Arkansas is among the top three US states with the lowest cost of doing business. However, common expansion challenges still exist in business-friendly states like Arkansas.
Fortunately, a detailed guide on Arkansas labor laws can help employers, business owners, and HR leaders understand compliance requirements and what to plan out for.
It covers hiring, payroll, benefits, workplace rights, and termination practices in Arkansas.
Overview of Employment Laws in Arkansas
You will benefit from the state's designated opportunity zones, with low taxes and minimal regulations.
Arkansas is an at-will employment state, allowing you to manage employees, including work hours, leave benefits, and termination at your discretion.
But remember, while state regulations are fewer, federal laws like the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) still apply.
Some key areas of Arkansas employment laws, even for remote workers, include minimum wage and overtime pay, payroll benefits, anti-discrimination provisions, and workplace safety and health.
Quick Arkansas Facts:
- Population: Approximately 3.0 million
- Major Industries: Agriculture, manufacturing, healthcare, education
- Major Cities: Little Rock (capital), Fayetteville, Fort Smith, Jonesboro
Working from home avoids commuting, and fewer commuters result in
lower greenhouse gas emissions.
Key Employment Laws for Arkansas Employers
Here’s a detailed breakdown of key employment laws in Arkansas:
At-will employment in Arkansas
You can follow the doctrine of at-will employment in Arkansas, terminating the employment relationship for any reason or no reason at all.
Arkansas labor laws for termination mandate due diligence with anti-discrimination and equal opportunity provisions, which are covered in detail later.
The following court cases limit the at-will employment doctrine in Arkansas:
| Sterling Drug, Inc. v. Oxford (1988) |
You cannot terminate an employment relationship for refusing to participate in or remain silent about illegal activities. |
| Ball v. Ark. Dept. of Comm. Punishment (2000) |
Employment manuals or handbooks can create implied contracts, limiting at-will employment. |
| Palmer v. Ark. Council on Eco. Edu. (2001) |
Reinforces the public policy exception to at-will employment. |
| Marlow v. United Sys. of Ark., Inc. (2013) |
You may be liable to pay attorney's fees in wrongful discharge cases violating public policy. |
Standard working hours in Arkansas
- Under the at-will employment doctrine, you can ask your employees to work beyond standard working hours but with additional overtime pay.
- Arkansas labor laws for hourly employees prescribe 40 working hours in a seven-day week.
- The labor laws in Arkansas consider full-time employment to exceed 30 hours per seven-day work week. Therefore, the answer to the most frequently asked question: is 32 hours considered full-time in Arkansas - Yes!
State of Arkansas minimum wage and overtime requirements
- You must follow the doctrine of minimum wage while hiring in Arkansas.
- If you employ four or more workers, you must pay the minimum wage in Arkansas, $11 per hour. (minimum wage ar)
- Moreover, Arkansas work laws mandate overtime pay at 1.5 times their regular pay rate for all hours over 40.
- However, you may observe the following exceptions while calculating overtime pay:
- Agricultural employees are not subject to overtime pay requirements.
- Arkansas Department of Labor laws may authorize alternative overtime pay arrangements for specific industries, such as those with irregular hours, piece-rate pay, or commission-based pay.
- Arkansas law exempts all overtime rules from the federal Fair Labor Standards Act (FLSA).
Employee Classification and Contracts
You face the pertinent issue of W2 or 1099 forms while hiring in the US. You can solve it and also avoid penalties for the misclassification of workers by following these guidelines under the Arkansas unemployment laws:
- To prove that you have hired an independent contractor and save on employee costs and compliance burden, you must show:
- The worker is free from your control in how they perform the work.
- The work is done outside your places of business.
- The worker is independently established in a trade or business similar to the work they're doing for you.
