Pennsylvania Employer Guide

Pennsylvania Household Employer Guide 2026

Your household employee — a nanny, caregiver, housekeeper, gardener, or anyone who works in your PA home — is a W-2 employee. Pennsylvania adds a flat 3.07% state income tax, a small employee SUI contribution, and city-level rules in Philadelphia and Pittsburgh. Here's everything you need for 2026.

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✓ Updated May 2026 · Verified against PA Department of Labor & Industry, PA Department of Revenue, City of Philadelphia, City of Pittsburgh, and IRS
Pennsylvania has three layers worth knowing: (1) state — flat 3.07% income tax plus a small 0.07% employee SUI contribution; (2) city — Philadelphia and Pittsburgh both add household-employer-specific rules (sick leave, contracts, breaks); (3) one important simplification — household employees are exempt from PA's local Earned Income Tax (Act 32) and Local Services Tax withholding, so you skip the patchwork of PSD codes and local tax collectors that other PA employers deal with.
Your household worker is a W-2 employee. Whether they're a nanny, caregiver, housekeeper, gardener, or personal assistant — if you control when, where, and how the work is done, they are your employee under IRS rules. That means W-2 reporting, payroll tax compliance, and Pennsylvania labor law obligations. Issuing a 1099 to a household worker is considered tax evasion by the IRS.

When the rules apply

Each tax threshold is a trigger. Once you cross one, the corresponding taxes apply to the wages that triggered the crossing — not just the amount above the threshold. Pennsylvania household employers face federal triggers, plus state UC tax and state income tax withholding.

Federal thresholds
$1,000
per quarter
Cash wages to all household employees combined. Triggers: pay federal Unemployment Tax (FUTA — 6% on the first $7,000 per employee, with state credit). Report on Schedule H with your 1040.
$3,000
per year, per employee
Cash wages to a single household employee in the calendar year. Triggers: withhold and pay FICA (Social Security 6.2% + Medicare 1.45%). Report wages to the Social Security Administration via W-2 and W-3.
Pennsylvania state thresholds
$1,000
per quarter
Cash wages to all household employees combined. Triggers: register with the PA Department of Labor & Industry for state Unemployment Compensation (UC) tax, and with the PA Department of Revenue to withhold and remit PA state income tax (3.07% flat) and the employee UC contribution (0.07%).
What's NOT in this list — and it's a meaningful simplification: Pennsylvania household employees are exempt from local Earned Income Tax (EIT) and Local Services Tax (LST) withholding under Act 32. That's the patchwork of municipal/school district taxes (with PSD codes, local tax collectors like Berkheimer or Keystone, and rates that vary by every borough) that ordinary PA businesses have to chase. As a household employer, you skip it entirely. Your employee may still owe local EIT to their resident municipality, but they file it themselves on their annual local return — there's nothing for you to withhold or remit. Source: PA DCED — Act 32 / Local Income Tax

How Nest Payroll handles this

Each pay period, you pay your employee the net amount directly — through Venmo, Cash App, Zelle, your banking app, or by check. We calculate accurate withholdings on every pay stub from day one. Once you cross the $1,000 quarterly threshold, we register you with the PA Department of Labor & Industry and the PA Department of Revenue.

At the end of each quarter, we debit your bank account for the taxes owed and remit them to the IRS and Pennsylvania. Your money stays in your account until taxes are actually due.

Pennsylvania UC Tax — 2026 rates: The new employer rate for nonconstruction household employers is 3.822% on the first $10,000 of each employee's wages — an employer-paid tax. After your first reporting periods, the state may reassign you an experience-based rate. Pennsylvania also requires you to withhold a 0.07% employee UC contribution from your worker's gross wages, with no wage cap — so it applies to every dollar you pay them, all year. Nest Payroll calculates and remits both portions with your quarterly UC-2 / UC-2A filings. Source: PA L&I — UC Tax Rates
Pennsylvania state income tax — 3.07% flat: Pennsylvania applies a single, flat 3.07% personal income tax to all wages — no brackets, no allowances, no separate state W-4. Withholding is calculated on every pay stub at that flat rate. Because the rate is uniform, the federal Form W-4 is the only employee tax form your worker needs to fill out for income tax purposes. Nest Payroll calculates the 3.07% withholding automatically and remits it with your quarterly returns. Source: PA Department of Revenue — Employer Withholding
End-of-year reconciliation: If you didn't cross the federal FICA threshold ($3,000/year per employee — most common when families start payroll late in the year or hire short-term help), we'll let you know exactly what was withheld but doesn't need to be remitted. You return those amounts to your employee, and we file accordingly.

