Pennsylvania Tax and Labor Law Summary
Household employment requirements for families hiring a caregiver in Pennsylvania
Families have a lot to think about when they hire a household employee and we want to make it as easy as possible to find the tax and labor law information they need. Our Pennsylvania nanny tax overview has all the answers for navigating the household employment process - and how our service can streamline paydays, tax time and all points in between.
When a family hires someone to perform duties in or around their home, they are considered a household employer. The IRS views the worker whether a nanny, health aide, housekeeper, senior caregiver, gardener, chef, personal assistant, estate manager, etc. as an employee of the family in nearly every case. Misclassifying an employee as an independent contractor (using Form 1099) is considered tax evasion, so please call us if you're not sure how to classify your worker.
PENNSYLVANIA HOUSEHOLD EMPLOYMENT TAX RESPONSIBILITIES
Household employers have four primary tax responsibilities. These are sometimes referred to as the Pennsylvania nanny tax obligations:
1. Withhold Social Security, Medicare and Pennsylvania unemployment taxes from their employee's paycheck each pay period. Federal and state income taxes should be withheld based on the employee's selections on Form W-4.
* Employees may be subject to local income taxes in addition to state and federal income taxes. Household employers are not required to withhold these taxes, so we recommend informing your employee that they may need to budget for them as they will be collected when your employee files their tax return.
2. Pay the employer's portion of Social Security and Medicare, as well as federal and Pennsylvania unemployment insurance taxes (FUTA and SUTA).
Good news! There are some tax breaks for dependent care that can help offset these employer taxes. For an estimate of your employer costs, your tax breaks and your employee's take-home pay, give us a call.
3. File tax forms with the Pennsylvania Department of Labor & Industry and the Department of Revenue, typically on a quarterly basis, and with the IRS in April, June, September and January. With these filings, employers remit (pay) the employee taxes withheld and the employer taxes accrued.
4. At the end of the year, prepare and file Form REV 1667 with the Pennsylvania Department of Revenue. Additionally, prepare Form W-2 and distribute to each employee, file Form W-2 Copy A and Form W-3 with the Social Security Administration and file a Schedule H with your personal income tax return.
PENNSYLVANIA LABOR LAW REQUIREMENTS
The Fair Labor Standards Act (FLSA) provides the framework for federal and state wage and hour law. Household employees are classified under the FLSA as non-exempt workers. Non-exempt workers in all 50 states are covered by the rules and protections of the FLSA. The state of Pennsylvania, as well as city governments, may supplement the federal law with additional state and municipal labor laws.
Minimum wage in Pennsylvania is currently $7.25 per hour.
Pennsylvania Overtime Requirements
Overtime requirements are not determined by the amount of hours or by the type of pay (hourly or salary); they are determined by the type of work performed. The FLSA requires domestic workers be protected by overtime laws. The requirements for Pennsylvania household employers are as follows:
- The standard workweek is defined as 40 hours in a 7-day period.
- Pennsylvania employees should be paid at least 1.5 times the regular hourly rate (time-and-a-half) for all hours worked over 40 in a workweek.
- Overtime compensation is not required for live-in employees.
- Overtime is not required to be paid when work is performed on a holiday.
Wage Notice Requirement
Household employers in Pennsylvania are required to provide their employees with a written wage notice at the time of hire. The notice must include the employer's address and the employee's hourly rate of pay. Families in Pittsburgh should provide their employee with this notice instead.
Philadelphia Employment Contract Requirement
Household employers in Philadelphia are required to have a written employment contract that includes the following:
- List of job duties.
- The employee’s hourly and overtime rate of pay.
- An expected weekly schedule, including the total hours worked in a week.
- How the employee will be paid and the payment frequency (weekly, bi-weekly, etc.).
- How meal and rest breaks are handled.
- The paid and unpaid leave the employee has.
- Any paid holidays the employee has.
- Other benefits the family will provide.
- Modes of required transportation.
- Value of housing provided if the employee is a live-in employee.
- Sleeping periods and personal time for an employee that is a live-in.
- The duration of the contract.
- Anything else agreed upon by the family and the caregiver.
Two weeks notice is required to terminate an employment contract (four weeks if a family has a live-in employee) unless there is significant misconduct by the employee.
