How to Do Payroll in Pennsylvania

Last reviewed: July 2026

Pennsylvania payroll looks straightforward at first glance because the state income tax is a single flat rate rather than a bracket system. The complexity shows up elsewhere: a UC system that pulls a small contribution from employee paychecks, and a local tax network that varies by municipality and school district. None of it is hard once you know the order of operations. Here's how to set it up correctly the first time.

1. Get Your Federal EIN

Before touching any Pennsylvania paperwork, apply for a federal Employer Identification Number through the IRS at irs.gov/ein. The online application is free and the number is issued immediately. You'll need the EIN for every state registration that follows, so do this step first.

2. Register for Pennsylvania State Withholding

Register with the Pennsylvania Department of Revenue through the myPATH portal using the Pennsylvania Online Business Tax Registration. Select "Employer Withholding" as one of your tax types. Once approved, you receive a state withholding account number tied to your EIN.

Pennsylvania withholds a flat 3.07% of taxable wages from every employee. There are no brackets, and Pennsylvania has no state withholding certificate the way most states use an equivalent to the federal W-4. You simply apply 3.07% to Pennsylvania-source wages. The one exception is Form REV-419, which lets an employee who lives in a reciprocal state (Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia) claim exemption from PA withholding so their home state can tax the wages instead.

Don't stop at the state level. Most Pennsylvania municipalities and school districts levy their own earned income tax under Act 32, and Philadelphia runs a separate wage tax system entirely outside Act 32. If any employee lives or works in Philadelphia, or lives in a Pennsylvania municipality with a local EIT, you have withholding obligations beyond the flat state rate. Our Pennsylvania local income tax guide walks through how to identify the right rate for each employee and where to remit it.

3. Register for UC (Pennsylvania's Unemployment Tax)

Pennsylvania calls its state unemployment insurance program "UC," short for Unemployment Compensation, and it is administered by the Department of Labor & Industry's Office of UC Tax Services. Register through the UC Management System at uc.pa.gov once you first pay wages in Pennsylvania. Our Pennsylvania UC registration guide covers the process step by step, including which businesses are required to register and when.

Here's the part that catches new employers off guard: Pennsylvania UC is not purely an employer tax. New employers currently pay a UC contribution rate around 3.822% on the first $10,000 of each employee's wages, but employees also contribute a separate 0.07% withheld from every paycheck with no wage cap. You collect that employee share the same way you collect income tax withholding, then remit it along with your own employer contribution on the quarterly UC return. Very few states ask employees to fund any part of unemployment insurance, so double-check that your payroll software is configured to withhold it.

4. Set Pay Frequency and Understand Final Pay Rules

Pennsylvania's Wage Payment and Collection Law requires most hourly and non-salaried employees to be paid at least semi-monthly, meaning twice a month at minimum. Salaried employees may be paid monthly. Weekly and biweekly schedules satisfy the law too, since they're more frequent than the semi-monthly floor. Whatever schedule you choose, communicate it to employees in writing and keep it consistent.

When someone leaves, Pennsylvania requires final wages by the next regularly scheduled payday, whether the separation was voluntary or not. There's no shorter deadline the way some states require. Accrued vacation counts as wages if your written policy says it's paid out at separation, so check your handbook language before your first termination.

5. Build Your Deposit and Filing Calendar

Pennsylvania assigns your withholding deposit frequency based on the size of your payroll. New small employers are commonly placed on a quarterly schedule with the Department of Revenue, while larger payrolls move to monthly or semi-monthly deposits. UC contributions are always reported and paid quarterly through UCMS, due the last day of the month following each quarter. Local EIT and Philadelphia wage tax generally follow a similar quarterly cadence, though larger employers may owe monthly.

On the federal side, most small employers file Form 941 quarterly. If you haven't worked with it before, our Form 941 guide explains what goes on the form and when it's due. A good paycheck calculator, like the one on our calculator page, also makes it easier to sanity-check withholding before your first live payroll run.

6. Year-End: W-2s and Reconciliation

By January 31 each year, issue W-2s to employees and file your fourth-quarter federal and state returns. Pennsylvania requires an annual withholding reconciliation (Form REV-1667) alongside your W-2 filing, and Philadelphia employers file a separate annual wage tax reconciliation with the city. If you're still deciding how much to withhold for each employee, our W-4 helper can walk a new hire through the federal side of the paperwork before their first paycheck.

Frequently Asked Questions

Do I need to register with Pennsylvania's Department of Revenue and the UC system separately?

Yes. The Department of Revenue handles state income tax withholding, while the Office of UC Tax Services handles unemployment contributions. They are separate accounts with separate account numbers, and most new employers need both.

What is the Pennsylvania withholding rate for 2026?

Pennsylvania withholds a flat 3.07% from every employee's taxable wages. There are no brackets and no state withholding certificate comparable to the federal W-4 to fill out for standard withholding.

Does Pennsylvania require an employee-paid unemployment contribution?

Yes. Pennsylvania is one of the few states where employees also contribute to unemployment compensation. Employers withhold 0.07% of gross wages from every paycheck, with no wage cap, in addition to the employer's own UC contribution.

How soon must I report a new hire in Pennsylvania?

Within 20 days of the employee's first day of work. Reports go through the Pennsylvania New Hire Reporting Program, accessible through PA CareerLink.

Making It Easier

Handling Pennsylvania's mix of flat state withholding, employee UC contributions, and local EIT by hand is doable for a one-person shop, but it gets tedious fast once you have more than a couple of employees or anyone working in Philadelphia. Gusto calculates and files all of it automatically, including the quarterly UC return and local tax remittances, so you're not tracking three or four separate due dates by hand.