CT Payroll: Employer Tax and Software Guide

Connecticut has no local income tax, which removes the single most error-prone part of payroll in states with municipal wage taxes. There is no worksite-versus-residence question to resolve, no city filings, no address-level tax lookup. On that axis Connecticut is one of the easier states in the country.

The complexity sits somewhere else. Connecticut abandoned withholding allowances and replaced them with a system of letter codes on its own state form, where an employee picks a single letter that encodes both filing status and an expected income range. Get no form back and you withhold at the top rate. There is a paid leave contribution withheld entirely from employees and remitted quarterly to a separate authority. And the paid sick leave threshold dropped to eleven employees this January on its way to covering every employer next year, which means a lot of Connecticut businesses became covered without doing anything differently.

This guide covers what Connecticut requires, what changed for 2026, and how 10 payroll providers price the work.

What Connecticut requires from employers

State income tax withholding

Connecticut uses a progressive structure of seven brackets running from 2 percent on the lowest band of income to 6.99 percent above $500,000 for single filers, with thresholds doubled for joint filers. Two phase-outs sit on top of the brackets and are already built into the withholding tables: one gradually replaces the 3 percent bracket with the 5 percent bracket as income rises, and the personal exemption phase-out reduces the exemption as income climbs past its threshold.

The practical consequence for an employer is limited, because the tables handle it. The practical consequence for a two-earner household is that a combined income near $150,000 can carry a marginal rate noticeably higher than the bracket table alone suggests, which is exactly why the CT-W4 code system exists.

Unemployment insurance

Two numbers changed on January 1, 2026 under the reforms in Public Acts 21-200 and 22-67.

Experienced employers receive a charged rate calculated from benefits charged against their account divided by taxable payroll, with a fund solvency tax rate added on top. Both the wage base and benefit levels are now indexed, which was the stated purpose of the reform: predictable employer costs rather than sharp corrections after a downturn. Connecticut repaid its outstanding federal unemployment loans before the November 2025 deadline, so employers avoid a FUTA credit reduction for 2026 and pay the standard net federal rate of 0.6 percent.

New hire reporting in twenty days

Employers report each new hire to the Connecticut Department of Labor within twenty days of the date of hire, defined as the first day the employee performs compensated services. An employee returning after a separation of 60 days or more counts as a new hire again. Independent contractors are separately reportable once expected payments cross the applicable threshold, which catches employers out because that obligation does not arise from a payroll run at all.

Final pay on the next business day

An employee who is discharged must be paid in full by the next business day. This is among the strictest final pay requirements in the country and it is an operational rule rather than a tax rule, which is why it tends to get missed until the first time it applies.

A Friday afternoon termination creates a Monday obligation. Biweekly payroll does not accommodate that, so an employer needs either an off-cycle payment capability in the platform or a manual check process that a named person is authorized to execute without waiting for approval. Our guide to the final paycheck for a terminated employee covers how the rules differ across states.

Wage floor and workers compensation

The minimum wage rose to $16.94 per hour on January 1, 2026, up from $16.35, under the indexing formula in Public Act 19-4 that ties annual increases to the federal Employment Cost Index. Workers compensation is required from the first employee with no headcount threshold, purchased from private insurers, and new hires must be covered from day one. Rates fell 3.8 percent for 2026, the twelfth consecutive annual decrease.

Form CT-W4 and the withholding code system

This is where Connecticut differs most from the states around it, and it is the part a payroll platform either handles cleanly or turns into a recurring support ticket.

Form CT-W4 is the Connecticut Employee's Withholding Certificate, a state form entirely separate from the federal W-4. Connecticut eliminated traditional allowances. Instead the employee selects a single letter code on Line 1, and that letter encodes both a filing status and an expected income range, which together determine the personal exemption applied before tax is calculated. Line 2 allows additional withholding per pay period and Line 3 allows a reduced withholding request.

Two things follow from this for an employer. First, the highest-rate default when no form is on file is a real financial consequence for the employee, not a formality, and it persists until a form arrives. Second, because the correct code depends on expected household income rather than just filing status, employees frequently choose wrong in both directions, and the ten-day revision window means a mid-year change is supposed to produce a new form rather than a note to the payroll administrator.

Nonresidents performing services partly inside Connecticut use Form CT-W4NA to apportion wages, which matters more here than in most states simply because of geography: a large share of the Connecticut workforce lives within commuting distance of New York, Massachusetts, or Rhode Island. Connecticut has no reciprocity agreements with neighboring states, so cross-border work produces genuine multi-state withholding rather than a simplified arrangement.

Paid leave and the sick leave threshold

Paid Family and Medical Leave

The CT Paid Leave contribution is 0.5 percent of employee wages for 2026, unchanged from 2025 after the CT Paid Leave Board of Directors voted in September 2025 to hold the rate. It is withheld entirely from the employee with no employer contribution to the state plan, and the employer remits quarterly to the CT Paid Leave Authority.

