Virginia payroll laws 2025: Updates, rules, resources, and employer tips

Payroll laws are the basic rules that govern how employers pay their workers. In Virginia, these rules generally follow federal guidelines but also include some important state-level requirements. Employers must follow all applicable laws related to on-time pay, final paychecks, and properly classifying workers to avoid penalties and legal issues. With more than 800,000 small businesses operating in Virginia, staying compliant with payroll laws is essential to avoid costly enforcement actions and maintain a strong reputation.

This 2025 guide outlines key Virginia payroll laws, where they differ from federal requirements, and the taxes and employer obligations you need to know. It also highlights tips, tools, and payroll services to help you stay compliant.

What are payroll laws?

Payroll laws are regulations that govern how employers compensate employees. They include rules about wages, tax withholdings, overtime pay, recordkeeping, and employee classification at both federal and state levels.

Why are payroll laws important?

Payroll laws help protect workers’ rights and ensure businesses meet their legal responsibilities. Following these laws reduces the risk of fines, lawsuits, and payroll errors that can affect employee trust and company operations.

What do payroll laws cover?

Payroll laws outline how employees must be paid, how taxes are withheld and reported, and what rights and responsibilities both parties have. In Virginia, this includes:

• Making sure employees receive full and timely pay for all hours worked.
• Following state and federal rules for wages, overtime, permitted deductions, and final pay.
• Keeping accurate payroll records to meet legal requirements and handle any disputes.
• Meeting tax reporting and withholding obligations at the state and federal levels.

When businesses follow these laws, they avoid penalties and build a stronger, more compliant workplace.

Who must follow Virginia payroll laws?

Whether you operate a small business, run a nonprofit, or hire someone to work in your home, Virginia payroll laws apply once you begin paying wages to an employee. These rules apply regardless of business size or industry.

Here’s who’s required to comply:

• Any business with one or more employees working in Virginia, including nonprofits and companies based outside the state.
• Employers who pay more than $100 in wages during any calendar quarter.
• Household employers who pay $1,000 or more in wages in a calendar quarter.

To summarize, if you have employees working in Virginia, you must comply with the state’s payroll laws, which cover wage payments, tax obligations, and required recordkeeping.

New payroll laws to know in 2025

The following are some of the key 2025 updates to Virginia payroll laws:

• Minimum wage increase: Virginia’s minimum wage increased to $12.41 per hour on January 1, 2025. This adjustment reflects the annual cost-of-living increase tied to the Consumer Price Index.
• Ban on non-compete agreements for nonexempt employees: As of July 1, 2025, employers can no longer enforce non-compete agreements for employees eligible for overtime under the FLSA. This applies regardless of the employee’s earnings or job title.
• Unemployment insurance tax rates increased: The Virginia Employment Commission raised unemployment tax rates in response to higher benefit payouts. Employers must review and respond promptly to claims, as stricter rules now affect eligibility and appeal timelines.
• Mandatory retirement savings enrollment (RetirePath Virginia): As of 2025, employers with 25 or more employees must register for RetirePath Virginia if they don’t already offer a retirement plan. Employers must auto-enroll eligible employees within 30 days, though workers may opt out.

Federal payroll laws every employer should know

While payroll laws vary by state, federal payroll laws set the baseline that all employers across the U.S.—including those in Virginia—must follow. These laws regulate how wages are paid, how taxes are withheld, and what benefits employers must offer in certain situations. Here's a look at the key federal regulations that impact payroll:

Fair Labor Standards Act (FLSA)

The FLSA establishes federal standards for minimum wage, overtime pay, recordkeeping, and child labor. It applies to most full-time and part-time workers in the private sector and in federal, state, and local governments. These are some of the payroll laws that fall under the FLSA.

