Connecticut is a state that has many pro-worker policies when compared to other states that businesses need to be aware of when processing payroll. Some of the major items include:
- Connecticut has a progressive state income tax that increases along with an employee’s income.
- Connecticut has one of the highest minimum wage rates in the country.
- Connecticut has stricter laws than the federal government when it comes to final paychecks and pay stub frequencies.
- Connecticut is a no-fault mandatory state when it comes to providing workers’ compensation.
Regardless of your state, the payroll process can be time-consuming if it is done manually. To save time and stay compliant with federal and state laws, consider using a payroll software like Gusto. It calculates and pays your employees and your payroll taxes, so you avoid IRS penalties. If you’re ever penalized for mistakes Gusto makes, you’ll be reimbursed. Sign up for a free trial.
Running Payroll in Connecticut—Step-by-Step Instructions
Step 1: Set up your business as an employer. At the federal level, you need your Employer Identification Number (EIN) and an account in the Electronic Federal Tax Payment System (EFTPS).
Step 2: Register with the State of Connecticut. In Connecticut, you will need to register with the Connecticut Department of Revenue Services. To register, you will need to complete the Business Taxes Registration Application online using the Taxpayer Service Center. This will allow you to register for various taxes including withholding tax, sales and use tax, and business entity tax. If you need assistance, the Connecticut Department of Revenue Services provides a FAQ section to assist businesses.
Please Note: Beginning in September 2021, myconneCT will be the new portal website for Connecticut Department of Revenue Services.
Step 3. Set up your payroll process. You’ll need to set up systems to support your payroll process; this includes selecting a pay schedule and deciding how you’ll pay employees, how you’ll process taxes and deductions, etc.
Step 4: Collect employee payroll forms. The best time to collect payroll forms is during onboarding. Payroll forms include W-4, I-9, and direct deposit authorization information. Connecticut requires you to submit form CT-W4 as well.
Step 5: Collect, review, and approve time sheets. You’ll need to track time for hourly and other nonexempt employees to ensure you pay them for the time they worked. If you’re not using a time and attendance system, downloading one of our free time sheet templates will help you stay organized.
Step 6: Calculate payroll and pay employees. You can process payroll yourself, use an Excel payroll template, or select a payroll service. Each option comes with benefits and drawbacks. Normally you have the option to pay employees in a variety of ways including by cash, check, direct deposit, or pay cards.
Step 7: File payroll taxes with the federal and state governments. The IRS has forms and instructions on filing federal taxes, including unemployment. You can also order official tax forms from the IRS. For Connecticut state taxes, you remit your taxes on either a weekly, monthly, quarterly or annual basis depending on your employer classification. New employers (within the first calendar year of registering in Connecticut) should remit quarterly. Special exemptions are made for seasonal, household, and agricultural employers. For more information, please see the Connecticut Employer’s Tax Guide.
Please Note: If you are required to remit weekly and you have two or more paydays in a week, you only have to make one payment. You should use the last pay date when submitting the payment. Exceptions include if the paydays fall in different quarters.
Step 8. Document and store your payroll records. It is important to retain records for all employees for several years (federal law requires three years for payroll documents and four for payroll tax records), including those who are no longer with your company.
Connecticut requires that you maintain the following employee information for three years:
- Daily and weekly hours worked computed to the nearest 15-minute increment
- Wage rate
- Overtime wages separate from regular pay
- Deductions per pay period
- Additional payments per pay period
- Total wages per pay period
- Work certificates for youth employees
In addition, you must keep these records at the place of employment unless you receive an exception from the Connecticut Labor Commissioner.
Step 9. Do year-end payroll tax reports. The federal forms that are required by law are W-2s (for employees) and 1099s (for contractors). These forms should be provided to employees and contractors by Jan. 31 of the following year. State W-2s are also required for Connecticut and these forms are due by Jan. 31 as well.
If you want to learn more about doing payroll, applicable to businesses in all states, please see our general guide on how to do payroll.
Connecticut Payroll Laws, Taxes & Regulations
For the most part, Connecticut payroll laws, taxes, and regulations provide more protection to employees than the federal law—in particular, the lowest-paid employees. Its state income tax is progressive with higher income individuals paying more. Connecticut also has a higher minimum wage, stricter requirements on final pay, and specific rules on paying employees via pay cards.
Federal law mandates that you pay income taxes, Social Security, Medicare, and Federal Unemployment Tax Act (FUTA) taxes. Called FICA taxes, Social Security and Medicare are withheld from each employee’s paycheck: Social Security at 6.2% and Medicare at 1.45%. You also have to pay a matching employer’s amount out of your bank account. FUTA is an employer-only tax that is 6% on the first $7,000 paid to each employee in that year.
To learn more about federal payroll taxes and withholdings, see our article on taxes, FICA, and FUTA.
