There are many important requirements to meet when hiring employees for new or established businesses, and we are here to help. In one place, SCBOS has gathered new and established employer requirements and information.
What to Expect When Hiring
The form of business you operate determines what taxes you must pay and how you pay them. According to IRS.gov, the following are the Five General Types of Business Taxes:
Labor Laws
South Carolina state labor laws are based on federal labor laws. More labor law information can be found at the following websites:
For specific labor law questions or to consult with an attorney, visit the South Carolina Bar website.
South Carolina Employer Requirements
- Withhold federal and state taxes from employee wages.
- Withhold FICA (Social Security and Medicare) from employee wages.
- Verify the employee work authorization through the E-Verify federal work authorization program administered by the U.S. Department of Homeland Security (USDHS) through Citizenship and Immigration Services (CIS). Complete and maintain the federal employment eligibility verification form, more commonly known as the Form I-9 for each employee.
- Report all new hires to the South Carolina Department of Social Services (SCDSS). This information will be used to ensure that non-custodial parents live up to their financial responsibilities to their children.
- Provide for Workers’ Compensation Insurance. According to the South Carolina Workers’ Compensation Commission (WCC), employers covered by the provisions of the State’s Workers’ Compensation Act are required to maintain insurance sufficient for the payment of compensation.
- Submit employee federal withholding to the IRS (Form 941) and the state withholding to the South Carolina Department of Revenue (SCDOR).
- Submit FICA (employee contribution and employer contribution) to the IRS (Form 941).
- Submit federal unemployment insurance (FUTA) to the IRS (Form 940) and the state unemployment insurance (SUTA) to the South Carolina Department of Employment and Workforce (SCDEW). The reporting of state unemployment is typically referred to as the Wage and Contribution Reports (UCE 101/120).
- Employers in South Carolina are required to post two employment notices from the South Carolina Department of Labor, Licensing and Regulation (SCLLR) in a place or places where employees can see them. Learn more about required employment posters at SCLLR.
The South Carolina Illegal Immigration and Reform Act requires all employers to verify the legal status of new employees, within three days of employment, and prohibits the employment of any worker who is not legally in this country and authorized to work. The South Carolina Department of Labor, Licensing and Regulation (SCLLR) is in charge of enforcing this law.
Businesses must obtain an employer withholding account from the South Carolina Department of Revenue (SCDOR). There is no charge to register for this account.
Withholding Tax is taken out of taxpayer wages to go toward the taxpayers' total yearly income tax liability. Every employer/withholding agent who has an employee earning wages in South Carolina (and who is required to file a return or deposit with the IRS) must make a return or deposit to the South Carolina Department of Revenue (SCDOR) for any taxes that have been withheld for state purposes.
- If the employee is working in South Carolina, regardless of where he/she is a resident, the income earned in South Carolina is taxed by South Carolina.
- If a South Carolina resident is earning wages in a state that does not have a state income tax, the withholding should be for South Carolina.
All employers must report all newly hired employees within 20 days after the employee's first day of work.
Businesses must file with the South Carolina Department of Employment and Workforce (SCDEW) if the employer has at least one employee. SCDEW will determine the Unemployment Insurance liability or non-liability of the employing unit.
South Carolina for-profit businesses are required to establish an unemployment tax account with the South Carolina Department of Employment and Workforce (SCDEW).
For-profit businesses are liable for quarterly UI tax contributions if the business meets any one of the following criteria:
- Pays $1,500 or more in wages in any calendar quarter or has at least one employee during any 20 weeks in a calendar year.
- Acquires all or part of a business that was an employer subject to UI taxes at the time of the acquisition.
- Is liable under the Federal Unemployment Tax Act (FUTA) and has employees in South Carolina.
- Elects to become a liable employer.
- Pays cash wages of $1,000 or more in any calendar quarter for domestic services. Pays $20,000 or more to individuals employed in agricultural labor during any calendar quarter.
- Employs 10 or more individuals in agricultural labor for a day in any 20 weeks in a calendar year. In particular, situations for-profit businesses may not be liable for UI taxes for certain individuals. The following are just two examples of situations where employers may not be liable for UI taxes:
- Independent Contractors: Businesses that employ independent contractors are not liable for UI tax contributions on those individuals. The department decides whether a worker’s employment status is that of an employee or an independent contractor. Although a contract between parties is considered, the fact that it states the relationship as an independent contractor does not bind the department in its determination.
- Multi-state workers: When an employee works in South Carolina and another state, the department applies the following test to determine employment reportable to DEW. The tests are applied in the following order:
- 1.) Localization: An employee’s services are in employment and "localized" in a state if he/she performs all services in the state or performs a majority of his/her services in that state with incidental services performed outside it.
- 2.) Base of Operations: If test one does not apply in any state, an employee’s services are in employment in a state if he/she performs some of his/her services and his/her base of operations is in that state as well. A base of operations is defined as a place of more or less permanent nature where the employee starts work and where he/she customarily returns to perform his/her contracted work.
- 3.) Place of Direction and Control: If tests one and two do not apply in any state, an employee’s services are in employment in a state if some of his/her services are performed there and his/her employer exercises general direction and control over him/her from that same state.
- 4.) Residence of Employee: If tests one, two, and three do not apply in any state, an employee’s services are in employment in a state where he/she performs some of his/her services, and he/she lives there as well.
For a complete list of covered and exempt services, please refer to the following South Carolina Code of Laws sections:
- 41-27-210,
- 41-27-220,
- 41-27-230,
- 41-27-235, and
- 41-27-260.
For specific questions, please contact the Employer Status Section at 803-737-2400 or registration@dew.sc.gov.
A nonprofit organization may or may not need to establish an unemployment tax account with the South Carolina Department of Employment and Workforce (SCDEW). Your organization would be considered liable for South Carolina UI tax contributions if it meets any one of the following criteria:
- A nonprofit organization, exempt under IRS Code 501-C-3, that employs four or more individuals for any 20 weeks within the current or preceding calendar year.
- A state government agency.
- A local government entity that employs at least one individual; regardless of the number of weeks the individual is employed or how much he/she is paid.
- A business that elects to become a liable employer.
The rule of thumb is that any employer who regularly employs four or more workers full-time or part-time is required to have workers' compensation insurance. However, there are some exceptions to this.
The Work Opportunity Tax Credit (WOTC) provides businesses a tax credit for hiring individuals with barriers to employment. The program enables targeted employees to move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers. Participating businesses are compensated by receiving a reduction in their federal income tax liability as a result of the tax credit. Maximum tax credits range from $2,400 to $9,600, depending upon the qualified employee’s targeted group.
If you are a business owner, you could benefit from hiring within the following groups:
- Temporary Assistance for Needy Families (TANF) recipient,
- Supplemental Nutrition Assistance Program (SNAP) recipient,
- Columbia/Sumter Empowerment Zone (EZ) resident,
- Marlboro County Rural Renewal Community (RRC) resident,
- Vocational Rehabilitation or Ticket-to-Work Participant,
- Recently released Ex-felon Supplemental Security Income (SSI) recipient,
- Disabled veteran who within the last year was discharged or unemployed for 6 or more months,
- Unemployed Veteran, or
- Veteran receiving SNAP.
This federally funded program is administered by the South Carolina Department of Employment and Workforce (SCDEW). SCDEW must certify the Work Opportunity Tax Credits before employers can claim them on their federal tax return. Requests must be postmarked within 28 days of the employee’s start date. Only those requests indicating potential target group eligibility should be mailed in/submitted.
Employers in South Carolina are required to post two employment notices from the South Carolina Department of Labor, Licensing and Regulation (SCLLR) in a place or places where employees can see them.