Your Ultimate Guide to Pennsylvania Payroll

As an employer in Pennsylvania, you are responsible for legally complying with proper payroll withholding regulations and requirements. To help you get started, this guide serves as an introduction to common payroll withholdings, such as unemployment insurance, personal income tax, and workers’ compensation. 

Paying unemployment insurance (UI) in Pennsylvania

As an employer, you may be familiar with common federal tax withholdings such as Medicare and Social Security. However, other Pennsylvania state taxes must also be withheld from your employee’s payroll. One of these employer payroll taxes is unemployment insurance (UI), commonly referred to as unemployment compensation in Pennsylvania. 

Unemployment insurance payroll withholding is a national program that provides financial assistance to eligible individuals who have lost their jobs involuntarily and are actively seeking new employment. 

Unlike most other states, Pennsylvania allows you to withhold portions of your employee’s salary as contributions to unemployment compensation. Administered by the US Department of Labor, unemployment compensation is managed through an online portal.  

More information on paying your unemployment insurance can be accessed from the Pennsylvania Office of Unemployment Compensation.

Pennsylvania State unemployment insurance (SUI) tax rates

Pennsylvania calculates unemployment compensation rates annually, based on factors such as the employer’s experience rating and the state’s Unemployment Compensation Trust Fund balance. Employers can access their specific tax rates and protest determinations via the Pennsylvania Office of Unemployment Compensation's online portal.

Employers must ensure they withhold the correct amount from employee wages, contributing both employer and employee portions where applicable. Employers have the right to protest their rate determination within 30 days of receiving their notification.

Withholding personal income tax from your Pennsylvania Employee

Personal income tax is another employer payroll tax that is calculated on the income of Pennsylvania residents. Also known as individual or state income tax, personal income tax is deducted from an employee’s wages and withheld by the employer. 

The employer is responsible for paying the withheld amount to the state, a process that can be completed through Pennsylvania’s online portal.

For more information on paying the withholding amount, the Pennsylvania Department of Revenue provides more information.

State withholding tax rates in Pennsylvania

The withholding tax rates in Pennsylvania depend on the employee's earnings and the payroll period. Below is a table illustrating the withholding rates for different payroll periods:

Employers can manage these tax payments using Pennsylvania’s e-TIDES online system, ensuring timely and accurate remittance. For more information on filing taxes online, visit the Pennsylvania e-TIDES.

Paying your Pennsylvania workers’ compensation

On top of paying your Pennsylvania payroll taxes, you must also pay workers’ compensation, even if you only have one Pennsylvania employee. 

Workers’ compensation is a form of insurance that provides wage replacement and medical benefits to employees who are injured or become ill on the job. The insurance is usually purchased from a qualified commercial carrier in the state. To assist, the Pennsylvania Department of Labor and Industry provides valuable information to help you find a qualified commercial carrier. 

Note: It’s important to verify that your workers’ compensation insurance complies with the state’s regulations for workers’ compensation.

Workers' compensation tax rates in Pennsylvania

Workers' compensation in Pennsylvania for 2024 includes the following rates:

Understanding these details ensures that your business complies with Pennsylvania's payroll tax laws and effectively manages its payroll obligations.

Payroll tax due dates in Pennsylvania

Understanding and adhering to payroll tax due dates is critical to avoid penalties. Pennsylvania has specific deadlines for various tax filings:

Quarterly tax filings

Employers are typically required to file quarterly tax reports, with due dates falling at the end of the month following each quarter's end:

Annual reconciliation

An annual reconciliation of withheld taxes must be submitted by the end of February each year. For more information on filing deadlines, visit the Pennsylvania Department of Revenue - Filing Deadlines.

Submission process for payroll taxes in Pennsylvania

Employers must file payroll tax forms electronically using Pennsylvania’s e-TIDES system. The state mandates online filing for efficiency and accuracy. Employers should utilize forms such as PA-W3 (Annual Reconciliation Statement) and UC-2 (Employer’s Report for Unemployment Compensation).

The e-TIDES system facilitates various payroll tax filings, including registration, filing, and payment of taxes. Bulk e-filing is available for employers managing a large number of employees, ensuring a streamlined and efficient process. For more information, visit the Pennsylvania e-TIDES System.

Withholding paid family leave from Pennsylvania employees

While Pennsylvania does not currently have a state-mandated paid family leave program, employers may need to comply with federal FMLA requirements. Employers should also stay updated on any future state legislation that might introduce similar programs, as there is growing interest in establishing paid family leave benefits in many states.

Pennsylvania employer responsibilities and compliance

Employers in Pennsylvania must not only withhold and remit the correct taxes but also keep accurate records of all payroll transactions. This includes maintaining detailed employee wage and tax records for at least four years. Compliance with both state and federal regulations helps avoid audits and penalties.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Pennsylvania payroll taxes, payroll compliance, and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel.

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.