• Federal minimum wage: As of 2025, the federal minimum wage is $7.25 per hour.
• Employers can pay tipped employees less than the full minimum wage—as long as the employee earns at least $30 per month in tips and their total pay (wages plus tips) adds up to at least the federal minimum wage of $7.25 per hour.
• Overtime pay: Nonexempt employees must be paid 1.5 times their regular rate for hours worked over 40 in a week.
• Recordkeeping: The FLSA requires employers to keep accurate, accessible records for all nonexempt employees. This includes basic information like name, address, Social Security number, occupation, hours worked, wages paid, and pay rates. Employers using the tip credit must also maintain weekly records of reported tips and the amount of credit claimed.
• Keep for at least 3 years: Payroll records, collective bargaining agreements, and sales or purchase records
• Keep for at least 2 years: Timecards, wage rate tables, schedules, and records of wage changes

Internal Revenue Service (IRS) Regulations

Employers are required to comply with IRS rules pertaining to payroll taxes. Taxes must be calculated, withheld, and submitted accurately and on time. Employers need to:

• Withhold federal income tax from employee wages based on Form W-4 information and current IRS federal withholding tax tables.
• Withhold and match Social Security and Medicare taxes (FICA) from employee wages. For 2025:
• Social Security tax: 6.2% each for employer and employee, up to a wage base limit of $176,100.
• Medicare tax: 1.45% each for employer and employee, with no wage base limit.
• Pay Federal Unemployment Tax Act (FUTA) taxes:
• Employers must pay a federal unemployment tax of 6.0% on the first $7,000 of each employee’s annual wages.
• If all state unemployment taxes are paid on time and the employer’s state is not designated as a credit reduction state, the FUTA tax may be reduced by a credit of up to 5.4%, resulting in an effective rate of 0.6%.
• Only employers pay FUTA; it is not withheld from employee wages.
• FUTA taxes are reported annually using IRS Form 940.

Affordable Care Act (ACA)

The Affordable Care Act (ACA) requires employers with 50+ full-time employees to offer affordable health insurance and report coverage to the IRS.

• They must offer affordable, minimum-value coverage to at least 95% of full-time employees and dependents.
• "Affordable" means the employee's share of self-only coverage doesn’t exceed a set income-based percentage.
• Employers must file Forms 1094-C and 1095-C with the IRS annually to report coverage details.
• Visit the IRS website to see if the ACA applies to your business.

Smaller businesses with fewer than 50 full-time employees may still be subject to certain ACA requirements depending on their specific circumstances. Check the IRS website for additional information on ACA tax provisions for small employers.

Key Virginia payroll laws

While federal payroll laws create the baseline, Virginia has its own set of state-level rules that employers must follow. If you have employees working in Virginia, it’s important to understand these somewhat complex state requirements, as they can add responsibilities beyond what federal law covers.

Minimum wage in Virginia for 2025

As of January 1, 2025, the Virginia minimum wage is $12.41 per hour for most workers. This rate applies statewide; however, certain employees may be exempt based on their industry or job classification.

Virginia overtime rules

Employers must follow Virginia's overtime laws, which generally align with federal standards under the Fair Labor Standards Act (FLSA). These rules apply to most nonexempt employees in the state.

• Standard overtime pay: Employees must be paid 1.5 times their regular rate of pay for:
• Hours worked over 40 in a single workweek.
• Double-time pay: Virginia law does not require double-time pay.
• Employers may offer it voluntarily, but it’s not mandated by the state.

Pay frequency

Virginia law (Virginia Code § 40.1‑29(A)) requires employers to set regular pay periods and adhere to a predictable schedule for paying employees.

• Salaried employees must be paid at least once per month.
• Hourly (nonexempt) employees must be paid at least every two weeks or twice per month, unless the employee earns over 150% of the state’s average weekly wage and agrees in writing to monthly pay.

Semi-monthly pay periods

• Virginia does not require specific pay-by dates for semi-monthly schedules. However, employers who choose a semi-monthly pay period must ensure employees are paid at least twice per month and stick to the written payday schedule communicated to employees.

Other pay periods (weekly, biweekly, etc.)

• Virginia allows employers to use various pay schedules, including weekly, biweekly, or monthly, as long as they meet the state’s minimum frequency rules.
• Hourly employees must be paid at least once every two weeks or twice each month unless they earn 1.5 times the state’s average weekly wage and consent in writing to monthly pay.
• Employers must clearly communicate the payday schedule in writing and follow it consistently.
• Any changes to the pay schedule must also be provided to employees in writing.

