Payroll Done Right

Indiana Payroll Requirements: What Employers Need to Know in 2026

Indiana payroll has a layer of complexity that catches many new employers off guard: in addition to the flat 3.05% state income tax, every one of Indiana's 92 counties imposes its own occupational income tax. County rates range from 0.5% to 3.38%, and the key rule is that withholding is based on the employee's county of residence — not the county where they work. This means an employer must know the residential county of every Indiana employee and apply the correct combined state-plus-county rate for each worker. If an employee moves to a different county during the year, the withholding rate changes as of January 1 of the following year.

State Unemployment Insurance in Indiana uses a taxable wage base of $9,500 per employee in 2026. New employers pay a rate of 2.5%, for a maximum first-year SUI obligation of $237.50 per worker. The Indiana Department of Workforce Development administers the SUI program. Employers file the WH-1 withholding return with the Indiana Department of Revenue — on either a monthly or quarterly schedule depending on prior-year withholding liability — and submit separate quarterly UI reports to Workforce Development. Learn how Indiana SUI experience rates are assigned and how the county occupational tax system affects multi-location payroll setups.

Indiana's minimum wage is $7.25 per hour, the federal minimum, as Indiana has not enacted a higher state rate. The federal FLSA floor applies to all covered employers in the state. Indiana allows a tip credit for tipped employees, consistent with federal rules: employers may pay a direct wage of $2.13 per hour provided tips bring total hourly earnings to at least $7.25. The employer must make up any weekly shortfall. Indiana has no state paid family and medical leave program and no state disability insurance tax in 2026.

The county occupational tax system creates a practical burden for Indiana employers: when a new employee is hired, the employer must collect the employee's county of residence and look up the applicable county tax rate from the Indiana Department of Revenue's annual county rate table. These rates are updated each January, so employers should download the current table at the start of each year. Indiana also permits reciprocity agreements with several neighboring states, which allows residents of those states who work in Indiana — or vice versa — to avoid double withholding in certain situations. Read the full Indiana payroll compliance guide for county rate tables, reciprocity state lists, and WH-1 filing instructions.

Final paycheck timing in Indiana requires that terminated employees receive their final wages on the next regular payday following separation. There is no requirement for same-day or next-business-day payment. This applies to both discharged and resigned employees. New hire reporting must be submitted within 20 days of hire to the Indiana New Hire Reporting Center. Indiana does not currently have a statewide paid sick leave mandate, though individual employers may offer it as a voluntary benefit.

For businesses starting Indiana payroll for the first time, the county occupational tax system is the item that requires the most upfront preparation. Employers need to build a process to capture county of residence at onboarding, verify it annually, and update withholding when employees move. Beyond that, registration involves the Indiana Department of Revenue for withholding and the Department of Workforce Development for SUI. Walk through the Indiana new employer registration process with step-by-step instructions for setting up both your withholding and UI accounts before your first payroll run.