Setup checklist (before they start)

The one-time tasks that need to be done before — or shortly after — your household employee's first day.

Workers' Compensation Insurance

Pennsylvania does not require household employers to carry workers' compensation insurance — domestic servants in private homes are specifically excluded from the PA Workers' Compensation Act unless the employer voluntarily elects to provide coverage.

That said, we strongly recommend obtaining coverage. Workers' comp protects you from liability if your employee gets injured or sick on the job. Without it, you could be personally liable for medical expenses, lost wages, and potential lawsuits arising from a workplace injury — even one as ordinary as a slip in your kitchen or a back injury from lifting a child.

Two paths to coverage

  • Homeowner's or renter's insurance rider — call your insurance company first. Many policies include or can add household-employee coverage as a low-cost rider.
  • Standalone household-employer policy — available from private carriers (or from the State Workers' Insurance Fund / SWIF) if your homeowner's policy can't cover it.
Resource: PA Department of Labor & Industry — Workers' Compensation — official guidance on coverage options, including SWIF (the state-run insurer of last resort).

Form I-9 (Employment Eligibility)

Federal law requires all employers to verify employment eligibility using Form I-9. Complete this before your household employee's first day of work.

Important: Don't submit the I-9 to anyone. Keep it with your employer records in case of a future audit.

Federal W-4 (no separate PA form needed)

The federal W-4 determines how much federal income tax to withhold from each paycheck. Have your household employee fill this out at hire and any time their situation changes.

No separate PA withholding form: Because Pennsylvania's personal income tax is a flat 3.07%, there's no PA-specific W-4 with allowances or filing-status options. The 3.07% applies to every dollar of compensation, regardless of marital status or dependents. The federal W-4 is the only withholding form your employee needs to complete.
Note on federal income tax withholding: Federal income tax withholding is voluntary for household employers — you and your employee must both agree to it. PA income tax withholding (3.07%) is mandatory once you cross the $1,000 quarterly threshold. Most household employees prefer federal withholding too so they don't owe at tax time.

Pennsylvania New Hire Reporting

Pennsylvania requires all employers — including household employers — to report newly hired and rehired employees to the Pennsylvania CareerLink New Hire Reporting Program within 20 days of the hire date.

Reporting can be done online, by mail, or by fax. You'll provide your employee's name, address, SSN, hire date, and your contact information. Penalties for non-compliance start at a written warning, escalating to $25 per missed employee.

With Nest Payroll: We handle PA new-hire reporting automatically when you add your employee in the app.

Notice of Wages at Hire (PA Wage Payment & Collection Law)

Under the Pennsylvania Wage Payment and Collection Law (43 P.S. §260.4), employers must notify each employee at the time of hire of their rate of pay, the regular payday, and the amount of any fringe benefits or wage supplements.

Tip: Provide this notice in writing — even a simple email or text confirming pay rate, pay frequency, and start date satisfies the requirement. Keep a copy for your records.

Required Employment Posters

Pennsylvania employers must provide certain notices to their workers. For a household employer with a single employee, you can satisfy this by emailing or texting the link, or printing and giving them physical copies:

📋 PA Required Postings 📋 Federal Minimum Wage (FLSA) 📋 EEOC Know Your Rights 📋 Employee Polygraph Protection

If you employ a worker in Philadelphia or Pittsburgh, additional city-specific notices apply — see the city sections below.

Written Work Agreement

Pennsylvania state law doesn't require a written employment agreement, but a written contract prevents misunderstandings about hours, duties, PTO, and house rules.

