South Dakota payroll taxes for employers (2026)

South Dakota payroll: short checklist, unusual exceptions

Workers comp is optional, but the risk is not

DLR recommends coverage and warns that an uninsured employer can be sued by an injured worker. Skipping a policy saves the premium and leaves you exposed to a lawsuit with no insurer behind you. If cash flow is the worry, pay-as-you-go workers comp spreads premiums across payroll runs. The market is private; there is no state fund.

Your rate steps down after year one

DLR states unemployment as two parts. In year 1 a new employer pays 1.20% reemployment assistance (RA) tax plus the 0.55% investment fee. In years 2 and 3, if the account has a positive balance, the RA tax drops to 1.00% and the fee stays at 0.55%. Construction starts much higher: 6.00% plus 0.55% in year 1, then 3.00% plus 0.55% in years 2 and 3 with a positive balance. DLR's FAQ adds a 0.08% administrative fee from calendar year 2026 that does not apply to new employers. Experienced rates run from 0.00% to 8.52% on the DOL July 2026 table.

Minimum wage rises again in January

The state minimum is $11.85 an hour in 2026 and goes to $12.30 on January 1, 2027. The tipped cash wage is $5.925 now (the DOL table rounds it to $5.93) and $6.15 in 2027. Load the new rates before the first January payroll; the minimum wage table lists every state.

Monthly paydays are allowed

SDCL 60-11-9 requires pay at least once each calendar month on regular paydays set in advance. Final wages, after a quit or a discharge, are due by the next regular payday or once the employee returns all employer property (SDCL 60-11-10 and 60-11-11).

With no state or local income tax and no state paid leave payroll program that we found, a South Dakota paycheck shows only federal withholding and FICA.

South Dakota employer payroll facts at a glance

Steps to become a South Dakota employer

1. Get a federal EIN.
2. Register for reemployment assistance with DLR through its online employer system (apps.sd.gov/ld94empuimenu).
3. Skip state withholding registration; South Dakota does not tax wages.
4. Report each new hire within 20 days of the first day of work, using the DLR new hire reporting page.
5. Decide on workers comp. It is not required by law, but DLR recommends it; get quotes before your first hire.
6. Pick regular paydays, at least monthly.

What a $50,000 South Dakota employee costs

A first-year, non-construction employer pays $262.50 to the state for this worker: $180.00 in RA tax (1.20% x $15,000) and $82.50 in investment fee (0.55% x $15,000).

In years 2 and 3 with a positive balance, the state line drops to 1.55% x $15,000 = $232.50. A first-year construction employer pays 6.55% x $15,000 = $982.50, for a total of $4,849.50; see construction payroll for the rest of that picture. The employee keeps everything except federal income tax and $3,825.00 of FICA. Try other wages in the South Dakota payroll calculator below, or compare the $15,000 base on the 2026 SUTA rate table.

Payroll providers and PEOs in South Dakota

With no state income tax, the main things a provider has to get right are the two-part RA tax plus investment fee, the year 2 rate change and the January 2027 minimum wage increase. Ask whether the system splits RA tax and investment fee the way DLR bills them.

Compare options on our payroll software rankings and the fees behind the prices in payroll cost. A PEO can also bundle workers comp, which matters more in a state where you have to choose to buy it. For workers across the state line, see North Dakota, Nebraska and Minnesota.