CT Payroll: Employer Tax and Software Guide

I build HR software for small businesses and the people who run their HR, and in any state's payroll rules I look first for where a small team is likely to slip. This guide covers what Connecticut requires, what changed for 2026, and how 10 payroll providers price the work, so you can choose one with those spots in view.

Start with the good news. 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 replaced withholding allowances with 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. A paid leave contribution is also withheld entirely from employees and remitted quarterly to a separate authority.

Paid sick leave is the part still moving. Its threshold dropped to eleven employees on January 1, 2026, on its way to covering every employer with at least one employee on January 1, 2027, which means a lot of Connecticut businesses became covered without doing anything differently.

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.

Several adjustments sit on top of the brackets and are already built into the withholding tables. As income rises, a phase-out gradually taxes the 2 percent slice of income at 4.5 percent. At high incomes, a recapture takes back the benefit of the lower brackets. The personal exemption also shrinks as income climbs past its threshold.

For an employer, the practical consequence is limited, because the tables handle it. For a two-earner household it is bigger: 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

Connecticut unemployment insurance is paid by the employer on each employee's wages up to a taxable wage base. Three of the numbers in the table below changed on January 1, 2026 under the reforms in Public Acts 21-200 and 22-67.

Experienced employers, those rated on their own record rather than at the new employer rate, receive a charged rate calculated from benefits charged against their account divided by taxable payroll.

The statutory ceiling on that charged rate is 10.0 percent, but for 2026 a divisor applied to soften the wage base increase holds the maximum at 8.9 percent. A 1.0 percent fund solvency rate goes on top, which puts 2026 contribution rates between 1.1 and 9.9 percent, according to the Connecticut Department of Labor.

The wage base and several benefit measures are now indexed. The Department of Labor names predictable employer costs among the aims of the reform, alongside long-term trust fund solvency.

On the federal side, Connecticut employers pay the standard net federal unemployment tax (FUTA) rate of 0.6 percent. The state repaid its outstanding unemployment advances before November 10, 2025, so its employers faced no FUTA credit reduction for 2025, a credit cut that would have raised that rate. With no balance carried into 2026 the state is not among those that could face one for 2026 either.

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 trips employers up because that obligation does not arise from a payroll run at all.

Paydays and what must appear on a Connecticut paycheck

Wages are paid weekly or once every two weeks on a regular payday designated in advance, and the pay period being paid has to end no more than eight days before that payday. Where the payday falls on a nonwork day, payment moves to the preceding work day. Anything less frequent than biweekly requires permission from the labor commissioner.

Each payment carries a wage statement showing hours worked, gross earnings with straight time and overtime as separate entries, itemized deductions, and net earnings. The hours and overtime lines may be left off only for employees exempt from both time records and overtime. Electronic delivery is allowed where the employee has explicitly consented and can reach and print the record privately (section 31-13a of the General Statutes).

Two things follow for a provider decision. The pay stub has to itemize the 0.5 percent paid leave deduction so an employee can see where it went, and deductions beyond those the law requires need written authorization from the employee on a form approved by the labor commissioner rather than a note in your own system.

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.

Wage floor and workers compensation

Connecticut's minimum wage, far above the federal minimum wage, is $17.48 per hour from January 1, 2027, a 54-cent step from $16.94 under the indexing formula in Public Act 19-4 that ties annual increases to the federal Employment Cost Index. Governor Lamont announced the rate in August 2026, after the index rose 3.2 percent over the twelve months ending June 30, 2026.

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.

Form CT-W4 and the withholding code system

Form CT-W4 is the Connecticut Employee's Withholding Certificate, a state form entirely separate from the federal W-4. It is where Connecticut differs most from the states around it, and the part a payroll platform either handles cleanly or turns into a recurring support ticket.

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.

That design matters to an employer in two ways. First, the highest-rate default when no form is on file is a real financial hit for the employee, not a formality, and it lasts 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. The ten-day revision window means a mid-year change is supposed to produce a new form, not 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, the deals under which a commuter pays income tax only to the home state, so cross-border work produces genuine multi-state withholding rather than a simplified arrangement.

What each withholding code means

The letters are not levels of withholding stacked from low to high. Each one pairs a filing status with an income band, and that pairing selects the personal exemption Connecticut subtracts before the rate table is applied.

Two of the six cause most of the trouble. Code D carries no personal exemption at all, which is right for a two-earner couple above $100,500 and expensive for anyone who picked it defensively. Code E switches withholding off completely, so an employee whose income climbs past the threshold during the year reaches filing season owing the whole amount.

The exemption figures come from the Department of Revenue Services withholding tables in Informational Publication 2026(7), and the code definitions from the instructions printed on Form CT-W4. That exemption ladder is reissued every year, so a platform running an old copy of it produces a small error on every check rather than an obvious failure.

Paid leave and the sick leave threshold

Connecticut runs two leave programs that reach payroll. Paid Family and Medical Leave (PFML) is funded by a contribution withheld from employee wages, and paid sick leave adds an accrual obligation whose employer threshold is still coming down.