Build a free contract with our editable template: Nest Payroll Household Employee Contract Builder — fill it out and download as a PDF.

Philadelphia exception — written contract is required: If your household employee works in Philadelphia, the Philadelphia Domestic Workers' Bill of Rights requires you to provide a written contract covering specific terms. See the Philadelphia section below.

Hand In Hand, a non-profit supporting domestic employers and employees, also offers free sample contracts and guidebooks.

Pay & compensation

Everything that goes into a paycheck — minimum wage, overtime, when to pay, pay stubs, and reimbursable mileage.

Minimum Wage — $7.25/hr (2026)

Pennsylvania's minimum wage is $7.25/hour, matching the federal floor. The PA Minimum Wage Act (43 P.S. §333.104) hasn't been raised since 2009, and PA state law preempts cities and counties from setting higher local minimums. Philadelphia, Pittsburgh, and the rest of the state all use the same $7.25 rate.

Practical note: Most PA household employees are paid well above $7.25/hr because the local market for nannies, caregivers, and housekeepers commands far higher rates. Common nanny rates in Philadelphia and Pittsburgh range from $18–$28/hr, and senior caregivers often earn $20–$30/hr. Sources: PA L&I — Minimum Wage Act · EPI Minimum Wage Tracker

Overtime

Pennsylvania follows the federal Fair Labor Standards Act (FLSA) standard for household worker overtime: 1.5× the regular hourly rate for all hours worked over 40 in a 7-day workweek. PA doesn't impose a stricter daily-overtime rule like California.

Pennsylvania Overtime — Household Workers
ConditionRate
Live-out, more than 40 hours in a workweek1.5× hourly
Live-in employees (any hours)Exempt from overtime
Work performed on a holiday or weekendNo premium required
Live-in exemption: Under federal FLSA — which Pennsylvania follows — live-in domestic workers are exempt from overtime requirements. Live-in nannies and caregivers must be paid at least minimum wage for all hours worked, but overtime is not legally required. This is a meaningful difference from states like California, New York, and Maryland, which require overtime for live-in workers. Source: U.S. DOL — Fair Labor Standards Act

"No Tax on Overtime" Deduction (2025–2028)

Under the One Big Beautiful Bill Act (OBBBA), signed July 2025, your household employee may be able to deduct the premium portion of their overtime pay — the "half" in time-and-a-half — from their federal taxable income.

OBBBA Overtime Deduction — Key Details
DetailValue
What's deductibleOnly the premium (0.5×) portion of FLSA overtime
Max deduction (single)$12,500/year
Max deduction (joint)$25,000/year
Income phaseout$150,000 MAGI ($300,000 joint)
DurationTax years 2025–2028
Good news for Pennsylvania employers: Because PA overtime is the federal FLSA standard (40 hours/week), virtually all overtime your household employee earns qualifies for the OBBBA deduction. This is unlike states with daily overtime rules (CA's over-8-hours/day) where state-only OT doesn't qualify. Source: IRS — OBBBA Tax Deductions
W-2 reporting (starting 2026): Employers must separately report qualified overtime compensation on Form W-2 using Box 12, code "TT." This is a new requirement — for tax year 2025, employers were given transitional relief from this reporting.

Pay Frequency

Under the Pennsylvania Wage Payment and Collection Law (43 P.S. §260.3), employees must be paid at least semi-monthly unless a contract specifies otherwise. The default schedule is:

  • First payment: between the 1st and 15th of the month, covering wages earned through the prior pay period
  • Second payment: between the 15th and the last day of the month

You may pay more frequently — daily, weekly, or bi-weekly are all allowed and common for household payroll. Whatever cadence you pick, designate the regular payday in advance and stick to it. Overtime wages can be paid in the next succeeding pay period after they're earned.

With Nest Payroll: Nest defaults to weekly pay stubs, which automatically satisfies PA's semi-monthly minimum and gives you flexibility on the bank-transfer schedule. The weekly pay stub is your record of what was earned; the bank transfer is whenever you want to move the money — as long as your designated paydays are honored. Source: 43 P.S. §260.3 — PA Wage Payment & Collection Law

Mileage Reimbursement

Pennsylvania doesn't require mileage reimbursement, but you must reimburse necessary work-related driving expenses if those costs would otherwise reduce your employee's wages below the minimum wage. Most employers use the IRS standard rate:

$0.725 per mile (2026)

Common examples: driving children to activities, running household errands, taking a client to medical appointments. (Commuting to/from work doesn't count.)

