by Robin Imbrogno, on Feb 5, 2021 12:35:17 PM
Employers processing payroll in Connecticut starts like payroll in most other states with determining employee pay, hours worked, overtime, any withholding or deductions, payroll tax rates, and ultimately paying employees and delivering vendor payments. Employers should be aware of final pay and lawful deductions when payments are in dispute. Knowing what the current federal laws and Connecticut legislation are regarding payroll is imperative right from the start.
Connecticut Minimum Wage
The Minimum Wage Public Act No. 19-4, passed in May 2019 incrementally raises the Minimum Wage to $15.00 and then adjusts according to Federal Economic Indicators.
Currently Connecticut's Minimum Wage is $12.00 per hour. However, the schedule of anticipated changes for the state are as follows:
- August 1, 2021 - $13.00 per hour
- July 1, 2022 - $14.00 per hour
- June 1, 2023 - $15.00 per hour
Another variance here is the minimum wage for minors under the age of 18, which is 85% of the current minimum wage and can be paid for minors working at farms or for the government indefinitely and for the first 200 hours of employment for minors employed elsewhere.
Connecticut employers may not pay under the current Minimum Wage per hour unless the employee or occupation are specifically exempt from the minimum wage under Connecticut or Federal law.
Connecticut Overtime Pay Law
Overtime pay is additional pay granted to non-exempt employees who have worked over 40 hours in a workweek. Non-exempt employees in Connecticut are entitled to overtime pay of 1.5 times their average hourly rate for every hour worked over 40 in a single week.
Employers in Connecticut must adhere to both Federal and state overtime regulations defining how much overtime must be paid, and which employees are entitled to overtime pay.
Time worked does not include vacation or sick time or holidays thus, such days do not count when calculating overtime.
Overtime exemptions are set by Federal Law and are found in the Fair Labor Standards Act (FLSA).
Connecticut Pay Schedule Requirements
Connecticut requires employers to pay employees on a weekly regularly scheduled pay day. If a regular payday falls on a non-workday, payment shall be made on the preceding workday. Exceptions to weekly pay day include collective bargaining agreements, private and parochial schools and state aided institutions.
Connecticut Payroll Deductions
A Connecticut employer may not withhold or deduct wages from an employee’s paycheck, unless:
- the employer is required or empowered to do so by state or federal law,
- the employer has written authorization from the employee for deductions on a form approved by the Connecticut Department of Labor;
- the deductions are authorized by the employee, in writing, for medical, surgical or hospital care or service, without financial benefit to the employer and recorded in the employer’s wage record book;
- the deductions are for contributions attributable to automatic enrollment in a retirement plan described in Section 401(k), 403(b), 408, 408A, or 457 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, established by the employer.
A Connecticut employer may not deduct the following from an employee’s wages, unless the employee has signed a form approved by the Connecticut Department of Labor:
- cash shortages,
- damaged or lost property,
- the cost of uniforms or necessary equipment,
- dishonored or bad checks,
- tools or other necessary equipment, or
- any similar deductions.
Connecticut Final Pay Rule
Under Connecticut Gen. Stat. Ann. § 31-71c, an employer must issue a final paycheck to a terminated employee no later than the following business day. However, an employee who quits his or her job is not entitled to a final paycheck until the next regularly scheduled pay date.
Final pay shall include all wages not in dispute. Sec. 31-71d. Payment of unused vacation at separation is guided by employer policy. Therefore, if the employer policy states accrued unused vacation is forfeited at separation it does not need to be paid. However, if employer policy or bargaining agreement provides for the payment of accrued fringe benefits upon termination, then must be included in final pay
Connecticut Unemployment Tax
Connecticut employers are liable for Connecticut Unemployment Tax they are also liable for Federal Unemployment Tax under the Federal Unemployment Tax Act (FUTA). An employee must pay Connecticut Unemployment Tax if During the current or preceding calendar the employer;
- Paid wages of $1,500 or more in any calendar quarter or
- Had one or more employees at any time in each of 20 calendar.
The Connecticut unemployment tax rates will not change for 2021. Effective January 1, 2021 unemployment tax rates for experienced employers are to range from 1.90% to 6.80%. The rates are to include a fund-solvency surtax of 1.40%. The tax rate for new employers is set to be 3.00% for 2021, a decrease from 3.20% in 2020.
Connecticut Income Tax Withholding
Only seven states still don’t have income withholding tax - Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Connecticut, however, does have a state income tax which is 6.99%. Income tax withholding is the money an employer withholds from each employee's wages to help prepay the state income tax of the employee. An employer must withhold Connecticut tax if the employee is a resident of Connecticut, performing services in the state. Wages of a nonresident are subject to Connecticut income tax withholding if the wages are paid for services performed in Connecticut. The employer remits the withholding to the state and will issue the employee a W-2 statement indicating the amount of state income tax withheld for the employee.
Social Security Payroll Taxes
Social Security tax is the tax levied on both employers and employees to fund the Social Security program. Social Security tax is collected in the form of a payroll tax mandated by the Federal Insurance Contributions Act (FICA) or a self-employment tax mandated by the Self-Employed Contributions Act (SECA).
Effective January 1, 2021, the maximum earnings subject to the Social Security payroll tax were increased by $5,100 to $142,800—up from the $137,700 maximum for 2020, the Social Security Administration (SSA) announced Oct. 13, 2020.
Connecticut Paid Family and Medical Leave (PFMLA)
As of January 1, 2021 employees must contribute 0.5% of their income of the first $142,800 of wages (the same as Social Security) through a mandatory payroll tax, withheld by employers, contributed to a Family and Medical Leave Insurance trust fund.
Payroll is a lengthy process, but understanding Connecticut and Federal law will help make processing payroll much easier. Your alternative? Outsource payroll processing to an expert.