How to Hire Employees in Pennsylvania: The Complete Guide for Small Businesses

The first time I helped a founder put someone on payroll in Pennsylvania, we got everything federal right and still nearly broke the law. The EIN was done. The I-9 was signed. What nobody mentioned was that the employee lived in one borough, worked in another, and that the employer was on the hook for withholding an earned income tax set by two different local governments neither of us had heard of.

That is the shape of hiring in this state. The federal layer is the same as anywhere. The state layer is straightforward once you know the sequence. The local layer is where Pennsylvania quietly separates itself from every other state, and it is the layer that most first-time employers discover after the first payroll run instead of before it.

This guide walks the sequence in the order the work actually happens, from the federal EIN through the ninetieth day. Every legal figure below was pulled from the agency or statute behind it rather than from a summary, because state figures change and secondhand guides go stale quietly.

I built FirstHR because a founder hiring their second or third employee should not need a payroll degree to keep a calendar of deadlines straight. The steps below are the same ones our onboarding workflows track: e-signature on the offer letter and policy acknowledgments, the I-9 and W-4 as tasks on the first-day list, an employee file for the completed forms, and a generated plan for the first 90 days.

Pennsylvania Hiring at a Glance: Every Deadline in One Place

Nine obligations attach to your first Pennsylvania hire, and most of them carry a hard date. The timeline below is the whole compliance surface in one view, with the agency that owns each item and what happens when the date slips.

Two of these deserve early attention. The unemployment registration clock starts when work is first performed, not when you get around to it, and workers compensation is a criminal statute in Pennsylvania rather than a civil one. Everything else follows the familiar federal pattern.

Step 1: Get Your Federal Employer Identification Number

Every Pennsylvania registration asks for a federal EIN in the first field, so this is genuinely step one. The IRS issues the number online in a single session at no cost, and you can use it the same day. Without it you cannot open a state withholding account, an unemployment account, or a local tax account.

If you formed an LLC or corporation you may already have one. If you have been operating as a sole proprietor with no employees and filing under your Social Security number, you need an EIN before the first hire. Payroll tax reporting cannot run on a personal Social Security number.

Step 2: Register Your Business on myPATH with the Department of Revenue

Pennsylvania employer registration runs through the PA Online Business Tax Registration on myPATH, the Department of Revenue portal. One filing opens your employer withholding account and, when you indicate that you will have employees, starts the creation of your unemployment compensation account with the Department of Labor and Industry. The registration replaced the former PA-100 business tax registration.

The same registration also collects your workers compensation coverage details. Revenue processes the withholding side quickly. The unemployment side moves to a different agency, so the two account numbers arrive separately.

The flat rate is the one genuine simplification Pennsylvania offers. There are no brackets to apply, no state allowances to track, and no standard deduction inside the withholding calculation. Every employee is withheld at the same percentage regardless of pay level or family situation.

Step 3: Open Your Unemployment Compensation Account

The Department of Labor and Industry requires new employers to register within 30 days after services covered by the Unemployment Compensation Law are first performed. Liability attaches to any employing unit that provides full or part-time work to at least one worker, so there is no dollar threshold to wait for the way there is in some states.

Registering late is expensive. According to the Pennsylvania Department of Labor and Industry, failure to register within the 30-day window triggers a three percentage point increase to the assigned contribution rate, and the penalty for missing that window can reach $10,000 per assessment.

Those figures come from the Labor and Industry unemployment tax highlights for calendar year 2026. The highlights for calendar year 2027 list the same values on every line, so the table holds through 2027. The surcharge line is already built into the rates above, so you do not add it on top.

The employee withholding line is the one that surprises people: Pennsylvania is one of a handful of states where the worker contributes to unemployment, and unlike the employer contribution it applies to every dollar of gross wages rather than stopping at the wage base.

The construction rate is more than double the standard entry rate, which matters if your first hire swings a hammer. Classification is based on your reported industry, so getting it right at registration avoids a correction later.

The account numbers arrive from three different places on three different timelines, so keep them on one page as they land. Fill in the record below as you work through the steps, and you will know at a glance whether you are ready to name a start date.

See who is on track and who is stuck

Active Onboardings lists every new hire in progress. Late items are marked, so you see them without messaging anyone.

Start free trialSee how onboarding works

Active OnboardingsTrack and manage employee onboarding progress#EmployeeStageProgressStatus1Angela MartinSenior AccountantStagePre-boardingProgress1/9 tasksStatusOn Track2Darryl PhilbinWarehouse ForemanStageFirst DayProgress4/10 tasksStatusOverdue3Ryan HowardSales AssociateStageFirst WeekProgress7/11 tasksStatusOn Track4Kelly KapoorCustomer Service RepresentativeStageFirst MonthProgress10/12 tasksStatusOn Track

Step 4: Verify Work Authorization with Form I-9

Form I-9 is federal and identical in every state. The employee completes Section 1 on or before their first day. You complete Section 2 by the end of the third business day after the start date, after physically examining original documents the employee chooses to present (E-Verify employers in good standing may examine them remotely instead).