Paystub Requirements

Under the PA Wage Payment and Collection Law, each pay period you must provide your employee with a statement listing wages, hours worked, rates paid, gross wages, allowances claimed as part of the minimum wage (if any), deductions, and net wages. Records must be retained for at least 3 years.

With Nest Payroll: Nest generates a compliant earnings statement (pay stub) for every weekly pay period — automatically. Each stub shows the rate, gross wages, FICA, federal income tax (if elected), PA 3.07% income tax, the 0.07% employee UC contribution, net pay, and hours worked. You can email each stub to your employee directly from the app, or download a PDF.

This is a lot to track on your own.

Nest Payroll handles federal and PA payroll, employee UC withholding, W-2s, and Schedule H — starting at $42/mo. 14-day free trial.

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Time off & leave

Pennsylvania does not have a state-mandated paid sick leave law, paid family leave program, or required vacation time. However, Philadelphia, Pittsburgh, and Lehigh County impose their own rules — covered in the city-specific section below.

Paid Sick Leave

Pennsylvania has no statewide paid sick leave law. The state also doesn't run a paid family leave or temporary disability insurance program — there's no PA equivalent of NY PFL, NJ FLI, or MD FAMLI.

That doesn't mean nothing applies. If your employee works in Philadelphia or Pittsburgh, city ordinances require paid (or unpaid) sick leave with specific accrual or frontloading rules. See the City-specific rules section for details.

Even outside those cities, offering some sick leave is good retention practice. A typical household employer offers 3–5 paid sick days per year. Records should be maintained either way.

Accrual vs. frontloading — and why frontloading is simpler

Whether you're complying with a Philadelphia or Pittsburgh ordinance, or simply offering sick leave as a benefit, you have two ways to deliver it:

Accrual
The default
Sick time builds up at a per-hour-worked rate (e.g., 1 hour per 30 hours worked in Pittsburgh, 1 hour per 40 in Philadelphia). Requires careful tracking, carryover into the next year, and unused-time reconciliation.
Frontloading
Recommended
Provide the full annual amount upfront at the start of each year (or pro-rated at hire). The employee has access to all hours on day 1 — no per-hour tracking, no carryover.

Frontloading is generally better for household employers — no accrual tracking, no payout obligation on unused hours, and no carryover to manage at year end. Both the Philadelphia paid sick leave ordinance and the Pittsburgh Paid Sick Days Act explicitly allow frontloading as an alternative to accrual tracking, so the same approach satisfies both jurisdictions.

How Nest Payroll handles this: Nest is built around the frontloading model — you set your employee's full annual sick leave balance at the start of each year (or pro-rated at hire), and pay stubs reflect the running balance as time is used. This is the simplest and lowest-risk approach for household employers, and it satisfies the Philadelphia and Pittsburgh ordinances. You enter the annual hours that match your location's rule (e.g., 48 for Pittsburgh, 40 for Philadelphia) — Nest doesn't auto-detect city tiers.

Vacation & PTO

Pennsylvania does not require paid vacation. If you offer it, document your policy in writing — under PA law, vacation pay is enforceable only to the extent your contract or policy states it will be paid. To preserve flexibility on what happens at separation, state your vacation policy explicitly in your work agreement.

City-specific rules (Philadelphia, Pittsburgh, Lehigh County)

Pennsylvania's most important household-employer rules sit at the city/county level. Three jurisdictions matter:

Philadelphia — Domestic Workers' Bill of Rights + POWER Act

The Philadelphia Domestic Workers' Bill of Rights (DWBR) was the first city ordinance of its kind. In May 2025, the POWER Act (Protect Our Workers, Enforce Rights) significantly expanded enforcement and aligned domestic worker sick leave with the broader Philadelphia paid sick leave ordinance.