The contribution cap tracks the federal Social Security wage base, so the maximum per employee rose without the rate moving. The maximum weekly benefit is set at sixty times the state minimum wage, which is why it climbed when the minimum wage did. Employers may apply to run an approved private plan instead of the state program, but it must deliver at least equivalent rights and benefits and a majority of the employer's Connecticut employees must vote in favor.

Paid sick leave, now at eleven employees

Connecticut was the first state in the country to enact paid sick leave, under Public Act 11-52 in 2011. Public Act 24-8 expanded it substantially and set a phase-in schedule that is still running.

Employees accrue one hour of paid sick leave for every 30 hours worked, up to 40 hours per year, and may begin using accrued time after 120 days of employment. Seasonal employees working 120 days or fewer per year are excluded. The 2024 expansion also broadened the definition of covered family members and the permitted reasons for leave, and placed new limits on the documentation an employer may request.

One detail worth knowing because it runs against the assumption: the Connecticut Department of Labor has confirmed that sick leave balances are not required to appear on pay stubs. The balance must be provided in writing when an employee requests it, which is a lighter requirement than several neighboring states impose.

10 payroll providers for Connecticut employers compared

Every provider below files Connecticut state withholding and unemployment insurance. Because there is no local tax layer, the differentiators here are narrower than in states with municipal taxes: whether the platform handles the CT Paid Leave withholding and quarterly remittance without manual intervention, whether it tracks sick leave accrual, and how it handles the cross-border employee that Connecticut geography produces so readily.

OnPay

One plan at $49 per month plus $6 per employee, everything included, no tiers to climb. Tax filing covers all 50 states with no multi-state surcharge, and year-end W-2 and 1099 filing sits in the base price. For a Connecticut employer with a few staff across the New York or Massachusetts line, the absence of a per-state charge is worth more than the headline rate difference against cheaper providers.

Gusto

The most common first payroll purchase for US small businesses, with automatic tax filing, published pricing, and the strongest onboarding experience among payroll-first platforms. Simple runs $49 per month plus $6 per employee after a base increase in early 2026.

The constraint is sharper in Connecticut than almost anywhere. Simple covers a single state only, and Connecticut is a small state bordered by three others within commuting distance. One hire in Westchester or Springfield moves you to Plus at $80 plus $12 per employee, which more than doubles the bill.

Patriot Software

The cheapest legitimate full-service payroll on the market. Full Service is $37 per month plus $5 per employee and includes federal and state tax filing plus new hire reporting. Basic is $17 plus $4 if you file taxes yourself, which in Connecticut means handling Form CT-941 quarterly reconciliation and the paid leave remittance by hand.

Square Payroll

At $35 per month plus $6 per person, Square is the cheapest full-service option with published pricing, and the full-service plan covers federal, state, and local tax calculations, payments, and filings plus quarterly filings and new hire reports. For a Connecticut restaurant or retail operation already running Square point of sale, timecard data flows straight into payroll with no integration work.

SurePayroll

Owned by Paychex and built for very small employers and household employers. Full Service is $29 per month plus $7 per employee, with a flat $9.99 monthly multi-state fee rather than a per-state charge, which is the most economical multi-state structure among the budget providers and directly relevant to a Connecticut employer with one person over a state line.

QuickBooks Workforce Payroll

Core is $50 per month plus $6.50 per employee, and the argument for it is unchanged: if your books live in QuickBooks Online, payroll reaches the general ledger without an export. For a Connecticut business whose accountant already works in QuickBooks, that alone can outweigh a $15 monthly difference elsewhere.

ADP RUN

ADP has the deepest tax compliance engine in the category. In Connecticut that depth converts into value mainly at the multi-state boundary and in handling statutory changes without customer intervention, which matters in a state where the sick leave threshold, the wage base, and the new employer rate all moved within one January.

The cost is opacity. ADP does not publish RUN pricing; third-party estimates put Essential near $79 per month plus $4 per employee, but every quote is individual. Contracts typically run a year with automatic renewal and a 30 to 60 day cancellation window.

Paychex Flex

Paychex competes on service rather than software, with a named representative at higher tiers. Pricing is quote-only and quarterly administrative charges appear regularly in customer reports. The Connecticut case for it is specific: if you want someone to call when the paid leave remittance does not reconcile or when a sick leave question arrives from an employee, that access has value.

Paylocity

Paylocity sits between small-business payroll and full HCM, aimed at companies that have outgrown basic payroll. The HR module covers performance, learning, and engagement alongside payroll, and leave accrual tracking is native rather than an add-on, which is worth weighing as Connecticut sick leave coverage expands. Pricing is quote-based and implementation is a project rather than a signup.

