Vermont Hiring Guide: Unemployment Insurance, Workers' Compensation, Earned Sick Time and the Child Care Contribution
Vermont Hiring Guide: Unemployment Insurance, Workers' Compensation, Earned Sick Time and the Child Care Contribution
Hiring your first employee in Vermont adds a second set of registrations on top of forming the business. You need a federal Employer Identification Number, a Department of Taxes withholding account, an unemployment insurance employer account with the Department of Labor, and workers' compensation coverage before anyone starts work. After that come the state payroll contributions and the employee rules on sick time, leave, minimum wage and overtime. This guide puts those steps in the order you should handle them.
This guide is informational content, not legal or tax advice. Employment and payroll rules change, and a qualified employment attorney or CPA can review your specific situation. Confirm each figure on the agency page named before you rely on it.
Form the entity before you register as an employer
Vermont has no general state business license, so your employer registration starts with the entity itself. File Articles of Organization for an LLC or Articles of Incorporation for a corporation with the Vermont Secretary of State's Business Services Division. The filing fee is $155 for either one. An LLC name must end with Limited Liability Company, LLC, Ltd. Liability Co., Limited Company, LC or Ltd. Co. If you need time to file, you can reserve a name for $25 with an Application for Reserved Name, and the reservation lasts 120 days and can be renewed.
Online filings through the Online Business Service Center are normally processed in less than 1 business day. Mailed filings take 7 to 10 business days. The Secretary of State publishes no expedited processing fee, so online filing is the fastest route at the same cost. Before you file, search the name in the Vermont business search to confirm it is available.
Vermont has 14 counties, but they have no licensing or zoning role. Towns, cities and villages handle zoning and local licenses, and those rules differ widely from place to place. Check with your municipality if your business needs a local permit or a zoning approval.
Vermont employer registration checklist
Complete these steps in order. Each one depends on the one before it, especially the EIN, which you need before opening state accounts.
| Order | Step | Agency or source | What to know |
|---|---|---|---|
| 1 | Form the LLC or corporation | Vermont Secretary of State | $155 filing fee; online filings normally processed in less than 1 business day |
| 2 | Obtain an Employer Identification Number | IRS | Needed for the state withholding and unemployment insurance accounts |
| 3 | Open a withholding account | Vermont Department of Taxes (tax.vermont.gov) | Required to withhold Vermont income tax from employee wages |
| 4 | Open an unemployment insurance employer account | Vermont Department of Labor, e-Services | Contributions are reported on your payroll; confirm your rate and schedule in the account |
| 5 | Buy workers' compensation insurance | Licensed insurer; 21 V.S.A. 687 | Required for employers, with exceptions for state, county and municipal bodies |
| 6 | Set up the Child Care Contribution | Confirm reporting on the agency page | 0.44% of Vermont wages; you may withhold up to 0.11% from the employee |
| 7 | Adopt an earned sick time policy | 21 V.S.A. 481 to 486 | Review the statute before setting accrual and use rules |
| 8 | Post the minimum wage poster | Vermont Department of Labor | Minimum wage is $14.42 an hour |
| 9 | Collect a W-4VT from each employee | Vermont Department of Taxes | Used to set state withholding for each employee |
| 10 | Report each new hire | Vermont Department of Labor | Due within 10 days of the hire date |
| 11 | File withholding returns | Vermont Department of Taxes | Form WHT-436 quarterly; Form WHT-434 annually by January 31 |
Unemployment insurance: open your employer account
Every Vermont employer with payroll needs an unemployment insurance (UI) employer account with the Department of Labor. You set up and manage the account through e-Services. Keep wage records accurate from the first paycheck, because your UI contributions are based on the wages you report. Your contribution rate and filing schedule come from the Department of Labor, so confirm them in your account rather than relying on a rate from another source.
Classifying workers correctly matters here too. Before you pay anyone as an independent contractor, read the Department of Labor's guidance on independent contractors and its unemployment insurance misclassification page. A worker treated as a contractor who is really an employee can create unemployment insurance and withholding problems for the business, so check the guidance before you set up the arrangement.
Workers' compensation: a required policy, not an industry choice
Vermont employers must secure workers' compensation coverage under 21 V.S.A. 687. The requirement does not depend on whether your industry is considered high risk. The exceptions are state, county and municipal bodies. Buy the policy from an insurer before your first employee starts work, and keep the certificate of coverage in your files. Ask your insurer how the requirement applies to owners and officers of your entity, since that answer depends on how your business is organized.
Child Care Contribution: 0.44% of wages
The Child Care Contribution is 0.44% of Vermont wages. You may withhold up to 0.11% from each employee's pay. Any part of the contribution you do not pass to the employee is your cost as the employer. Set this up in payroll from the first paycheck. This guide does not cover the reporting and remittance mechanics, so confirm the filing schedule and forms on the agency page before your first payroll run.
Earned sick time and minimum wage
Vermont's earned sick time law is found at 21 V.S.A. 481 to 486. Read the statute and the Department of Labor's guidance before you write your policy, because the accrual, use and documentation rules are set there and not in this summary. Build your timekeeping system to track sick time from the first day of employment so that your records match what the law requires.
The state minimum wage is $14.42 an hour. Post the minimum wage poster in a place where employees can read it. Check the rate against your pay practices, including any employee who receives tips or works in a role with a different pay structure, and confirm how the rules apply to your workers.
Unpaid leave under Act 32 of 2025
Act 32 of 2025 requires unpaid leave for Vermont employees, and the obligations depend on your headcount. Employers with at least 10 employees averaging 30 or more hours a week must provide bereavement, safe, parental and qualifying exigency leave. Employers with at least 15 such employees must also provide family leave. Employees can take up to 12 weeks of leave in a 12-month period, and bereavement leave is up to 2 weeks, or 10 workdays. Count your employees carefully, since those thresholds decide which leave types you must offer.
Paid family and medical leave is optional
Vermont has no mandatory state paid family and medical leave program. Its Family and Medical Leave Insurance program is optional and runs through The Hartford. An employer with two or more employees buys that coverage through a broker. Decide whether to offer it as part of your benefits planning, and get quotes before you make hiring commitments that depend on it.
Overtime and exemptions
Vermont requires overtime pay at 1.5 times the regular rate for hours over 40 in a week. Certain workers are not covered by the state requirement under 21 V.S.A. 384(b): employees of retail or service establishments, hotels, motels, restaurants and some seasonal amusement businesses. The federal Fair Labor Standards Act may still apply to those workers, so check with the US Department of Labor before you assume an exemption covers a particular role.
Where to confirm each step
Use the official sources below to check current forms, fees and deadlines before you act. The Vermont Small Business Development Center offers guidance to new owners who are preparing to hire.
- Vermont Secretary of State, Business Services Division: entity filings, name reservations and the business search
- Vermont Department of Taxes: withholding accounts, withholding returns and tax registration
- Vermont Small Business Development Center (VtSBDC): advisers for new and growing businesses
- U.S. Small Business Administration, Vermont district: federal resources for Vermont employers
Hiring creates obligations that are easy to miss, and a mistake in classification, leave eligibility or withholding can be expensive to correct. Before your first payroll, ask a qualified employment attorney or CPA to review your worker classifications, leave obligations and withholding setup against your specific facts.