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 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. It reaches $1,048.80 on January 1, 2027 when the minimum wage moves to $17.48.

Employers may apply to run an approved private plan instead of the state program, but the plan 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

The Connecticut paid sick leave law now covers employers with eleven or more employees, on its way to nearly every employer. It dates to Public Act 11-52 of 2011 and, when it took effect in 2012, reached only service workers at employers with 50 or more employees, according to the Congressional Research Service.

Public Act 24-8 expanded the law substantially and set the phase-in schedule below, which 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 barred employers from requiring documentation of the reason for leave.

One detail ties sick leave to payroll records. Under section 31-57w, the hours of paid sick leave accrued and used during the calendar year go into the payroll record that section 31-13a already requires, and employers keep those records for three years.

The Connecticut Department of Labor has said sick leave balances do not have to be printed on pay stubs, but an employee who asks for them must be given them.

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

OnPay sells one payroll plan at $49 per month plus $6 per employee, with HR tools and time tracking sold as optional add-ons rather than tiers. 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

Gusto is a common first payroll purchase for US small businesses, with automatic tax filing, published pricing, and onboarding built in. Simple runs $49 per month plus $6 per employee, after a base increase from $40 during 2025.

The catch is that Simple covers a single state only, and in Connecticut that limit is sharper than almost anywhere: it 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 nearly doubles the bill.

Patriot Software

Patriot is the lowest-cost full-service option in this comparison. Full Service is $37 per month plus $5 per employee and includes federal and state tax filing, though you still file new hire reports yourself. 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

Square's full-service plan costs $35 per month plus $6 per person paid. It covers tax payments and filings in each state or tax jurisdiction where you run payroll, plus new hire reporting, and multi-state payroll is included at no surcharge. For a Connecticut restaurant or retail operation already running Square point of sale, timecard data flows straight into payroll with no integration work.

SurePayroll

SurePayroll is owned by Paychex and built for very small employers and household employers. The Small Business plan is $29 per month plus $7 per employee. Multi-state coverage is a flat $9.99 monthly fee however many states you add, which beats per-state pricing and matters directly to a Connecticut employer with one person over a state line.

QuickBooks Workforce Payroll

QuickBooks Payroll was renamed QuickBooks Workforce in 2026, and its entry tier, formerly Core, is now Workforce Payroll at $50 per month plus $7 per employee.

The argument for QuickBooks 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 modest monthly price difference elsewhere.

ADP RUN

ADP's case for RUN rests on tax compliance. In Connecticut that focus pays off 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: the Essential, Enhanced, Complete, and HR Pro packages are all quoted individually, and every package lists multi-state payroll and tax filing as included.

Paychex Flex

Paychex competes on service rather than software, with a payroll specialist included on its top Complete package. Every payroll package (Basic, Foundations, Advanced, and Complete) is priced on request. 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 a full human capital management suite, aimed at companies that have outgrown basic payroll. Its clients average more than 150 employees, according to its fiscal 2026 annual report, and its HR tools cover performance, learning, and engagement alongside payroll.

Paylocity's Time and Attendance module tracks leave accruals, which is worth weighing as Connecticut sick leave coverage expands. Pricing is quote-based, and each client goes through a consultant-led implementation rather than a signup.

Rippling

Rippling unifies payroll, HR, and IT provisioning on one employee record. Its pricing page lists no rates, but Rippling's small-business page starts payroll at $8 per user per month plus a $40 monthly base fee. Its blog prices the core platform at $8 per employee and the payroll module at $8 billed annually or $10 billed monthly, so configured quotes run higher.

The same blog estimates roughly $15 to $25 per employee per month for a 100-employee company running HR, payroll, benefits administration, and time tracking.

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 small and shares borders with three states, so a meaningful share of employers here end up with at least one person working from the other side of a line.

Patriot is the cheapest published option at every headcount, with Square close behind, but Patriot charges $12 per month for each additional state while Square includes multi-state payroll.

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

Five questions separate these providers for a Connecticut employer. Put each one to a vendor before you sign, because every answer maps to one of the state rules above.

Before you choose

FirstHR is an onboarding and HR platform, not a payroll provider. Payroll runs, payroll tax filing, and benefits administration come from the providers above, so 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 that put the I-9, W-4, and CT-W4 on each new hire's first-day task list, e-signatures on offer letters, employee records, and document management for small US teams at a flat $98 a month for up to 10 people or $198 for 11 to 50.

Two of the Connecticut requirements above are document problems rather than payroll problems, namely getting the CT-W4 back before day one so nobody is withheld at the maximum rate, and putting the new hire report on a dated task within twenty days of the hire date rather than leaving it to the next payroll close. If those are where things break for you, that is the gap we built for.

Frequently Asked Questions

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

Three at the 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.

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 pay between 1.1 and 9.9 percent for 2026: a charged rate based on benefits charged, capped at 8.9 percent, plus a 1.0 percent fund solvency rate. The wage base is now indexed.

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 that report electronically 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, and the rate for a specific business depends on classification codes and claims history.