Rippling

Rippling unifies payroll, HR, and IT provisioning on one employee record. The core platform is $35 per month plus $8 per employee, with payroll as a separate module. Real-world all-in costs land between $25 and $45 per employee per month once you assemble a working configuration.

What each provider actually costs a Connecticut employer

The table below models published rates at three headcounts. Read the second-state column carefully: Connecticut is 110 miles across and borders three states, and a meaningful share of employers here end up with at least one person working from the other side of a line.

Square is the cheapest published option at every headcount. Patriot runs close behind but charges $12 per month per additional state. SurePayroll looks expensive on the per-employee fee and becomes competitive the moment a second state enters, because its flat $9.99 multi-state charge does not scale with the number of states. The pattern that reorders everything is Gusto Simple: competitive until one hire across a border forces the Plus tier, taking a 25-person payroll from $199 to $380 per month.

Choosing a payroll provider for Connecticut

Before you choose

FirstHR does not process payroll, file payroll taxes, or administer benefits. Every provider above does something we do not, and if running payroll is the problem in front of you, one of them is the answer.

What we handle is the document layer that feeds payroll: onboarding workflows, e-signature on Form CT-W4, I-9s, and offer letters, employee records, and document management for 5 to 50 employee US teams at a flat $98 to $198 per month. Two of the Connecticut requirements above are document problems rather than payroll problems, namely getting CT-W4 signed before day one so nobody is withheld at the maximum rate, and triggering the new hire report within twenty days of the hire date rather than at the next payroll close. If those are where things break for you, that is the gap we built for. Our Connecticut HR compliance guide covers the wider set of state obligations beyond payroll.

Frequently Asked Questions

What are the Connecticut payroll taxes an employer has to handle?

Three at state level plus federal. Income tax withholding runs seven brackets from 2 percent to 6.99 percent, driven by the CT-W4 code rather than allowances. Unemployment insurance applies to the first $27,000 of wages at 1.9 percent for new employers. Paid leave is 0.5 percent withheld from the employee with no employer match, capped at $922.50 per person. There is no local income tax. See our overview of payroll taxes by state for how this compares elsewhere.

What is Form CT-W4 and what are the withholding codes?

The Connecticut Employee's Withholding Certificate, separate from the federal W-4. Connecticut eliminated allowances and uses letter codes A through F that combine filing status with an expected income range to set the personal exemption. Without a form on file the employer withholds at the highest rate, and a revised form is due within ten days of a change in circumstances.

How much is the Connecticut Paid Family and Medical Leave contribution?

0.5 percent of wages for 2026, unchanged from 2025, withheld entirely from the employee with no employer contribution to the state plan. Contributions stop at the federal Social Security wage base of $184,500, making the annual maximum $922.50 per employee. Employers remit quarterly to the CT Paid Leave Authority and may apply to run an approved private plan instead.

Does my Connecticut business have to provide paid sick leave?

As of January 1, 2026, yes at eleven or more employees, down from 25 in 2025, and all employers with at least one employee from January 1, 2027. Accrual is one hour per 30 hours worked up to 40 hours per year, usable after 120 days of employment. Seasonal employees working 120 days or fewer are excluded.

What is Connecticut's unemployment insurance wage base and rate?

The wage base rose to $27,000 on January 1, 2026 from $26,100, and the new employer rate fell to 1.9 percent from 2.2 percent. Experienced employers land between 0.1 and 10.0 percent based on benefits charged, plus a fund solvency rate. Both figures are now indexed. Our guide to state unemployment tax covers how experience rating works.

How long do Connecticut employers have to report a new hire?

Twenty days from the date of hire, meaning the first day the employee performs compensated services, filed with the Connecticut Department of Labor. Employees returning after 60 days or more count as new hires again. Contractors are separately reportable above the applicable payment threshold. Multi-state employers may designate one state to receive all reports with written notice to the labor commissioner.

When is a final paycheck due in Connecticut?

By the next business day for a discharged employee, among the strictest rules in the country. A Friday termination creates a Monday obligation that a biweekly cycle cannot absorb, so employers need an off-cycle payment capability or an authorized manual check process ready before the situation arises.

Does Connecticut have local payroll taxes?

No. There is no municipal or county income tax, so there is no address-level tax resolution problem, no separate city filings, and no worksite-versus-residence question. That removes the most error-prone element of payroll in states with municipal wage taxes.

Does Connecticut require workers compensation insurance?

Yes, from the first employee with no headcount threshold, and new hires must be covered from their first day. Coverage is bought from private insurers on the open market. Rates fell 3.8 percent for 2026, the twelfth consecutive annual decrease, though the rate for a specific business depends on classification codes and claims history.