You cannot tell an employee which documents to bring. Directing the choice is document abuse, and it is enforced separately from paperwork errors. Give the employee the list of acceptable documents and let them select.

Where E-Verify Fits in Pennsylvania

Most private Pennsylvania employers are not required to use E-Verify. Two categories are. Construction industry employers must verify every new hire through E-Verify under the Construction Industry Employee Verification Act, Act 75 of 2019, effective October 2020, and the Department of Labor and Industry applies it to all construction industry employers in the Commonwealth regardless of size.

Public works contractors and subcontractors above the statutory contract value are covered by a separate act. Enforcement is graduated. A first violation draws a warning and an obligation to terminate unauthorized workers. Repeat violations move to the Attorney General, and the remedy can include a three-year probation period with quarterly verification reporting. Neither statute replaces the I-9, which every employer completes regardless.

Step 5: Collect the Tax Forms Before the First Paycheck

Pennsylvania new hires complete a federal W-4 and a Residency Certification Form, and that second one is where employers new to the state get caught. There is no state W-4 for ordinary withholding, because a flat 3.07 percent rate leaves nothing for the employee to elect.

The Residency Certification Form, catalogued as CLGS-32-6, captures the employee's home address and the political subdivision codes for both where they live and where they work. Act 32 then makes you withhold the higher of the total resident earned income tax rate and the non-resident rate at the worksite, and remit it to the tax collection district for your county.

Local Services Tax is a separate item from earned income tax. Municipalities and school districts that levy it collect through payroll withholding, capped at $52 per person per calendar year across every jurisdiction where that person works.

At higher rates, Local Services Tax also carries a low-income exemption. Where the combined rate exceeds $10, the taxing bodies must exempt anyone whose total earned income from within that jurisdiction falls below $12,000 for the year, and the employee claims the exemption with an annual certificate.

Both taxes come down to a lookup you do once per employee and redo whenever someone moves. Record the answer rather than re-deriving it every payroll: the first tab below holds the earned income tax codes and the rate you settled on, and the second tracks Local Services Tax separately, because it follows the worksite rather than the home address.

What worked for me

I now treat the Residency Certification Form as a Day 1 document with the same weight as the I-9, not as a payroll afterthought. The form takes the employee two minutes and it is the only thing standing between you and a local tax the collector will eventually bill you for.

Nick Anisimov, FirstHR founder

Step 6: File the New Hire Report Within 20 Days

Pennsylvania gives you 20 days from the date of hire to report a new employee, and the date of hire is the first day services are performed for wages. Reports go to the Pennsylvania Department of Labor and Industry through the PA CareerLink new hire reporting system.

The obligation is broader than most founders assume. It covers employees of any age, workers still in a probationary period, part-time and seasonal staff, rehires, and people who work a few hours and quit. The statutory basis sits in Title 23 of the Pennsylvania Consolidated Statutes, sections 4391 through 4396, which is the domestic relations title, because the register exists to support child support enforcement.

Step 7: Put Workers Compensation Coverage in Force

Workers compensation is mandatory in Pennsylvania from the first employee, and this is the step that most sharply distinguishes Pennsylvania from states where coverage is elective or triggered by a headcount threshold. Coverage must be in place on the first day of employment.

According to the Pennsylvania Department of Labor and Industry, the requirement reaches employers with at least one employee whether that person is full-time, part-time, seasonal, or a family member on the payroll.

An employer escapes the requirement only if every single worker falls inside a narrow exclusion, such as casual labor outside the regular course of the business, agricultural labor below a small annual earnings figure, domestic workers who have not elected coverage, or licensed real estate salespeople compensated by commission as independent contractors.

You can buy coverage from a licensed private carrier, from the State Workers Insurance Fund, or qualify to self-insure. Once the policy is bound, post the LIBC-500 notice with the carrier name and the claims contact filled in.

Active Onboardings

Ryan HowardFirst WeekOn Track

Darryl PhilbinFirst DayOverdue

Kelly KapoorFirst MonthOn Track

Onboarding Wizard

1 · EmployeeRyan Howard

2 · TemplateSales Associate

3 · Review & Launch11 items

Onboarding Templates

Sales Associate11 steps

Warehouse Foreman10 steps

Customer Service12 steps

Onboarding

Each new hire, set up in one go

Put tasks, documents to sign and courses into one plan, then send all of it with one launch.

Start free trial

Step 8: Post the Required Notices, Then Onboard Through Day 90

Federal and Pennsylvania law both require specific notices displayed where employees can see and read them. The Pennsylvania set is available free from the Department of Labor and Industry, so there is no reason to buy a laminated poster from a vendor.

Download the Pennsylvania set from the Department of Labor and Industry mandatory postings page and the federal set from the US Department of Labor. Remote employees complicate this: the safe practice is to deliver the same notices electronically and record the acknowledgment.

What the First 90 Days Should Look Like

The first 90 days should run on a written plan: the paperwork done before Day 1, the I-9 and the new hire report on their deadlines, and check-ins at Day 30, 60 and 90. Compliance gets someone legally onto the payroll. Onboarding decides whether they stay.

