New Employer Payroll Setup: Step-by-Step Checklist for 2026

Hiring your first employee in Pennsylvania is exciting — and overwhelming. Between federal requirements and Pennsylvania's notoriously detailed state regulations, there are at least a dozen things you need to set up before you can legally run your first payroll. Miss a step, and you could face penalties from the IRS, the PA UC, or both. This guide walks you through every step of setting up payroll as a new Pennsylvania employer in 2026, in the order you should complete them.

Step 1: Get Your Federal Employer Identification Number (EIN)

Before you can pay anyone, you need an Employer Identification Number (EIN) from the IRS. This is your business's tax ID — think of it as a Social Security number for your company. You will use it on every payroll tax filing, both federal and state.

Applying for an EIN is free and can be done online at IRS.gov. The online application is available Monday through Friday, 7 a.m. to 10 p.m. Eastern Time, and you receive your EIN immediately upon completion. You can also apply by mail (Form SS-4) or fax, but the online method is by far the fastest.

You need a new EIN if you are starting a brand-new business entity. If you already have an EIN from a sole proprietorship and you are incorporating or forming an LLC, you generally need a new EIN for the new entity. If you are a sole proprietor hiring your first employee but not changing entity type, your existing EIN (or SSN, if you have not gotten one yet) can be used — but getting an EIN is strongly recommended regardless.

Step 2: Register with Pennsylvania PA UC

Pennsylvania requires all new employers to register with the Employment Development Department (PA UC) within 15 days of paying more than $100 in wages in a calendar quarter. In practice, you should register as soon as you know you will be hiring.

You register online through e-Services for Business at EDD.PA.gov. During registration, you will:

• Provide your federal EIN
• Enter your business entity information (LLC, corporation, sole prop, etc.)
• Provide your business address and NAICS industry code
• Set up your account for Pennsylvania's four payroll taxes: SUI, ETT, SUI, and PIT withholding

After registration, PA UC will assign you a State Employer Account Number and send you your initial SUI tax rate. New employers in Pennsylvania typically receive a SUI rate of 3.4% (the "new employer rate") on the first $7,000 of wages per employee. Your rate will be adjusted annually based on your experience rating once you have been in the system long enough.

Step 3: Choose a Payroll Frequency

Pennsylvania law requires that most employees be paid at least twice per month (semi-monthly), on designated paydays. The most common payroll frequencies for Pennsylvania small businesses are:

• Biweekly (every two weeks): 26 pay periods per year. The most common choice for hourly and salaried employees.
• Semi-monthly (twice per month): 24 pay periods per year, typically the 1st and 15th, or the 15th and last day of the month.
• Weekly: 52 pay periods per year. More common in construction, food service, and other industries with hourly workers.
• Monthly: Only allowed in Pennsylvania for executive, administrative, and professional employees. You cannot pay hourly workers monthly.

Pennsylvania also has strict rules about when wages must be paid relative to the pay period. For most employees, wages earned between the 1st and 15th of the month must be paid by the 26th of that month, and wages earned between the 16th and last day of the month must be paid by the 10th of the following month. Overtime is due no later than the next regular payday following the pay period in which it was earned.

Step 4: Set Up Tax Withholding

As a Pennsylvania employer, you are responsible for withholding multiple taxes from each employee's paycheck:

Federal Withholding

• Federal income tax: Based on employee's Form W-4 and IRS Publication 15-T withholding tables
• Social Security: 6.2% of wages up to $176,100 (2025 wage base)
• Medicare: 1.45% of all wages, plus 0.9% on wages over $200,000

Pennsylvania Withholding

• SUI (State Disability Insurance): 1.1% of all wages (no cap as of 2024)
• PIT (Personal Income Tax): Based on employee's Form DE 4 and Pennsylvania withholding schedules (PA UC Publication DE 44)

Employer-Paid Taxes (No Withholding)

• Social Security employer match: 6.2% of wages up to $176,100
• Medicare employer match: 1.45% of all wages
• FUTA: 0.6% effective rate on first $7,000 per employee
• PA SUI: 1.5% to 6.2% on first $7,000 per employee (3.4% for new employers)
• PA ETT: 0.1% on first $7,000 per employee

You need to deposit federal taxes through EFTPS (Electronic Federal Tax Payment System) and Pennsylvania taxes through e-Services for Business at EDD. Set up accounts with both systems before your first payroll.

Step 5: Collect Employee Forms

Before an employee starts working, you need to collect several critical forms:

Form W-4 (Federal)

The IRS Form W-4 determines how much federal income tax to withhold. The employee completes this form, and you keep it in your records — do not send it to the IRS. If an employee does not submit a W-4, withhold at the "Single" rate with no other adjustments.