Overtime pay

• Virginia law does not establish separate pay frequency rules for overtime wages beyond general wage payment timing.
• Overtime earned during a pay period must be included in the paycheck issued on the regular payday for that period.

Exception for exempt employees

• Exempt (salaried) employees must be paid at least once per month.

Final paycheck laws in Virginia

Under Virginia law, employers must issue final wages based on how the employment relationship ends. The timing of payment varies depending on whether the employee was terminated or resigned.

• Termination (fired or laid off): All earned wages must be paid by the next regular payday following the termination date.
• Voluntary resignation: Final wages are also due by the next regularly scheduled payday, regardless of whether notice was given.
• Accrued vacation (PTO payout): Employers are only required to pay out unused vacation or PTO if their written policy or employment contract states that it will be paid upon separation.
• Waiting time penalty: Virginia law does not impose an automatic penalty for late final pay. However, employees may file a wage claim with the Virginia Department of Labor and Industry, and employers may face legal action for willful nonpayment.
• Additional considerations:
• Sick leave: There is no legal requirement to pay out unused sick leave unless company policy says otherwise.
• Severance pay: Not required by law, but may be offered as part of a contract or company policy.
• Deductions: Employers may only deduct from final pay if the deduction is legally allowed or the employee has agreed to it in writing.

For more detailed information, refer to the Virginia Department of Labor and Industry’s resources on wage payment laws and final pay requirements.

Family leave policies

Virginia does not offer a standalone state-level paid family leave program. However, eligible employees may still take unpaid, job-protected leave under the federal Family and Medical Leave Act (FMLA). Employers may choose to voluntarily provide paid family leave, and any such policy must comply with its own terms and be honored as part of the employment agreement. These voluntary benefits must be clearly outlined in employee handbooks or contracts.

State-specific recordkeeping requirements

Virginia employers must retain records related to wages, hours worked, job classifications, and deductions for a minimum of three years, in accordance with state labor law. These records should be readily available for review by the Virginia Department of Labor and Industry (V-DOLI) if requested. Proper documentation helps employers address any wage disputes or regulatory inquiries effectively.

Tip credit rules

Virginia follows federal FLSA rules regarding tipped employees. Employers may take a tip credit only if tips bring the employee’s total earnings to at least the federal minimum wage ($7.25/hour). Employers must inform employees in advance of using a tip credit and allow them to retain all tips, except for those pooled under a valid shared-tips plan.

Virginia payroll taxes

In Virginia, employers must comply with all federal payroll tax obligations and manage state-specific payroll requirements. Virginia imposes a state personal income tax, which employers are required to withhold from employee wages. While the state does not offer a mandatory disability insurance program for private-sector employees, employers are still responsible for other key payroll-related obligations.

Unemployment Insurance Tax (SUTA)

Virginia employers are required to contribute to the State Unemployment Tax Act (SUTA) program, which funds unemployment benefits for employees who lose work due to no fault of their own. The Virginia Employment Commission (VEC) administers this program, and employers must pay taxes on the first $8,000 (as of 2025) of each employee’s annual wages, with tax rates determined annually based on employer experience and the state’s solvency.

State Income Tax

Virginia requires employers to withhold state income tax from employee wages and remit payments to the Virginia Department of Taxation. The state uses a progressive tax system with rates ranging from 2% to 5.75%, depending on income level. Employers must register for withholding, file regular returns, and submit withheld amounts based on their assigned filing frequency.

Virginia payroll compliance requirements

Virginia employers must meet a number of state and federal payroll responsibilities to remain compliant. Here’s what your business needs to know.

Register as an employer

Employers must register with the Virginia Department of Taxation and the Virginia Employment Commission (VEC) once they hire employees or begin paying wages. Registration allows employers to withhold state income tax and report unemployment insurance wages. You can register online through the Virginia Tax website and the VEC’s online services portal.

Provide accurate pay statements

While Virginia does not require itemized pay stubs by law, it’s strongly recommended that employers provide a written or printed statement showing hours worked, wages earned, deductions, and pay period dates. Good recordkeeping helps prevent disputes and supports legal compliance under federal wage laws.

