How to Figure Out Payroll in Pennsylvania
Under the Fair Labor Standards Act (FLSA), employers are required to pay employees appropriately for wages earned. Additionally, the Internal Revenue Service (IRS) requires employers to adhere to federal payroll tax regulations. However, some states establish their own payroll laws; the state of Pennsylvania is no exception. Both the Pennsylvania Department of Labor and Industry and the Pennsylvania Department of Revenue have payroll laws that the employer must abide by.
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Instructions
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Pay nonexempt employees a minimum of $7.25 per hour for hours worked up to 40 for the workweek. Pennsylvania's minimum wage is the same as the federal law. Nonexempt employees are those not exempt from overtime pay. Notably, minimum wage criteria are narrowly defined by occupation, so check with your state labor board for exemption requirements. For example, golf caddies and newspaper delivery employees are exempt from minimum wage.
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Compensate nonexempt employees with overtime pay if they work more than 40 hours for the week. Pay the extra hours worked at the overtime rate of one and one-half times the regular pay rate. Like minimum wage, overtime is narrowly categorized. For example, seamen and taxicab drivers are exempt from overtime pay.
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Compensate salaried employees according to agreed salary. Most salaried employees are exempt from overtime pay. Still, you should not assume exempt status. Check with your state labor board to know which employees are exempt. For example, administrative, executive and professional employees are exempt from overtime pay if they meet the FLSA wage and job duties requirements. To determine salary per pay period, divide the annual sum by the number of pay periods in the year.
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Consult the employee's W-4 form and the IRS withholding tax tables (Circular E) to compute federal income tax. Retrieve the employee's filing status and allowances from her W-4 and ensure you use the Circular E relevant to the tax year you are computing. You can get the Circular E from the IRS website.
Calculate Social Security tax at 6.2 percent of gross income (up to the annual wage cap of $106,800) and Medicare tax at 1.45 percent of all gross income.
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Check the necessary forms for state income tax application. Withhold state income tax based on the resident state if the employee works in Pennsylvania but lives in the following states: Indiana, Maryland, Ohio, New Jersey, Virginia and West Virginia. If this is case, you are required to give new employees an Employee's Statement of Nonresidence in Pennsylvania and Authorization to Withhold Other State's Income Tax form to complete. Use the state withholding tax tables for the resident states to figure state income tax.
If the employee is exempt from Pennsylvania income tax altogether, have her complete the Employee's Nonwithholding Application and do not withhold any income tax.
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Withhold Pennsylvania state income tax at the flat rate of 3.07 percent of gross earnings. Make this withholding if Step 5 does not apply.
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Tips & Warnings
Consult the Pennsylvania Department of Revenue for your payroll tax payment schedule.
References
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