Pennsylvania Payroll Guide for Employers

Pennsylvania Payroll Requirements: What Employers Need to Know in 2026

Pennsylvania payroll has two income tax withholding obligations that most employers in other states never deal with simultaneously: the flat 3.07% state personal income tax, plus local earned income tax that varies by municipality and applies to virtually every working Pennsylvania resident. The state rate is straightforward to calculate and remit through the Pennsylvania Department of Revenue. The local EIT is more complicated—rates range from around 1% to 3% depending on where the employee lives and works, the tax is collected by local tax collectors or earned income tax bureaus rather than the state, and you must determine the correct rate for each employee's work location and residence. Getting local EIT right from the start saves significant correction work later.

Pennsylvania SUI for new employers is 3.822% on the first $10,000 of each employee's wages in 2026. Pennsylvania's unemployment system has an unusual structure: the SUI tax funds not only unemployment benefits but also job-search assistance programs through the UC system. Quarterly UC-2 filings are due to the Pennsylvania Department of Labor and Industry. Your rate adjusts annually based on your account's reserve ratio—essentially whether your contributions have exceeded the benefits paid out to former employees. New employers typically see their rate change after three years of experience. The Pennsylvania SUI rates guide covers how the reserve ratio calculation works and how to read your annual rate notice.

Pennsylvania's minimum wage remains at $7.25 per hour, the federal floor, as of 2026. The state has not increased its minimum wage since 2009, making it one of only a handful of states still at the federal minimum. There is no state law currently scheduled to change this. Philadelphia has enacted its own minimum wage for city employees and contractors, but this does not apply to most private-sector employers. Overtime follows federal FLSA rules: non-exempt employees earn 1.5 times their regular rate after 40 hours in a workweek, with no daily overtime trigger. The Pennsylvania payday laws guide covers pay frequency requirements and what deductions are permitted.

Final paychecks in Pennsylvania are due on the next regular payday following separation. There is no same-day or within-72-hours rule as in some other states. Pennsylvania does not have a state disability insurance program or a statewide paid family and medical leave law. New hire reporting must be submitted within 20 days of hire to the Pennsylvania New Hire Reporting Program. 1099s for independent contractors must be filed with the Department of Revenue by January 31 when services were performed in Pennsylvania. Local Earned Income Tax filings must also be submitted annually to the relevant local tax bureau for each municipality where you have employees—this is separate from your state filing and caught many employers off guard when the local tax collection system was consolidated.

One aspect of Pennsylvania payroll that confuses many employers is the local EIT registration requirement. You are required to register with the local tax bureau serving your business location and, in some cases, the municipalities where your employees reside. The Pennsylvania local income tax guide explains how to find the correct tax collector for each municipality, what rates apply, and how withholding works when an employee lives in a different municipality than where they work. Pennsylvania also requires that you register with the Department of Revenue for state income tax withholding before running your first payroll, not after.

2026 Pennsylvania payroll quick facts: Flat 3.07% state income tax + local EIT (1%–3%, varies by municipality) | SUI new employer rate 3.822% on $10,000 wage base (PA L&I) | No state disability insurance | No statewide paid leave | Minimum wage $7.25/hr (federal floor, unchanged since 2009) | Final paycheck: next regular payday | New hire reporting: 20 days | 1099s due: January 31 | Quarterly filing: UC-2 | Overtime: federal FLSA only