Commission (LWC). Ensure compliance with minimum wage laws; Louisiana follows the federal minimum wage (as discussed above). Overtime must be paid at 1.5 times the regular rate for hours worked beyond 40 in a workweek. There’s no mandate for pay stub distribution.
  • Step 2: Employee Documentation and Setup: Each employee must complete a W-4 Form for federal tax withholdings and an L-4 Form for state tax withholdings. Gather personal details and set up each employee in your payroll system. This includes their full name, the nine-digit Social Security number (SSN) assigned by SSA, address, and wage rate. Accurate records are crucial for tax purposes and in case of any disputes regarding wages or employment terms.
  • Step 3: Processing Payroll: Once the registration and documentation part is finalized, determine a consistent pay period, whether weekly, bi-weekly, or monthly. Calculate gross pay based on hours worked and agreed wage. Deduct federal and state taxes using the data provided in the W-4 and L-4 Forms. Consider other deductions such as retirement contributions. After deductions, the remaining amount is the net pay, which is what the employee receives.
  • Step 4: Payroll Tax Compliance: Employers must withhold federal income tax, Social Security, and Medicare taxes, along with state income tax. You’re responsible for paying employer payroll taxes to the Internal Revenue Service (IRS) and the Louisiana Workforce Commission (LWC). Report and pay federal taxes using Forms 940 and 941 and state taxes through the LWC’s portal. Timely payment avoids penalties and interest on late payments.
  • Step 5: End of Year Documentation: At the end of the year, reconcile your payroll records. Distribute W-2 forms to employees by January 31st. These forms show annual wage and tax information. File the same with the SSA, along with your federal tax reporting. For state taxes, file with the LWC. Keep all payroll records for at least four years for auditing purposes.
  • Step 6: Maintaining Records and Addressing Discrepancies: Keep detailed payroll records for each employee, including hours worked, wages paid throughout the employment period, and deductions made. In case of discrepancies, refer to these records to resolve issues. Louisiana law requires maintaining these records for at least three years. Regularly review your payroll practices to ensure ongoing compliance with all federal and state regulations.
  • Step 7: Staying Informed of Changes: Payroll regulations can change. Stay informed on federal and state law updates that could affect your payroll process significantly. Subscribe to updates from the IRS and the LWC, and actively engage in online forums. Attend seminars or training sessions on payroll management regularly. This proactive approach ensures compliance and helps avoid costly mistakes due to outdated practices or misunderstanding of current laws.

Final Thoughts

Managing payroll in Louisiana can be a challenging task. Employees must ensure they diligently adhere to Louisiana’s strict payroll regulations. To simplify the often complex process of managing payroll, consider exploring our comprehensive list of the top 6 applications tailored to streamline payroll responsibilities in the United States. If you’ve already established a payroll system, we’ve provided ten tips to enhance your payroll procedure within the United States.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.

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