How to Do Payroll in Pennsylvania: What Every Employer Needs to Know

Federal law mandates that all employers in Pennsylvania must have a payroll tax program. This article will cover the basics of what an employer needs to know about doing payroll, including deadlines and penalties if you miss them.

The “pa employer withholding guide” is a document that provides information about payroll in Pennsylvania. It includes the requirements for employers and employees, as well as the tax codes for each state.

The majority of Pennsylvania’s standards are in conformity with federal employment laws, making payroll processing very easy. However, Pennsylvania’s many taxes make it more confusing than other states. You’ll need to know which taxes you and your workers are accountable for paying, including Income Taxes in the State, earned income tax, and municipal and city taxes.

Consider utilizing Gusto if you need to conduct payroll in Pennsylvania and want to avoid making any errors that might result in fines. It’s a one-stop shop for payroll services that can help you onboard new workers, pay through direct deposits at no extra charge, and submit payroll taxes. It even ensures that if a Gusto representative makes a mistake, you won’t pay any IRS fines or late fees. To begin a 30-day free trial, sign up now.

Gusto is a great place to visit.

Payroll Processing in Pennsylvania: A Step-by-Step Guide

Step 1: Register your company as an employer. You must apply for a Federal Tax ID and create an account with the Electronic Federal Tax Payment System on the federal level (EFTPS).

Step 2: Register with the Pennsylvania Department of Revenue (Pennsylvania Department of Revenue). The PA-100 Business Entity Registration Form may be used to register for both Income Withholding and Unemployment Insurance Contribution accounts online. After completing the online registration, you should obtain your account number instantly.

Step 3: Pay your city taxes. If you pay an employee in either the city of Pittsburgh or the city of Philadelphia, you must register for tax accounts with both jurisdictions separately.

City of Pittsburgh: You must register your company with the City of Pittsburgh if you do not have a City ID and will be paying an employee in Pittsburgh. With Jordan Tax Service, you’ll want to pick Payroll Expense Tax, Local Services Tax, and Earned Income Tax. After enrolling, you should get your number within one to two days.

City of Philadelphia: You must register your company with the City of Philadelphia if you do not have a City ID and will be paying an employee in Philadelphia. You may register with the Department of Revenue of the City of Philadelphia online. After completing the online registration, you should obtain your account number instantly.

Step 4: Pay your Taxes on the local level. You must withhold and remit the local Earned Income Tax (EIT) and Local Services Tax (LST) on behalf of workers working in Pennsylvania if one of your work locations is in Pennsylvania. Factories, offices, branches, and warehouses are examples of workplaces. You may register by filling out and submitting an Employer Registration Form to your local tax collector.

Step 5: Create a payroll system and gather employee information. Whether you conduct your own payroll or utilize payroll software, you’ll need to figure out a pay cycle that complies with Pennsylvania law and create a method that works for your company. During the onboarding process, it’s important to gather employment paperwork from new recruits. W-4, I-9, and Direct Deposit information are among the forms. There are no extra forms in Pennsylvania.

Collect, evaluate, and approve time sheets in step 6. Make sure you accomplish this a few days before payday, since the Pennsylvania Wage Payment and Collection Law mandates that workers get their paychecks by the designated deadline. If you don’t already have a system in place, use one of our free time sheet templates to get started.

Step 7: Work out your payroll and pay your staff. There are many methods for calculating payroll, and you must choose the one that is ideal for your company. Payroll software, a calculator, or even Excel may be used.

Step 8: Register with the federal and state governments to file payroll taxes. All state and local tax payments must be submitted directly to the appropriate agency, according to the schedule that has been given to your company. EFTPS is required for federal tax payments. In general, you must deposit federal income tax withheld, as well as employer and employee Social Security and Medicare taxes, according to the IRS’s timetable for your firm. You may be assigned to one of the following depositing schedules by the IRS:

• Monthly Depositor: This option requires you to deposit employment taxes on payments received throughout the month by the 15th of the following month.
• Semi-Weekly Depositor: Requires you to deposit employment taxes by the following Wednesday for payments made on Wednesday, Thursday, and/or Friday. Taxes paid on Saturday, Sunday, Monday, and/or Tuesday must be deposited by the following Friday.

It’s vital to remember that the deposit and reporting of taxes follow different schedules. Employers that deposit both monthly and semi-weekly should only file Form 941 or Form 944 quarterly or yearly to report their taxes.

Step 9: Finish your payroll reports for the year. W-2s must be completed for all employees, and 1099s must be completed for all independent contractors. By January 31 of the following year, both employees and contractors must have received these papers.

