Under current law, Alabama exempts amounts paid to non-exempt employees as overtime compensation in accordance with the U.S. Fair Labor Standards Act (FLSA) from state income tax. This tax exemption is in effect through June 30, 2025.
Next steps
Effective July 1, 2025, employers must again withhold state income tax from FLSA overtime wages paid to all non-exempt employees.
· For pay dates on and after July 1, 2025, ADP will withhold Alabama state income tax from overtime wages paid using the standard overtime earnings code (OT). No further action is needed if only the standard code is used.
· If you previously requested additional codes for tax-exempt overtime pay, you must inform ADP of the codes that need to be updated with Alabama state income tax withholdings.
Please contact your ADP Service Representative with any questions.