State Income Taxes
Connecticut has a progressive income tax that taxes an employee’s income at a higher rate as their income goes up, which is similar to the federal income tax guidelines. If you’re not using a payroll provider, you’ll need to use Connecticut’s withholding tax table to determine how much to withhold from each employee’s paycheck.
State Unemployment Tax
Connecticut’s state unemployment tax (SUTA) rate is 3% for new employers. For established employers, the rate is based on your experience rate, which includes how many of your former employees applied for unemployment benefits and the fund balance tax rate, which is based on the solvency of Connecticut’s unemployment fund. In 2021, the rate can be anywhere between 1.9% and 6.8%. The percentages for both new and experienced employers are on the first $15,000 of taxable income per individual employee.
When you pay SUTA on time and in full, you may qualify for a 5.4% deduction on your FUTA taxes, potentially taking that rate down to 0.6%.
In Connecticut, you are required to provide workers’ compensation for all businesses with at least one employee with very few exceptions. These exceptions include employees who work occasionally/as-needed, domestic employers who work at a private home for no more than 26 hours weekly, and corporate executives who decline coverage. Connecticut is also a no-fault state, meaning that workers’ compensation claims can be covered regardless of the reason behind the workplace injury.
Employees are required to report any workplace injury immediately, and the employer/insurer has 28 days to start payment for lost wages or deny the employee’s claim.
The cost of workers’ compensation insurance is around $1.10 for each $100 payroll you processed. For example, a company that processes $500,000 of payroll can expect to pay around $5,500 in insurance.
For more information and a list of providers to consider, see our guide on Connecticut’s Workers’ Compensation.
Minimum Wage and Tips
Most jobs will require you to pay at least minimum wage.
Connecticut’s 2021 minimum wage is $13.00 per hour for nontipped employees (much higher than the $7.25 federal minimum wage). This is an increase of $1 from the previous minimum wage. State law allows employers in Connecticut to take up to a $6.62 tip credit for hotel and restaurant workers and a $4.77 tip credit for bartenders, which puts the minimum cash wage that has to be paid by employers at $6.38 and $8.23 per hour, respectively.
Connecticut generally follows federal guidelines regarding overtime. You’ll need to pay 1.5 times the regular hourly rate for any hours your employees work over 40 in a workweek.
For help ensuring your overtime calculations are correct, please check out our guide on calculating overtime.
Different Ways to Pay Employees
In Connecticut, you are able to pay employees via standard payment options. These options include by check, cash, pay cards or direct deposit. You are required to provide employees the option of being paid by check or direct deposit.
If paying an employee by pay card, they must be able to have three free withdrawals for each pay period. One withdrawal has to allow for a complete withdrawal of funds. In addition, no employer costs for the card can be passed on to the employee, and the employee must be allowed to change their pay method as desired.
Check out our guide on how to pay employees for more in-depth information.
Minimum Pay Frequency
Connecticut requires that you pay employees at least twice a month. Payday cannot come more than eight days after the end of the pay period, which means you are allowed to pay employees biweekly or weekly but not semimonthly or monthly.
Pay Stub Laws
You must provide a written statement of your employee’s earnings and withholdings in Connecticut unless the employee authorizes that the statement can be provided electronically and with safeguards to protect sensitive information. Pay statements must include hours worked, gross earnings for regular hours and overtime, itemized deductions, and net pay.
If you’d like to create your own pay statements, then download one of our free pay stub templates. They’re already formatted, so you can print and provide them to employees today.
Paycheck Deduction Rules
Connecticut does not allow you to deduct the following from an employee’s paycheck:
- Shortage of cash
- Lost or damaged possessions of the company
- Equipment, supplies, or uniforms
- Bad checks
You are able to deduct these common items from an employee’s check:
- Garnishments and levies
Final Paycheck Laws
Connecticut has different rules regarding final pay depending on if the employee resigned (voluntary termination), was terminated by the company (involuntary termination), or left the company due to a labor dispute.
- Voluntary Termination: Must be paid on the next regularly scheduled pay period.
- Involuntary Termination/Labor Dispute: Must be paid by the next business day.
If you find yourself needing to print a check for a terminated employee as soon as possible, use one of our recommended free ways to print payroll checks online.
Connecticut HR Laws That Affect Payroll
Connecticut has stricter time off requirements than the federal government for many Connecticut employees. It also has stricter laws on youth employment. However, it does not require employers to purchase disability insurance.
Connecticut New Hire Reporting
Connecticut requires that you report new hires within 20 days of the hire date. You can report new hires online through the Connecticut Department of Labor’s New Hire Reporting website.
Breaks, Lunches & Time-Off Requirements
Connecticut does not mandate vacation leave. However, all other time-off requirements supersede federal law as they are more advantageous to Connecticut employees. There’s a special sick leave law and new requirements for offering state family leave.
Click through the tabs below to learn what you need to comply with.