Payroll Laws, Taxes, and Regulations in Pennsylvania

Many of the federal requirements are fairly similar to Pennsylvania payroll laws. You’ll need to be aware of certain overtime restrictions as well as special taxes. Overall, keep in mind that Pennsylvania has a state tax, an earned income tax, and municipal taxes, all of which might make things a little more confusing.

Payroll Taxes in Pennsylvania

Although you will not be personally liable for any state or Taxes on the local level as a Pennsylvania employer, you will be responsible for withholding and remitting them on behalf of your workers. Residents of Pennsylvania are subject to both state and municipal taxes, so it’s vital to have a basic grasp of both to be in compliance.

Income Taxes in the State

Pennsylvania’s state personal income tax withholding rate is a flat 3.07 percent for all workers. Employers must withdraw state withholding from an employee’s pay and remit it on their behalf, according to the schedule below:

Taxes are payable on the last day of April, July, October, and January if total withholding is less than $300 every quarter.

Taxes are payable on the 15th day of the next month if total withholding is $300 to $999 every quarter.

Taxes are payable within three banking days after the completion of the semi-monthly period if total withholding is $1,000 to $4,999.99 every quarter.

Taxes are due on the Wednesday following the pay dates for employers whose paydays fall on a Wednesday, Thursday, or Friday, and on the Friday following the pay dates for employers whose paydays fall on a Saturday, Sunday, Monday, or Tuesday if total withholding is $5,000 or more per quarter ($20,000 per year).

Taxes on the local level

Employers with Pennsylvania work locations are likewise obligated to withhold local EIT and LST on behalf of their Pennsylvania workers. Each municipality is assigned a PSD (political subdivision) code by the Department of Community and Economic Development to assist employers and tax collectors in remitting the right amount of local Earned Income Tax.

These PSD codes also help employers to know which agency is responsible for their district. With over 50 Tax Collection Agencies responsible for Taxes on the local level within the state of Pennsylvania, it’s important to know which one to register with and remit taxes to so that you can avoid making any mistakes.

When an employee is hired, they must fill out a Residency Certification Form, which you must preserve with their employee files. If you have any questions or need to verify a Pennsylvania employee’s identity, go to the DCED website and search by address to get the correct PSD codes.

Unemployment Insurance Contribution

Unemployment Compensation (UC) is a state fund that protects employees from losing their jobs by providing interim income to qualifying persons. The principal source of financing is employer payments, which are deducted from the first $10,000 earned by each employee in a calendar year.

Every calendar year, a contribution tax rate is calculated and delivered to each employer for the next calendar year. If you disagree with the information on the rate notice, you have 90 days from the date of the notification to submit an appeal.

When you pay wages in Pennsylvania for the first time, you are deemed a “new employer” and will be allocated a contribution rate of:

The Pennsylvania UC Law has certain exclusions that exclude some employers from liability. The following are some of the exceptions:

1. Owners of a sole proprietorship or a partnership are considered self-employed. Individuals who work for themselves are not officially workers, and their earnings are not considered wages.
2. If a parent, son, daughter, or spouse employs a person, or if a kid under the age of 18 is hired by a parent. Stepchildren and their parents, foster children and their parents, and adopted children and their parents are all included in the extended family.
3. Agricultural Employment: If there are less than 10 workers for more than 20 calendar weeks or if the cash wages paid are less than $20,000.
4. Individual homes, local college organizations, fraternities, and sororities that pay less than $1,000 throughout any quarter of the calendar year are considered domestic employers.
5. Elected vs. Appointed Officials: Elected officials provide services.

It’s also vital to keep in mind that you’ll be liable for federal unemployment taxes. On the first $7,000 of each employee’s taxable earnings, the standard rate is 6%. The highest tax per employee is $420 ($7,000 multiplied by 6%).

Tip: When you pay state unemployment taxes, you may qualify for up to a 5.4% discount on your federal Unemployment Insurance Contributiones. This can significantly reduce what you pay to the IRS—from 6% to 0.6%.

Insurance for Workers’ Compensation

Insurance for Workers’ Compensation covers medical bills, rehabilitation costs, and lost wages for employees who get injured or experience a work-related illness. Coverage is mandatory for most employers under Pennsylvania law. You can obtain Insurance for Workers’ Compensation through a licensed insurance carrier or the State Workers’ Insurance Fund (SWIF).

Some employers are not covered by workers’ compensation. Railroad personnel, longshore workers, government employees, domestic servants, and certain agricultural workers are all excluded, as are religious convictions and executive rank in some businesses.

Minimum Wage in Pennsylvania

The current minimum wage in Pennsylvania is $7.25 per hour, which is the same as the current federal minimum wage. The Minimum Wage in Pennsylvania Act established that as of July 1, 2021, the minimum wage in Pennsylvania will be raised to $12 per hour with annual increases until reaching $15 per hour July 1, 2027.