- Unless proven otherwise, you must consider any worker as an employee
In most cases, you won’t require an employment contract due to at-will employment in Arkansas. Moreover, you can place restrictions on your employees via contractual clauses like:
- Drug testing programs
- Confidentiality agreements
- Covenants not to compete or non-competition clauses
- Non-solicitation clauses
Payroll and Employer Tax Obligations in Arkansas
Here’s how you can comply with Arkansas employment taxes & payroll requirements:
| Tax type |
Employer responsibility |
| Federal Income Tax Withholding |
Calculate based on the employee’s Form W-4 and IRS guidelines. The current withholding tax rate is 3.9%. |
| Arkansas State Payroll Taxes |
You must withhold state income tax based on the employee’s Form AR4EC and withholding tables. |
| Arkansas Unemployment Insurance |
You pay 0.1%–10% (experience-based rate) on the first $10,000 of each employee’s wages (2023). |
| Federal Unemployment Tax (FUTA) |
You pay 6% on the first $7,000 of wages. The effective rate may be reduced to 0.6% with a 5.4% state tax credit. |
| Recordkeeping |
Maintain payroll records for at least four years. |
| Timely Deposits |
Follow federal and Arkansas schedules for payroll tax deposits and UI payments. |
| Reporting |
- File IRS Form 941 (Quarterly Federal Tax Return for FICA/income taxes).
- File IRS Form 940 (Annual FUTA Tax Return).
- Submit Arkansas Quarterly Contribution and Wage Report.
|
You need an experienced Employer-of-Record (EOR) solution partner in Arkansas to manage payroll for benefits administration and compliance with Arkansan state employment laws.
Employer contribution summary table
Arkansas payroll laws prescribe the following withholding rates for unemployment insurance, Social Security, Medicare, and FUTA contributions:
| Tax Type |
Employer Contribution Rate |
Employee Contribution Rate |
Taxable Wage Base (2023) |
| Federal Unemployment Tax Act (FUTA) |
6% (0.6% effective rate with 5.4% state UI credit) |
None |
$7,000 |
| Arkansas Unemployment Insurance (UI) |
0.1%–10% (based on employer experience rating) |
None |
$10,000 |
| State Income Tax |
N/A |
Based on Arkansas withholding tax tables (0% to 4.4%) |
No limit |
| Social Security Tax |
6.2% |
6.2% |
$160,200 |
| Medicare Tax |
1.45% |
1.45% |
No limit |
| Additional Medicare Tax |
N/A |
0.9% (for wages > $200,000 annually) |
No limit |
Benefits and Insurance Requirements
Arkansas labor law for salaried employees mandates the following benefits and insurance requirements:
| Benefit |
Description |
Legal Basis |
| Workers' Compensation Insurance |
You must cover work-related injuries or illnesses if you employ three or more workers. |
Arkansas Workers' Compensation Law |
| Unemployment Insurance (UI) |
You must pay into the state unemployment insurance system to support eligible workers. |
Arkansas Division of Workforce Services |
| Social Security and Medicare |
You must contribute 6.2% for Social Security and 1.45% for Medicare taxes. |
Federal Insurance Contributions Act (FICA) |
| Family and Medical Leave (FMLA) |
If you employ 50 or more workers, you must provide unpaid leave for qualified medical and family reasons. |
Federal Family and Medical Leave Act (FMLA) |
| Health Insurance (ACA Compliance) |
If you employ 50+ full-time employees, you must offer affordable health coverage or face penalties. |
Affordable Care Act (ACA) |
Workers’ compensation and liability
Arkansas has multiple no-fault compensation laws, including one for workers' compensation.
Arkansas employment laws on compensation cover medical expenses and lost wages for injured workers. You must provide these benefits for a minimum of two years from the date of their injury.
Workplace Breaks and Rest Periods
There are no specific Arkansas labor laws on break nor the Fair Labor Standards Act mandates any.
However, there is an Arkansas law on breaks at work for minors aged below 16 years and working in the entertainment industry.
To boost employee productivity, you can voluntarily plan for standard breaks (typically 20 minutes or more) during working hours or rest periods.
