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 labor laws and legislation are regarding payroll is imperative right from the start.
Connecticut Minimum Wage
Connecticut's minimum wage is currently $13.00 per hour. This is dictated by Minimum Wage Public Act No. 19-4, which was passed in May 2019 and incrementally raises the Minimum Wage for 5 years until it reaches $15.00 per hour in 2023.
In 2024 and thereafter, gradual increases will be calculated by the U.S. Department of Labor (DOL) according to Federal Economic Indicators calculated by the U.S. Department of Labor (DOL).
Here is the schedule of anticipated Connecticut minimum wage changes based on the above state law:
- October 1, 2019 - $11.00 per hour
- September 1, 2020 - $12.00 per hour
- August 1, 2021 - $13.00 per hour
- July 1, 2022 - $14.00 per hour
- June 1, 2023 - $15.00 per hour
- January 1, 2024 - Adjusted based on the increase, if any, to the employment cost index.
In Connecticut, the minimum wage for minors (employees under the age of 18) is $11.05 (or 85% of the current minimum wage) for the first 200 hours of employment. However, if employed at a farm or a government employee the 85% reduction from the current minimum wage rate can be paid indefinitely.
Connecticut employers may not pay less than the hourly minimum wage unless the employee or occupation is specifically exempt under Connecticut law or Federal Minimum Wage 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 payday. If a regular payday falls on a non-workday, payment shall be made on the preceding workday. Exceptions to weekly payday 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 and 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 calendars.
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.
*FUTA Update* Effective January 1st, 2022, the FUTA tax was increased by 0.3% and will be applied to all payroll paid during 2022 (1/1 - 12/31). The increase approximately equals $21 per full-time employee per year. The calendar year 2022 tax return, with additional tax payments, will be due and payable in January of 2023.
Important to note is that the IRS will publish a list of FUTA credit reduction states in November 2022.
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 for January 1, 2022, the Social Security Administration (SSA) announced maximum earnings subject to the Social Security payroll tax have increased by 5.9 percent to $147,000. This is quite significant compared to the 2021 maximum, an increase of 1.3% to $142,800—and up from the 1.6% increase to $137,700 for the 2020 maximum.
The tax rate for Social Security or OASDI at 6.20% (or more commonly viewed as a combined rate of 7.65% when coupled with Medicare), however, remains unchanged. For the self-employed the combined rate also remains unchanged at 15.30%.
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.
Federal 401K Limit
In early November of 2021, the IRS announced changes to 401(k) limits and planning. Changes were made to the amount individuals may contribute to their 401(k) starting in 2022. Now, employees may contribute up to $20,500, up from $19,500 in 2021.
The contribution limit applies for employees participating in 401(k)s, 403(b)s, most 457 plans, and Thrift Savings Plans.
Income ranges also increased for determining eligibility for traditional Individual Retirement Arrangements (IRAs), Roth IRAs, and to claim the Saver's Credit. These ranges are referred to as 401(k) eligibility "phase-out" ranges.