The following changes to the state minimum wage will take effect on July 1 of each year, so be sure what you’re paying your workers aligns:

If you do any of the following, you will violate the Minimum Wage in Pennsylvania Act:

• Employees are incorrectly classified as exempt from overtime pay while their work activities require extra compensation.
• Taking such a substantial deduction from an employee’s take-home pay that the employee’s take-home pay falls below the minimum wage.
• Not compensating tipped workers whose gratuities do not bring their wages up to the minimum wage.
•  

Violating the Minimum Wage in Pennsylvania Act may subject your business to serious fines, penalties, and other legal consequences.

Overtime Regulations in Pennsylvania

The federal overtime statutes and Pennsylvania’s requirements vary in three main ways.

1. The highly paid employee exemption, which enables firms to avoid paying overtime to workers earning more than $107,432 per year, is not recognized in Pennsylvania. Due to the fact that Pennsylvania does not recognize this level, you are responsible for paying qualified workers overtime regardless of their wages.
2. Certain computer workers are not required to work overtime under federal law; however, Pennsylvania does not have such an exemption. Overtime must be compensated in Pennsylvania.
3. Executive, administrative, and professional personnel in Pennsylvania must earn a higher income in order to be exempt from overtime pay. On October 3 of each year, the salary threshold will rise as follows:

Beginning in 2023, the salary level will be adjusted every three years depending on the average pay of exempt Pennsylvania jobs.

Unless an employee is exempt, the Pennsylvania Department of Labor requires an employer to pay 1.5 times the employee’s usual rate of pay for any hours worked in excess of 40 in a workweek.

Employees in Pennsylvania are paid in a variety of ways.

While there are several methods for paying workers, Pennsylvania’s Wage Payment and Collection Law stipulates that an employer must pay wages in one of the following ways:

• Cash
• Check
• Make a direct deposit (with employee consent)
• Cards of Payment (while originally not permitted, an amendment was passed in 2017 allowing the use of pay cards as long as your employees are explicitly made aware of all payment options and it is their choice to be paid via pay card)

Consider Gusto if you want to pay your Pennsylvania workers by direct deposit. Gusto provides direct deposit at no extra charge and still enables you to pay with real checks if necessary. It also has a pay-on-demand option that allows your workers to get a portion of their payment early—as they earn it. For 30 days, you may try it for free.

Gusto is a great place to visit.

Pay Stub Laws in Pennsylvania

There are no pay stub rules laid down by Pennsylvania law. A specific format is not necessary, nor is it essential that an employer furnish a pay stub at all.

Tip: While pay stubs are not required by law in every state, it is nevertheless a good practice to send them to your workers for all payments. When making cash payments, this is very critical. For more information, see our post on free pay stub templates.

Minimum Pay Period

Employers in Pennsylvania are obligated to pay their workers at least twice a month, or at least semi-monthly. The first payment must be paid between the first and fifteenth days of the month, and the second payment must be made between the fourteenth and the final day of the month. There must be no more than 15 days between the end of a pay period and payday.

Check out our page on pay periods and download one of our free payroll calendars if you need assistance understanding pay periods or determining which pay period is appropriate for your company.

Pennsylvania’s Final Paycheck Laws

When a company fires an employee, it’s critical that they get their last salary as soon as possible. Regardless of whether the employee left or was fired, Pennsylvania law mandates that last payments be provided on the following scheduled payday. The employee’s normal earnings from the most recent pay period should be included in the final payment, as well as any other forms of remuneration owed to them (commissions, bonuses, and accumulated sick/vacation money).

If an employee owes your company money, you have the legal right to deduct money from their last paycheck. This might be the consequence of unpaid corporate loans, money for uniforms that was never paid, or even unlawful charges on a company credit card.

Tip: While it’s not legally necessary, it’s a good idea to keep track of any deductions from final paychecks. Make a note of the amount deducted and what it was for so you can find it readily if you need it.

In Pennsylvania, there is a system of severance pay.

If your workers are dismissed or leave willingly, you are not required to give them with severance compensation as a Pennsylvania employer.

Only a documented written agreement between an organization and an employee will compel you to provide severance payments to your workers under Pennsylvania law.

Paid Time Off Payouts That Have Been Earned

There is no law that requires accumulated vacation pay to be paid out. Employers are left to make the decision under both Pennsylvania and federal law.

Employers are only obligated to pay accumulated vacation upon separation if it is incorporated in a previously signed employment contract or policy, similar to severance compensation.

While it isn’t required by law, cumulative PTO payments may be a valuable reward for top employees. Check out our free PTO calculator to learn more about how to calculate vacation accruals.