Written contract — required

You must provide a written contract that covers, at minimum: job duties, wages, schedule, payment frequency, breaks, leave provisions, transportation arrangements, and other agreed terms.

Heads-up on templates: The Nest contract builder is a general household-employer template — it's a useful starting point, but it isn't pre-loaded with Philadelphia DWBR's required terms. If you're a Philadelphia employer, either (a) use Nest's builder and cross-check the output against the City's required-terms checklist, or (b) start from Philadelphia's free DWBR sample contract, which is already DWBR-compliant.

Rest and meal breaks

  • 10-minute paid rest period for every 4 consecutive hours worked
  • 30-minute meal break after more than 5 consecutive hours worked
  • Live-in workers: 24-hour uninterrupted rest period after working 6 consecutive days

Termination notice

  • Live-out: 2-week notice (or 2 weeks' severance pay in lieu)
  • Live-in: 4-week notice (or 4 weeks' severance pay in lieu)

Paid sick leave (POWER Act, May 2025)

Under the POWER Act, Philadelphia domestic workers are now entitled to paid sick leave under the city's Promoting Healthy Families and Workplaces Act, regardless of how many employees you have:

  • Accrual: 1 hour of paid sick leave per 40 hours worked, capped at 40 hours per year
  • Live-in workers are explicitly covered and protected from retaliation, wage theft, and coercion
  • Eligibility: begins after 90 days of employment
  • The City is developing a centralized portable benefits system so workers can carry accrued sick time across employers

As an alternative to per-hour accrual, you can frontload all 40 hours at the start of each year (or pro-rated at hire) — this satisfies the ordinance and avoids the per-40-hour tracking. See the state-level frontloading framework above.

POWER Act enforcement is real. Philadelphia's Office of Worker Protections (OWP) can now conduct investigations without a complaint, impose fines of up to $2,000 per violation, suspend or revoke business licenses and city contracts, and add repeat offenders (3+ infractions) to a public Bad Actors Database. Recordkeeping requirement: 3 years of contemporaneous records of hours worked, sick time taken, and payments made. Source: City of Philadelphia — POWER Act Employer Memo (Aug 2025)

A note on the Philadelphia Wage Tax

Philadelphia operates its own City Wage Tax separate from PA's Act 32 EIT. For wages paid between July 1, 2025 and June 30, 2026, the rate is 3.74% for residents and 3.43% for non-residents who work in the city. Most household-employer arrangements don't involve a Philadelphia "place of business" registration, but if you live in Philadelphia or your employee works at your Philadelphia residence, your employee may owe the Wage Tax (residents) or Earnings Tax (non-residents working in Philly).

What this means in practice: Philadelphia residents typically file the Earnings Tax themselves at year end if their employer doesn't withhold the City Wage Tax — which is the typical situation for households. Talk to your employee at hire about whether they want to make estimated payments to the City directly, or settle at filing time. Under-withholding penalties are modest if the balance is paid by the April filing deadline. Source: City of Philadelphia — Earnings Tax (Employees)

Pittsburgh — Paid Sick Days Act (expanded January 1, 2026)

The Pittsburgh Paid Sick Days Act has been in force since 2020 and was significantly expanded effective January 1, 2026. The expansion roughly doubles the required hours and accelerates accrual. Both rules apply to any household employer whose worker performs services within Pittsburgh city limits.

Pittsburgh Paid Sick Days — 2026 amendments
Employer SizeAnnual CapAccrual Rate
Fewer than 15 employees (typical household)48 hours/year1 hour per 30 hours worked
15 or more employees72 hours/year1 hour per 30 hours worked

For comparison: prior to 2026, the small-employer cap was 24 hours and the accrual rate was 1 per 35 hours worked.

Carryover and frontloading: Unused accrued time generally carries over into the following year, capped at the 48-hour (or 72-hour) annual maximum. Frontloading the full annual amount at the start of each year exempts you from the carryover requirement.