Gallup research finds that most employees do not strongly agree their organization does a great job of onboarding new hires, so the default outcome is a new hire forming their impression of the company from whatever happens by accident in the first month.

The AI onboarding wizard in FirstHR builds this plan from the job description, sends the offer letter and policy acknowledgments out for e-signature before the start date, and puts the first-day paperwork on a task list instead of in your head. Pair it with a 30-60-90 day plan and the first quarter stops being improvised.

Pennsylvania-Specific Employment Rules Worth Knowing on Day 1

Several Pennsylvania rules differ enough from the federal baseline that they change how you write an offer letter and a handbook. The Pennsylvania compliance hub covers the full set; these are the ones that touch a first hire directly.

The overtime line deserves a second look. Pennsylvania repealed its own white collar exemption regulations in 2021, so the salary floor matches the federal $684 per week. But the Pennsylvania Minimum Wage Act never adopted the federal highly compensated employee exemption or the computer employee exemption, which means a high-earning worker who is exempt federally can still be entitled to overtime under state law.

What worked for me

The four-employee threshold under the Pennsylvania Human Relations Act changed how early I take handbook policies seriously. A federally exempt small employer can still be a covered employer here, which means the anti-harassment policy, the complaint channel and the documentation habits need to exist before you think you are big enough for them.

Nick Anisimov, FirstHR founder

City and Local Requirements: Philadelphia, Pittsburgh, Allegheny County

Pennsylvania preempts local minimum wage ordinances but leaves the rest of local employment law alone, so the city your employee works in can add real obligations. Three jurisdictions matter most for small employers.

Philadelphia

Philadelphia sits outside the Act 32 system and runs its own City Wage Tax. Employers must register with the city within 30 days of becoming the employer of a Philadelphia resident or of a non-resident who performs services in the city.

According to the City of Philadelphia Department of Revenue, the City Wage Tax is 3.735 percent for residents and 3.425 percent for non-residents, effective July 1, 2026, part of a multi-year reduction that began in tax year 2025.

The city also enforces paid sick leave, fair chance hiring and salary history rules. Sick time accrues at one hour for every 40 hours worked, up to 40 hours a year, paid at employers with 10 or more employees and unpaid at smaller ones. The POWER Act signed in May 2025 kept that cap and set a new sick-pay rate for tipped workers.

Amendments to the Philadelphia Fair Criminal Records Screening Standards took effect in January 2026, shortening the misdemeanor lookback window to four years, excluding summary offenses, and confirming that criminal history inquiries wait until after a conditional offer.

Pittsburgh and Allegheny County

Pittsburgh amended its Paid Sick Days Act effective January 1, 2026. Employees working inside the city now accrue one hour of paid sick time for every 30 hours worked, up from one hour per 35, with an annual cap of 48 hours for employers with fewer than 15 employees and 72 hours once an employer reaches 15. The city law applies to employers of any size.

Allegheny County runs its own paid sick time ordinance, which reaches employers with 26 or more employees and accrues at one hour per 35 hours worked with a 40-hour annual cap, so a growing business with sites across the county can end up tracking two accrual schemes.

If you hire across multiple Pennsylvania municipalities, build the local tax lookup into the offer process rather than the payroll process. The rate depends on the employee's home address, so it is known the moment they accept and unknown until then.

Employee or Independent Contractor: The Pennsylvania Cost of Getting It Wrong

Misclassifying an employee as an independent contractor is the most expensive way to save money on a first hire. Pennsylvania looks at unemployment coverage through a two-part test: the worker must be free from control or direction over the performance of the service, and must be customarily engaged in an independently established trade or business.

Construction is regulated separately and more strictly. The Construction Workplace Misclassification Act applies its own criteria to construction and remodeling work, and it carries administrative penalties in addition to the tax exposure. A finding of misclassification means back contributions, interest and penalties, and it usually arrives through an unemployment claim filed by the worker you called a contractor.

When the answers are mixed, classify as an employee. The cost of a W-2 relationship is predictable. The cost of a reclassification finding is not, and it lands with back unemployment contributions, unpaid withholding, and a workers compensation gap for the entire period the person worked for you.

The 5 Mistakes That Cost Pennsylvania Small Employers the Most

These are the failures I see repeatedly, and every one of them is a scheduling problem rather than a knowledge problem. The employer knew the rule. The date passed while they were doing the actual work of the business.

The pattern is consistent. Nobody misses the unemployment registration because they disagree with it. They miss it because the deadline lives in a browser tab that got closed. Putting every deadline on a calendar is worth more at small scale than becoming an expert on the underlying statutes.

What worked for me

The mistake that cost me real money was assuming the state tax registration and the unemployment registration were one action with one confirmation. They start from one filing but they clear on two different timelines at two different agencies. I ran a first payroll with a withholding account and no UC account number, and unwinding it took longer than the hire itself. Now I do not schedule a start date until both numbers are in hand.

Nick Anisimov, FirstHR founder

Set up your next new hire in FirstHR

4.7 on G2

Start free trial

Offer LetterSigned

Welcome courseCompleted

Frequently Asked Questions