Much like in other states, processing payroll in Ohio starts with understanding minimum wage, hours worked, overtime, allowed deductions, payroll taxes, and more.
Here is everything you need to know to process payroll in Ohio.
Employers with operations or employees in Ohio need to understand the following laws and regulations to effectively process payroll in the state.
Here is what Ohio businesses should understand in order to process payroll in the state.
The standard for Ohio minimum wage in 2024 is $10.45 per hour. For tipped employees, the minimum wage is $5.25 per hour.
In accordance with the Ohio Constitutional Amendment (II-34a), which was passed by voters in 2006, Ohio’s minimum wage is to increase on January 1st of each year to adjust for inflation.
Employers of smaller companies with annual gross receipts of $385,000 or less may pay employees a sub-minimum wage rate equal to the federal minimum wage. The same goes for any employees who are minors aged 14 - 15 years old.
A tipped employee is classified as a worker who regularly receives over $30 in tips per month.
In Ohio, the minimum wage rate for tipped employees is $5.25 per hour, plus tips. If an employer decides to use a tip credit provision, they must ensure that tipped employees receive at least the minimum wage, when their wage is combined with their tip credit amount. If an employee does not make the applicable minimum wage, the employer must make up the difference.
Set forth by the Director of the Ohio Department of Commerce (ODOC), there are rules and regulations allowing a sub-minimum wage to be paid with certain exceptions.
The Ohio sub-minimum wage law was created with the intent to prevent employers from avoiding hiring individuals with disabilities, due to fear of having to pay state minimum wage to such an individual.
Per the Ohio Department of Commerce Bureau of Wage & Hour (ODOC) and federal overtime requirements, employers in Ohio must maintain compliance with the requirements set forth under the Minimum Fair Wage Standards (MFWS).
Under both state and federal law, private employers are required to pay their employees 1.5 times their regular rate of pay for all hours worked over 40 in a workweek.
For salaried employees, their regular rate of pay is determined by dividing the total weekly pay by the total number of hours worked a week (Typically 40 hours).
Ohio Overtime Law does not apply to a franchisor with respect to the franchisor’s relationship with a franchisee or an employee of a franchise, or an employer whose annual gross sales are less than $150,000.
It should be noted that employers may still be covered under federal overtime laws.
Under Ohio’s Compensatory Time Law, state and county employees are granted the option to take compensatory time off instead of overtime pay.
If a state or county employee decides to take compensatory time, an appropriate supervisor must approve the time which must be used within 180 days of earning the overtime.
In addition to the Fair Labor Standards Act (FLSA), which includes exemptions to overtime depending on employee classification, certain employees are also exempt under state law. However, some employees may still be covered under federal law.
Ohio has included certain elements of the federal Portal-to-Portal Act in its state legislation.
Ohio’s Portal-to-Portal Act enforces the following:
Under Ohio Wage Payment Timing Law, employers must follow certain requirements regarding when wages are to be paid to employees.
Employers must pay earned wages to their employees from the first half of the preceding month (ending with the fifteenth day) before or on the first day of each following month.
As follows, employees are to be paid their earned wages during the remaining days of the preceding month (16th to the end of the month) before or on the fifteenth day of each following month.
Exceptions can be made when a written agreement or contract is made between the employee and the employer.
If an employee is terminated, the employer is required to pay that employee their outstanding wages no later than the next regularly scheduled payday.
Ohio does not have specific legislation governing the procedures for issuing final paychecks upon an employee's resignation or termination. Consequently, employers are advised to follow the standard state wage payment timing regulations when handling final payments.
This entails disbursing any remaining benefits upon termination if an employer has committed, either through a written or verbal policy or by custom, to compensate employees for unused benefits.
In Ohio, there are strict laws regarding what may be lawfully deducted from an employee’s paycheck or wages.
Employers may deduct an employee’s wages for the loss or damage of wares, tools, or machinery caused by the employee, only if the employee has consented to the deduction with a written agreement.
Under Ohio Rule 4101:9-4-07, employers may also make authorized deductions from an employee's paycheck or wages in cases such as:
Federal law also permits wage deductions for an employee's uniforms, tools, as well as other necessary equipment required for employment, however, per Ohio law, employers are not permitted to reduce an employee's wages for uniforms, tools, or damaged machinery without a written agreement between the employer and employee.
Ohio itself does not have any specific laws requiring employers to pay their employees for travel time, however, in compliance with the rules of the FLSA, employers are required to compensate employees for travel time under the following circumstances:
Employers in Ohio must understand their obligations concerning state unemployment tax. One key responsibility is providing employees with the necessary information to assist them in completing their unemployment insurance benefits application.
Covered employers can enroll their business by visiting the Department of Job & Family Services. They must also report their liability as soon as they have one or more employees engaged in covered employment.
| 2021 | 2022 | 2023 | 2024 | |
| Lowest Experience Rate | 0.3% | 0.3% | 0.3% | 0.4% |
| Highest Experience Rate | 9.3% | 9.7% | 9.8% | 10.1% |
| Mutualized Rate | 0.5% | 0.5% | 0.5% | 0.5% |
| New Employer Rate | 2.7% | 2.7% | 2.7% | 2.7% (*except construction) |
| NER*Construction Industry | 5.8% | 5.5% | 5.6% | 5.6% |
| Delinquency Rate | 12.3% | 12.8% | 12.9% | 13.3% |
| Annual Taxable Wage Base | $9,000 | $9,000 | $9,000 | $9,000 |
Contribution Rate Determinations for the upcoming calendar year are sent out by December 1.
In Ohio, there is no corporate income tax rate, however, there are individual income tax rates that range from 2.765% to 3.750%. In general, Ohio has four income tax and residency rates depending on which tax bracket you are in, per the Ohio Department of Taxation.
| Ohio Taxable Income | Tax Calculation |
| More than - Up to | Nonbusiness Income Tax |
| $0 - $26,050 | 0.000% of Ohio Taxable Nonbusiness Income |
| $26,051 - $100,000 | $360.69 + 2.75% of excess over $26,050 |
| $100,000 - $115,300 | $2,394.32 + 3.688% of excess over $100,000 |
| More than $115,300 | $2,958.58 + 3.750% of excess over $115,300 |
Employers that do business in Ohio are responsible for withholding Ohio individual income tax from their employee’s pay. If the employee is a resident of Ohio, the employer is responsible for withholding state income tax from the employee's pay as well.
If an employee is an Ohio resident but works in another state, the employer is responsible for withholding the other state’s taxes, if applicable.
Employers must still withhold wages for federal income tax, Medicare, and Social Security contributions in addition to the state income tax.
Back in November of 2023, the IRS that there would be changes made to 401(k) limits and planning. In 2024, employees can contribute up to $23,000, an increase from $22,500 in 2023.
The contribution limit pertains to employees participating in 401(k)s, 403(b)s, most 457 plans, and Thrift Savings Plans.
Ohio payroll laws are constantly changing. Most Ohio businesses struggle with processing payroll without the proper software services to remain compliant.
Businesses and employers in Ohio struggling to remain compliant with state and federal payroll laws may want to reach out to an Ohio Payroll Services Company for help.
To learn more about how PayBridge is helping countless businesses with their payroll processing in Ohio, contact us today.