HR Laws in Pennsylvania That Affect Payroll

Although Pennsylvania has a number of HR laws, the bulk of them are federally mandated. You should pay special attention to mandatory breaks and work permits for youngsters.

Reporting of New Hires in Pennsylvania

You must disclose all workers who live or work in Pennsylvania to the Pennsylvania Department of Labor and Industry as a Pennsylvania employer. Within 20 days after their employment date, all new workers must be reported. Employers may report on the Pennsylvania CareerLink website in a variety of ways, including:

1. Using a web form, manually input new employees one at a time (best for 10 or fewer)
2. Copy your data into a template and upload it all at once (best for 10 or more)
3. Use a web portal to transfer a file to their server in a secure manner (best for large companies to automate reporting)

Paid Leave, Meals, and Breaks

All of Pennsylvania’s breaking laws are dependent on one’s age. You must give a 30-minute break interval to workers aged 14–17 who work five or more continuous hours as a PA employer. Employers are not obligated to provide workers beyond the age of 18 breaks.

While it is not mandatory, it is up to the employer to decide whether or not to give breaks to their workers. It’s crucial to understand that if you do decide to give breaks, there are salary requirements. Even if the break is shorter than 20 minutes, the employee must be compensated for it. If the break is longer than 20 minutes and the employee is not working, the break is not required to be compensated.

Laws Concerning Child Labor

The Pennsylvania Child Labor Law (CLL) was enacted to safeguard children under the age of 18 and to ensure that they work in a safe and healthy environment. The CLL restricts the amount of hours that children may work and prevents them from working in certain places and vocations.

• Minors under the age of 18 must also get a work permit before they may begin looking for job.
• Minors under the age of 16 must additionally provide a signed declaration from their parent or legal guardian admitting and approving the nature of the job and working hours.

Minors’ Work Permits

For youth under the age of 18, Employment Certificates, also known as Work Permits, are required in Pennsylvania. Before a minor may be recruited, they must get a certificate and provide it to their employer as proof of their capacity to work. Minors in Pennsylvania may apply for a Work Permit of Employment Certificate through their local public school.

It is critical that if you want to employ a child, you follow these rules and get a copy of their work permit before doing so. Failure to do so might result in fines and penalties being imposed on your company.

Forms for Payroll

The only state-specific Forms for Payroll you’ll need to worry about as an employer in the state of Pennsylvania is for UC. Otherwise, you’ll just use federal Forms for Payroll.

W-4 Form in Pennsylvania

Like the federal W-4 form, Pennsylvania does not have a statewide withholding document. There is no requirement for separate state paperwork since Pennsylvania’s Personal Income Tax is based on a flat tax rate of 3.07 percent.

Unemployment Tax Forms in Pennsylvania

Employers must electronically submit UC wage and tax information, according to the Department of Labor and Industry. The following are the most often used:

Federal Forms for Payroll

• Form W-4: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
• Form W-2: This form is used to record total yearly earnings (one per employee)
• To submit total salaries and taxes to the IRS for all workers, use Form W-3 (summary of W-2s)
• Form 940 is used to submit and compute unpaid unemployment taxes to the Internal Revenue Service (IRS).
• To submit quarterly income and FICA taxes deducted from paychecks, use Form 941.
• To report yearly income and FICA taxes deducted from paychecks, use Form 944.
• 1099 Forms: Used to report non-employee compensation and assist the IRS in collecting taxes on contract labor.

Sources and Materials

• Find access to COVID-19 resources, e-file your state taxes, and read about how property tax and rent rebate programs may assist you with your cash flow at the Pennsylvania Department of Revenue.
• Find employment tools for your company, learn about disability service partnerships, and report new employees at Pennsylvania CareerLink.
• Directly from the Pennsylvania Office of Unemployment Compensation website, you may apply for a UC Tax Account Number and appeal a UC Contribution Rate. It also gives state-specific information on audits, appeals, and common paymasters, among other things. Employers may call for help with anything from registrations to tax filings to labor law posters using an employer fast guide that includes contact information for each agency.

Also, check with your payroll software or provider for state-specific features and resources.

Conclusion

While processing payroll in Pennsylvania is pretty simple overall, it’s still important to remember that what does make Pennsylvania a bit more complicated is taxes. Though many of its labor laws align with federal guidelines, there are quite a few that are unique to Pennsylvania. With Income Taxes in the State, earned income tax, and local/city taxes, you will want to make sure that you are diligent with your payroll to avoid penalties.

The “pa payroll calculator” is a tool that allows employers to make sure they are doing their payroll correctly. The “pa payroll calculator” will provide the necessary information for each employee, including how much taxes should be taken out of their paycheck.

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