Furnish required new hire reports

Virginia employers must report all newly hired and rehired employees within 20 days to the Virginia New Hire Reporting Center. This includes part-time, full-time, and seasonal employees. The report helps enforce child support obligations and prevent unemployment insurance fraud.

Pay employees on time

Virginia law requires that employees be paid at least monthly or biweekly. Employers must establish and communicate regular paydays in writing. Failing to pay wages on time can result in penalties and potential legal claims.

Withhold and remit payroll taxes

Virginia employers must withhold state income tax from employee wages and submit it to the Department of Taxation. Employers must also pay state unemployment insurance taxes through the VEC. Deadlines vary depending on your assigned filing frequency.

Maintain compliance with federal rules

In addition to state requirements, employers must meet all federal payroll rules, including withholding for Social Security, Medicare, and federal income tax. Late payments or reporting errors at the state or federal level can result in fines and interest charges.

Can an employer withhold a paycheck for any reason?

No. Employers cannot withhold a paycheck for any reason not allowed by law. They are legally required to pay all earned wages on time. Deductions are only permitted if:

• Required by law (e.g., taxes, wage garnishments)
• Authorized in writing by the employee (e.g., benefits)
• Covered under a collective bargaining agreement

Employers may not withhold wages as punishment or for issues like property damage. Unlawful withholding can lead to legal action by the employee.

Consequences of non-compliance

In addition to the specific regulatory actions outlined above, failing to follow Virginia’s payroll rules can lead to broader consequences for your business:

Financial penalties

In Virginia, employers may face penalties from the Virginia Employment Commission or the Department of Labor and Industry if they fail to pay wages on time, submit required reports late, or file payroll taxes incorrectly. These agencies enforce state labor and tax laws to ensure employers meet their legal obligations.

Employee claims and lawsuits

Employees may file wage complaints or lawsuits if they believe they were underpaid, paid late, or denied proper documentation. This can lead to back pay, legal fees, and court-ordered penalties.

Audits and investigations

Non-compliance can trigger audits by the Virginia Department of Taxation or the Virginia Employment Commission. Federal agencies like the IRS or the Department of Labor may also investigate payroll issues, increasing the legal and financial risks.

Reputation damage

Violating payroll laws can erode employee trust and harm your company’s public image. Word can spread quickly, affecting recruiting, retention, and customer perception.

Operational setbacks

Responding to penalties, claims, or audits takes time and resources away from daily operations. Rebuilding compliance systems can also increase long-term costs and disrupt business growth.

Common payroll mistakes (and how to avoid them)

Payroll mistakes can cost businesses more than just money. They can lead to fines, compliance violations, and damaged employee trust. Below are some of the most frequent errors companies make, along with ways to prevent them.

Misclassifying employees

Misclassifying a worker, such as labeling an employee as an independent contractor, can lead to audits and financial penalties. The IRS may investigate if a business submits both a W-2 and a 1099 for the same person, as this can signal potential classification errors.

How to avoid this:

• Use the IRS and Virginia Employment Commission (VEC) criteria to distinguish contractors from employees. These guidelines focus on the degree of control the business has over how work is performed, the financial relationship between the parties, and how the working relationship is structured. Misclassification can lead to audits, fines, and required back payments.
• Use QuickBooks payroll features to categorize workers and file the correct forms.
• Audit classifications regularly to stay compliant.

Underpaying employees

Paying employees incorrectly isn’t just a mistake; it’s a risk that could cost your business big time. In 2024, the U.S. Department of Labor’s Wage and Hour Division clawed back over $273 million in unpaid wages and damages for nearly 152,000 workers. This is a clear signal that payroll compliance is under the spotlight, and enforcement is real.

How to avoid this:

• Stay current on wage and hour laws.
• Run regular payroll audits.
• Use automated payroll and time-tracking tools, like a time card calculator.
• Train staff on compliance basics.
• Keep accurate, organized records.

Miscalculating overtime

Overtime mistakes are a top source of wage claims. Errors like not separating regular from overtime hours or applying the wrong rate can add up fast.

How to avoid this:

• Make sure your payroll system automatically correctly tracks and calculates overtime.
• Review exempt vs. nonexempt classifications.
• Train staff on both federal and Virginia overtime rules.
• Use timesheet templates to help employees accurately track their hours and overtime.