Philadelphia Meal and Rest Break Requirement
Employees in Philadelphia are allowed to take an uninterrupted, paid 10-minute rest period for every four consecutive hours they work, and an uninterrupted, paid 30-minute meal break after 5 hours worked. If this is not possible because of the nature of the job, the employee must continue to be paid while they are eating.
Philadelphia Unpaid Sick Time
Household employers in Philadelphia are required to provide up to 40 hours of sick time to their employees each calendar year. The sick time does not have to be paid and accrues at 1 hour for every 40 hours worked. Employees can begin using their sick time after 90 days of employment and may roll over unused sick time to the next year, but cannot accrue more than 40 hours.
Philadelphia Paid Time Off
Household employers in Philadelphia are required to provide up to 40 hours of paid time off (PTO) per year to their employees. PTO accrues at 1 hour earned for every 40 hours worked and can be used if an employee is sick or needs personal time away from the job to handle unexpected personal matters. Employees can also use PTO if the family has to unexpectedly change their work schedule or cancel a day of work.
Philadelphia Time Off Requirement for Live-In Employees
Families in Philadelphia with live-in domestic workers cannot require them to work more than six consecutive days without a 24-hour rest period. This time off does not have to be paid, but employees must be allowed to come and go as they please and have no work responsibilities.
Pittsburgh Unpaid Sick Time
Household employers in Pittsburgh are required to provide up to 24 hours of sick time to their employees each calendar year. Sick time accrues at 1 hour for every 35 hours worked, but employers can offer the full amount of sick time upfront if they choose. Employers are required to roll over up to 24 hours of unused sick time to the next year unless they have chosen to offer the full amount of sick time upfront to their employee. Sick time records must be kept for 2 years and employers must notify their employee if their rights using this poster. Beginning in 2021, sick time will be become paid instead of unpaid.
Termination Notice Reimbursement
Household employers in Pennsylvania are required to provide their employee with a termination notice when they are let go from their job.
Employment Poster Requirement
Families are required to notify their employee of their rights by sharing these posters in a location that is easily accessible to them.
The current federal mileage reimbursement rate is 57.5 cents per mile. This rate, which covers the cost of gasoline as well as general wear and tear on the car, should be used to calculate reimbursement payments to an employee who drives their own vehicle while on the job. Mileage reimbursement is not considered taxable compensation, so neither the employee nor the employer is required to pay any taxes on that portion of the compensation.
Note: Miles driven while commuting to and from the jobsite are not considered on-the-job. If the employer reimburses the employee for commuter mileage, it is considered taxable compensation.
INSURANCE FOR PENNSYLVANIA HOUSEHOLD EMPLOYERS
Workers' Compensation Insurance
Household employers in Pennsylvania are not required to carry a workers' compensation insurance policy. However, we recommend obtaining coverage because it assists with medical expenses and lost wages if an employee has a work-related injury or illness. It also provides protection to the employer since workers who accept benefits generally forfeit their right to sue the employer regardless of fault. You can get an instant quote and purchase a policy online or by contacting our workers’ compensation advisor, Clarke White, at 804-267-1210 or firstname.lastname@example.org.
Pennsylvania unemployment insurance is a state-managed program that provides financial assistance to help laid-off workers make ends meet until they can find another job. This insurance is funded through withholdings from employees' paychecks and taxes that employers are required to pay on wages paid to employees. These taxes flow into a general fund, and unemployment benefits are distributed from the fund to employees who are let go from their job due to no fault of their own. The Pennsylvania Department of Labor & Industry (DLI) determines whether or not an applicant qualifies for benefits after reviewing their online or paper application and/or by conducting a telephone interview. Benefits paid to a former employee by the DLI may trigger a future tax rate increase for the employer.
Household employers in Pennsylvania are NOT required to pay for their employee's health insurance. However, there is a tax incentive to do so. Families with only 1 employee can make contributions toward their employee's health insurance premiums and treat the amount as non-taxable compensation. In this scenario, neither the employee nor the employer are required to pay any taxes on that portion of the compensation.
Note: Employers with 2 or more employees must set up an Individual Coverage Health Reimbursement Arrangement (ICHRA), a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or purchase a policy through SHOP (Small Business Health Options Program) to gain this benefit. Visit our health insurance page for more information about these options.
The information herein is general in nature and may not be applicable to or suitable for your specific circumstances. Accordingly, the information is not intended to be providing legal or tax advice, and should not be relied upon without the advice and guidance of a professional tax or legal advisor.
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