Kentucky Payroll Compliance
Every rate, wage base, and threshold Kentucky employers need for 2026 — sourced from the Dept. of Revenue and Office of Unemployment Insurance — including the state's distinctive UPAF surcharge and construction industry rate rules.
Minimum Wage & Hours
Kentucky’s minimum wage matches the federal floor of $7.25/hour with no state-level increase enacted or scheduled. No Kentucky locality sets its own minimum wage.
| Item | 2026 Value | Notes |
|---|---|---|
| State minimum wage | $7.25/hr | Matches the federal FLSA floor |
| Overtime rule | 40 hrs/week | Federal FLSA; no separate state daily overtime rule |
| Local wage ordinances | None | No Kentucky city or county sets its own minimum wage |
State Income Tax Withholding
Kentucky applies a flat 4.0% rate to all taxable wages — the result of a multi-year phased reduction from a 5% graduated top rate in 2018. Kentucky maintains reciprocity agreements with several neighboring states, easing cross-border payroll for the Louisville and Cincinnati metro areas.
| Item | 2026 Value | Notes |
|---|---|---|
| Flat withholding rate | 4.0% | Same rate at every income level |
| Reciprocity | IN, IL, MI, OH, VA, WV, WI | Broad reciprocity list eases multi-state metro-area payroll |
| Local occupational tax | Many cities/counties | Separate from state tax; Louisville and Lexington both impose one, with rates that vary by jurisdiction — confirm the local rate directly with each city/county before running payroll |
Paid Leave
Kentucky has no state disability insurance, no mandatory paid family/medical leave, and no statewide paid sick leave. Federal FMLA is the only job-protected leave baseline.
Unemployment Insurance (SUI)
Kentucky’s SUI wage base is $11,100 for 2026. New construction employers are assigned the highest rate on the chart — a notably strict rule compared to most states, which typically give even construction employers a standard entry rate.
| Item | 2026 Value | Notes |
|---|---|---|
| SUI taxable wage base | $11,100 | Per employee, per year |
| Experienced range | 0.3% – 9.0% | Based on claims history |
| New construction employer rate | Highest chart rate | Assigned the maximum rate on the current rate chart, unlike most states |
| UPAF surcharge | Separate from SUI | Unemployment Program Administrative Fund; not creditable on federal Form 940 |
Official Kentucky .gov Resources
Kentucky Payroll Compliance
Every rate, wage base, and threshold Kentucky employers need for 2026 — sourced from the Dept. of Revenue and Office of Unemployment Insurance — including the state's distinctive UPAF surcharge and construction industry rate rules.