Late wage payments

Paying employees late damages trust and can lead to penalties.

How to avoid this:

• Automate payroll with scheduled direct deposits.
• Monitor cash flow regularly.
• Use payroll calendar templates, alerts, and reminders to track due dates and meet deadlines.

Poor recordkeeping

Incomplete or inaccurate records can derail compliance, lead to fines, and make it hard to defend against claims.

How to avoid this:

• Keep detailed records of hours, wages, classifications, and deductions.
• Use secure, digital payroll software to track and store information.
• Back up your data regularly.

Timesheet errors

According to QuickBooks research, U.S. employers report needing to fix errors on 80% of employee-submitted timesheets. One of the main causes? Employees forget to clock in or out and later struggle to recall their actual hours worked.

How to avoid this:

• Employ digital time-tracking software and tools with real-time clock-in/clock-out features.
• Enable automated reminders or mobile alerts to prompt employees throughout the day.
• Train staff on proper timekeeping procedures and the importance of accurate reporting.
• Review timesheets regularly before processing payroll to catch discrepancies early.

Incorrect tax withholding

Failing to withhold the correct amount of federal, state, or local taxes can result in penalties.

How to avoid it:

• Use payroll software that automatically calculates and withholds the correct taxes for each jurisdiction.
• Stay up to date with IRS and state tax rate changes each year.
• Review employee W-4 forms regularly and update them as needed.
• Reconcile payroll tax filings with payment records to catch discrepancies early.
• Consider working with a payroll provider that offers tax filing and accuracy guarantees.
• Accurately estimate taxes and net pay by using a Virginia paycheck calculator before processing payroll.
• Consult with a tax professional in Virginia who understands the state’s payroll landscape to ensure you're meeting all local obligations and staying compliant.

Payroll resources for Virginia employers

Employers in Virginia must comply with both state and federal requirements, which involves coordination with several government agencies. Here's a summary of the most relevant ones:

• Virginia Department of Taxation: Oversees state income tax withholding. Employers must register, file, and remit withheld taxes through this agency.
• Virginia Employment Commission (VEC): Manages state unemployment insurance (SUTA) taxes and new hire reporting. Employers must file wage reports and pay unemployment taxes through the VEC portal.
• Virginia Workers’ Compensation Commission: Regulates workers' compensation coverage. Most employers with three or more employees must carry coverage and stay compliant with reporting requirements.
• Virginia New Hire Reporting Center: Employers must report newly hired and rehired employees within 20 days to help enforce child support orders and prevent benefits fraud.
• Internal Revenue Service (IRS): Handles federal payroll tax responsibilities, including federal income tax withholding, Social Security, Medicare, and Federal Unemployment Tax Act (FUTA) compliance.
• U.S. Department of Labor (DOL): Enforces federal labor laws under the Fair Labor Standards Act (FLSA), including minimum wage, overtime, and recordkeeping rules.

Simplify payroll law compliance for your Virginia business

Navigating Virginia’s payroll requirements isn’t always simple, and even minor errors can cost you. QuickBooks Payroll helps you stay accurate and compliant by automatically calculating, filing, and paying your federal and state payroll taxes—backed by a 100% accuracy guarantee and tax penalty protection.** On-the-go time tracking with QuickBooks Time keeps employee hours organized and synced. Plus, as your business grows, QuickBooks scales with you, offering the right tools to support faster, more seamless payroll.

Disclaimer:  

**Accuracy Guaranteed: Available with QuickBooks Online Payroll Core, Premium, and Elite. We assume responsibility for federal and state payroll filings and payments directly from your account(s) based on the data you supply. As long as the information you provide us is correct and on time, and you have sufficient funds in your account, we'll file your tax forms and payments accurately and on time or we'll pay the resulting payroll tax penalties. Guarantee terms and conditions are subject to change at any time without notice.

Tax penalty protection: If you receive a tax notice and send it to us within 15 days of the tax notice we will cover the payroll tax penalty, up to $25,000. Additional conditions and restrictions apply. Only QuickBooks Online Payroll Elite users are eligible to receive tax penalty protection.

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