For Pittsburgh: Set 48 hours as your employee's annual sick balance (or pro-rated at hire) for employers with fewer than 15 employees. This eliminates the per-30-hour tracking and the carryover bookkeeping. See the state-level frontloading framework above for how Nest tracks the running balance. Source: City of Pittsburgh — Paid Sick Days Act

Lehigh County — Human Relations Ordinance (effective June 1, 2024)

Lehigh County's Human Relations Ordinance applies to any employer with at least one employee — including household employers. It prohibits discrimination based on protected characteristics and adds two operational rules worth flagging:

  • Ban-the-box: You may not ask about an applicant's criminal history on an initial application; criminal background may only be considered later in the hiring process and must be job-related.
  • Salary history inquiry ban: You may not ask candidates about their prior compensation history. You can (and should) state the wage range you're offering.
Practical note: If you're recruiting a nanny or caregiver in Allentown or elsewhere in Lehigh County, frame your job posting around the wage range you'll pay (e.g., "$22–$26/hr DOE") rather than asking what the applicant earned at their last position.

Upon departure

Final wages: Under the PA Wage Payment and Collection Law (43 P.S. §260.5), all wages owed to a separated employee — whether terminated or resigning — must be paid by the next regular payday following the separation.

Unused vacation/PTO: Vacation pay is enforceable only to the extent your contract or written policy states it will be paid out at separation. Without a written policy, PA does not require payout.

Final W-2: Provide the federal Form W-2 by the regular January 31 deadline (or earlier if requested by the former employee).

Philadelphia note: If your worker is in Philadelphia and the DWBR applies, the 2-week (live-out) or 4-week (live-in) termination notice rule may also apply — see the Philadelphia section above.

Year-end forms

By the end of January each year, you'll need to deliver:

  • W-2 to your household employee — for their personal tax return (PA UC employee contribution typically reported in Box 14)
  • W-3 + Copy A of W-2 filed with the Social Security Administration
  • Schedule H attached to your personal Form 1040 by April 15
  • Quarterly UC-2 / UC-2A filings with the PA Department of Labor & Industry (handled throughout the year)
  • Quarterly PA-W3 / annual REV-1667 reconciliation with the PA Department of Revenue for state income tax withholding
With Nest Payroll: Your tax forms are generated automatically and appear in your Tax Summary by the end of January. We handle W-3 filing with the SSA, PA UC quarterly filings, the PA Department of Revenue withholding reconciliation, and provide a signature-ready Schedule H for your accountant or your own 1040 preparation.

Tax breaks for household employers

Paying your household employee legally unlocks meaningful federal tax breaks that often offset most of your employer-side payroll tax cost.

Dependent Care FSA (DCFSA)

For 2026, the federal max contribution is $7,500 (married filing jointly) — up significantly from prior years under the OBBBA. Note: your employer's specific plan may still cap at $5,000.

Child & Dependent Care Tax Credit

Up to 50% of qualifying care expenses for 2026 — up from 35% in 2025. Capped at $3,000 of expenses for one qualifying child or $6,000 for two or more. At the 50% rate, a family with two or more dependents could receive a credit of up to $3,000.

→ See our complete guide to nanny tax breaks — includes DCFSA, Care Credit, EAP (Educational Assistance Program), and ICHRA (health reimbursement).

Resources & free tools

🧮 Payroll Calculator 🧮 Gross-Up Calculator 🧮 Tax Catch-Up Calculator 📄 Free Contract Builder 💡 Tax Breaks Guide 📅 2026 Tax Update 📖 Household Payroll 101 ⏰ Catch-Up on Back Taxes 📊 All 50 State Guides 🤝 How to Hire a Nanny

Ready to pay your PA household employee legally?

Nest Payroll handles EIN setup, PA Department of Labor & Industry and PA Department of Revenue registrations, payroll calculations, and quarterly tax filings — all automatically. 14-day free trial.

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Disclaimer: The information on this page is general in nature. This is not tax, legal, benefits, financial, or HR advice. Rules and regulations change over time and vary by location. Workers' compensation, city ordinances (Philadelphia DWBR/POWER Act, Pittsburgh Paid Sick Days), and local tax requirements can be complex — consult an attorney, financial advisor, or licensed insurance broker for your specific situation.