Form DE 4 (Pennsylvania)

Pennsylvania's equivalent of the W-4 is the DE 4. If an employee does not submit a DE 4, you may use the federal W-4 information for Pennsylvania withholding. However, because Pennsylvania has its own tax brackets and rates, employees with complex situations should complete both forms.

Form I-9 (Employment Eligibility)

The Form I-9 verifies that the employee is legally authorized to work in the United States. The employee must complete Section 1 on or before the first day of employment, and you must complete Section 2 (examining identity and work authorization documents) within three business days of the employee's start date. Failure to properly complete I-9 forms can result in fines ranging from $272 to $2,701 per form for first offenses.

Step 6: Report New Hires

Both federal and Pennsylvania law require employers to report new hires. in Pennsylvania, you must report each new employee to the Pennsylvania New Employee Registry within 20 days of their start date (or the first day wages are paid, whichever is earlier).

You can report online through the PA UC's e-Services for Business portal, by fax, or by mail. The report requires basic information: employee name, Social Security number, address, date of hire, and your employer information.

This reporting is used primarily to locate parents who owe child support and to detect unemployment insurance fraud. The penalty for failing to report can be $24 per employee, or $490 per employee if the failure is the result of a conspiracy.

Step 7: Get Workers' Compensation Insurance

Pennsylvania requires all employers to carry workers' compensation insurance — even if you have only one employee. There is no exemption for small businesses. You can purchase workers' comp from a licensed insurance carrier, through the State Compensation Insurance Fund (State Fund), or you can self-insure if you meet the requirements (most small businesses do not).

Failure to carry workers' compensation insurance is a criminal offense in Pennsylvania, punishable by a fine of up to $10,000 and/or imprisonment. The Division of Labor Standards Enforcement can also issue a stop order, shutting down your business operations until coverage is obtained.

Step 8: Choose a Payroll System

You have three basic options for processing payroll:

• Manual payroll (spreadsheets + EFTPS): Cheapest but most error-prone. You calculate taxes, make deposits, and file returns yourself. Not recommended unless you have a strong accounting background.
• Payroll software: Services like Gusto, QuickBooks Payroll, and Paychex automate calculations, tax deposits, and filings. Most cost between $40 and $100 per month plus a per-employee fee. This is the best option for most small businesses.
• Full-service payroll provider or accountant: A CPA or payroll service handles everything. Higher cost but minimal effort on your part.

For Pennsylvania employers specifically, make sure any payroll system you choose handles Pennsylvania SUI withholding, SUI/ETT deposits, DE 9 and DE 9C quarterly filings, and Pennsylvania PIT withholding. Not all national payroll platforms handle Pennsylvania's unique requirements well.

Step 9: Run Your First Payroll

Before you process your first payroll, confirm that you have completed every preceding step. Here is the final pre-payroll checklist:

• Federal EIN obtained
• Registered with Pennsylvania PA UC (have your state employer account number)
• EFTPS account set up for federal tax deposits
• e-Services for Business account set up for Pennsylvania tax deposits
• Pay frequency established and paydays designated
• W-4, DE 4, and I-9 collected for every employee
• New hire report filed with PA UC
• Workers' compensation insurance in force
• Payroll system selected and configured
• DLSE-NTE notice provided to each employee

When you run your first payroll, your system will calculate gross pay, subtract all withholdings (federal income tax, Social Security, Medicare, Pennsylvania PIT, and SUI), and produce a net pay amount. You will then need to deposit the withheld taxes plus your employer-paid taxes (FICA match, FUTA, SUI, ETT) according to the applicable deposit schedules.

Ongoing Obligations After Setup

Setting up payroll is not a one-time task. Once you are running payroll, you have ongoing filing and reporting obligations:

• Every pay period: Calculate and withhold taxes, issue paychecks or direct deposits, provide itemized pay stubs
• Monthly or semi-weekly: Deposit federal taxes via EFTPS (schedule depends on your lookback period liability)
• Quarterly: File IRS Form 941 (federal), PA UC Form DE 9 and DE 9C (Pennsylvania)
• Annually: File Form 940 (FUTA), issue W-2s to employees by January 31, file W-2s/W-3 with SSA, file DE 7 with PA UC
• As needed: Report new hires within 20 days, update withholding when employees submit new W-4/DE 4 forms

Pennsylvania's quarterly filing deadlines for DE 9 and DE 9C are the last day of the month following the quarter (April 30, July 31, October 31, and January 31). Late filings can result in penalties of 15% of the amount due, plus interest.