In Connecticut, you are required to give a 30-minute break to employees who work at least seven and a half hours consecutively or provide paid rest breaks during the day that amount to 30 minutes for every work period of seven and a half hours.
Connecticut does not have any vacation leave requirements; however, if you do provide vacation leave, you must abide by the policy you set.
Employers in Connecticut with more than 50 employees are required to provide paid sick leave for service workers at a rate of one hour of sick leave per every 40 hours worked up to 40 hours per year. Service workers are defined as nonexempt employees who directly work with the general public. Some jobs include cooks, crossing guards, and librarians. Exceptions to the law include manufacturing companies and nonprofit companies that provide recreation, educational, or child care services.
To be eligible for sick leave time, employees must have worked at least 680 total hours and an average of 10 or more hours a week in the last quarter. Sick time can be used for taking care of the employee and immediate family members’ health and wellness needs. Employers are deemed to be in compliance if you offer vacation, sick, or PTO days that exceed the benefits provided in the paid sick leave law.
Currently, Connecticut state law requires employers who have more than 75 employees to provide at least 16 weeks of family medical leave, which can be paid or unpaid. However, starting in 2022, Connecticut is introducing new requirements. The new law will allow eligible employees to take up to 12 weeks of paid leave to attend the healthcare of their families or themselves.
Connecticut’s new family leave program will be funded by an additional 0.5% of Connecticut employees’ checks. Companies are deemed to be in compliance if their healthcare benefits offer the same amount of benefits as the Connecticut Paid Leave Program.
If you are self-employed, you can voluntarily elect to join the paid family leave program by contributing 0.5% of your self-employment income to the Connecticut Paid Family Leave fund.
Federal law also imposes leave rules: The Family and Medical Leave Act (FMLA) requires that all eligible employers provide up to 12 weeks of unpaid leave for covered employees. Giving birth, adopting, and taking care of an ill family member are examples. You’re not required to pay employees during this time away from work, but you must provide them with the same or a similar job once they return to work.
State Disability Insurance
There is no state disability program in Connecticut or a requirement for companies to purchase disability insurance. However, it is a good idea to have, both for your employees and yourself.
Child Labor Laws
Connecticut restricts the work hours of 16- and 17-year-olds. The rules are broken down by industry, school enrollment, and whether school is in session. In general, youth who are enrolled in school can only work under these guidelines when school is in session:
- Between the hours of 6 a.m.-10 p.m.
- A maximum of six hours per day
- A maximum of 32 hours per week
When school is not in session, they can work:
- No more than eight hours a day
- No more than six days in a week
For youth who are not enrolled in school, they can work a maximum of six days in a week and 48 total hours.
Federal child labor laws restrict 14- and 15-year-olds from working more than 18 hours per week (three hours per day) when they’re in school and no more than 40 hours per week (eight hours per day) when school is out. In addition, they can only work between 7 a.m. and 7 p.m.
No minor is allowed to perform hazardous work, such as mining.
For exceptions and more detail regarding your industry, please visit the Employment of Minors section on the Connecticut Department of Labor’s website.
Check out our guide to hiring minors for more insight into federal regulations.
Listed below are some federal and state forms needed to produce accurate pay for employees and compliant payroll reporting and tax remittance for business.
Connecticut Payroll Forms
- Connecticut W-4 Form (CT-W4): To help employers on calculating tax withholding for employees
Federal Payroll Forms
- W-4 Form: Assists employers calculate withholding tax for employees
- W-2 Form: Reports total yearly wages earned (one per employee)
- W-3 Form: Reports total yearly wages and taxes for all employees
- Form 940: Calculates and reports unemployment taxes due to the IRS
- Form 941: Files quarterly income and FICA tax withholding
- Form 944: Reports annual income and FICA tax withholding
- 1099 Forms: Provides contractors with pay information and amounts that assist them in tax calculation
Connecticut Payroll Tax Resources & Sources
- myconneCT: Register, submit and file forms, and make payments, beginning in September 2021.
- Connecticut Workers’ Compensation Commission: Find information pertaining to workers’ compensation requirements. It is also a place to refer employees for a step-by-step guide on what they need to do if they suffer an on-the-job injury.
- Connecticut New Hire Reporting: Complete new hire reporting and view FAQs relating to new hire compliance.
- Connecticut Department of Labor: Obtain information relating to the calculation of unemployment taxes, as well as other laws and regulations relating to the welfare and protection of employees.
To learn more about payroll laws, check out our payroll compliance guide.
Connecticut payroll differs from other states by the way it structures state income taxes, minimum wage, workers’ compensation requirements, timing on when employees should be paid, and child labor rules. Be sure to follow deadlines by federal and state governments.
If you are looking to make your payroll process easier, try a payroll software like Gusto. It calculates and files your payroll taxes and allows you to pay your employees via direct deposit at no additional cost. You can also give them early access to their paychecks if you’d like to offer that as a benefit. Try it free today.