Anti-Discrimination and Equal Opportunity Laws
Labor laws in Arkansas, specifically the Arkansas Civil Rights Act of 1993, prohibit employment discrimination based on several protected characteristics: race, color, religion, sex, national origin, disability, and pregnancy.
The Federal Workforce Innovation and Opportunity Act (WIOA) also prohibits discrimination based on age, political affiliation, or citizenship status.
Leave Policies in Arkansas
No Arkansas state employment laws mandate private companies to offer paid time off. Arkansas labor laws allow you to decide if you want to offer vacation days, sick days, or any other kind of leave.
The Arkansas sick leave law prescribes paid leave to full-time employees only when they are too sick to work.
You are encouraged to follow the federally mandated Family Medical Leave Act (FMLA) to award annual, parental, or any other kind of leave in Arkansas.
Employee Termination and Severance Policies
While you are encouraged to follow the at-will employment in Arkansas, you should ensure that terminations are conducted fairly and legally. Here are some best practices:
- Maintain clear and accurate documentation of performance issues, disciplinary actions, and reasons for termination.
- Ensure that termination decisions are not based on protected characteristics such as race, color, religion, sex, etc.
Severance pay practices
Arkansas labor laws do not mandate severance pay. However, you are encouraged to offer generous severance packages as a gesture of goodwill or to avoid potential legal claims. When offering severance pay, consider the following:
- A written severance agreement can outline the payment terms, including any conditions or restrictions, such as confidentiality agreements or non-compete clauses.
- It can also waive any claims under federal and Arkansas laws, such as minimum wage and overtime.
Workplace Safety and Health Obligations
You must comply with the Arkansas Department of Labor and Licensing to protect workers from workplace hazards. Here are some key requirements:
- You must implement a written hazard communication program to inform employees about chemical hazards in the workplace.
- You must provide appropriate PPE to protect employees from workplace hazards.
- You must have a fire protection plan, including fire prevention plans, systems, and employee training.
- You must maintain accurate records of workplace injuries and illnesses and report serious injuries and illnesses.
- You must follow specific OSHO regulations regarding the number and access to toilets at the workplace.
How to Simplify Arkansas Employment Compliance
Arkansas has 85 designated Opportunity Zones, and compliance requirements with Arkansas labor law often go unnoticed when investing in the state. Here is why you need an Employer-of-Record (EOR) solution.
An EOR like Skuad acts as the legal employer in Arkansas, thus outsourcing labor law compliance:
- Handle HR support services, including onboarding, offboarding, performance management, and employee relations.
- Accurate and timely payroll processing, including federal, state, and local taxes.
- Offers a range of benefits, such as health insurance, leave policy, and worker compensation, tailored to Arkansas labor laws.
Benefits of using Skuad for Arkansas employment
- Skuad specializes in managing global teams in 160+ countries, including the US.
- Our EOR platform integrates seamlessly with your existing HR and payroll systems, streamlining your processes.
- Our dedicated support team can answer your questions and assist you with any issues.
- Moreover, our team of HR experts ensures that your business adheres to all local, state, and federal labor laws.
Let Skuad handle the complexities of hiring in Arkansas so you can focus on growing your business.
Hire, Pay, and Manage Employees with Skuad
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FAQs
1) Is it legal to work 8 hours without a break in Arkansas?
Yes, working more than eight hours without a break in Arkansas is legal. There are no specific state employment laws on workplace breaks or rest periods. However, you can make minors aged 16 work in the entertainment industry for 8 hours without a break.
2) What are Arkansas labor laws?
Arkansas labor laws draw majorly from the at-will employment doctrine. It doesn't have specific laws mandating paid time off or meal/rest breaks. Federal laws like the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) apply for most labor law compliance.
3) What are the overtime laws in Arkansas?
Arkansas labor laws mandate overtime pay for work exceeding 40 hours in a seven-day work week. The overtime pay rate is usually 1.5 times the regular hourly pay.
4) What is the law regarding PTO in Arkansas?
There is no law regarding paid time off (PTO) in Arkansas. Employers can offer PTO at their discretion to boost employee productivity.
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