Washington Payroll Taxes 2026: Complete Overview for Employers

1. Overview: No Income Tax, But Still Complex

Washington is one of only nine states with no state income tax. That sounds like great news for employers — no state income tax withholding to calculate, no W-4 equivalents to collect, and no annual state returns to reconcile against employee wages.

But don’t let that fool you into thinking Washington payroll is simple. In reality, WA employers face four major payroll tax obligations, each administered by different state agencies with separate registration, reporting, and payment systems:

• State Unemployment Insurance (SUI) — administered by the Employment Security Department (ESD)
• Paid Family & Medical Leave (PFML) — also administered by ESD
• WA Cares Fund — long-term care insurance, reported through ESD
• Workers’ Compensation — administered by the Department of Labor & Industries (L&I), completely separate from ESD

The table below summarizes all four Washington payroll taxes at a glance for 2026:

Let’s break down each obligation in detail.

2. State Unemployment Insurance (SUI)

State Unemployment Insurance is the foundation of Washington’s payroll tax system. Every employer with workers in Washington must pay SUI taxes to the Employment Security Department (ESD). These taxes fund unemployment benefits for workers who lose their jobs through no fault of their own.

New Employer Rates

When you first register as a Washington employer, ESD assigns you a new employer rate of approximately 1.0%, though this varies by industry. Some industries with historically higher unemployment claims — like construction or seasonal agriculture — receive higher initial rates. The new employer rate applies until you build enough claims history for experience rating, which typically takes about three years.

Wage Base: $72,800

Washington’s SUI taxable wage base is $72,800 per employee per year (as of 2025). This is one of the highest SUI wage bases in the country. For context:

• California’s SUI wage base is just $7,000
• Texas uses the federal minimum of $7,000
• Oregon’s is approximately $52,800
• Washington’s $72,800 means significantly more tax per employee

Experience Rating

After you’ve been in business long enough to establish a claims history (generally 3+ years), ESD assigns your company an experience rate. This rate is based on the amount of unemployment benefits charged to your account relative to your taxable payroll. Employers with fewer layoffs and claims get lower rates; those with more get higher rates.

Experience-rated employers in Washington can see SUI rates ranging from as low as 0.13% to over 5.4%, depending on their claims history. Keeping turnover low and contesting illegitimate unemployment claims can meaningfully reduce your SUI costs over time.

SUI Reporting

SUI taxes are reported and paid quarterly through ESD’s online system at esd.wa.gov. You’ll report wages for each employee and pay the tax due based on your assigned rate and the taxable wage base.

3. Paid Family & Medical Leave (PFML)

Washington’s Paid Family & Medical Leave program gives employees access to paid time off for serious medical conditions, bonding with a new child, or caring for a family member with a serious health condition. PFML is funded through a payroll tax shared between employers and employees.

2026 PFML Premium Rate

The combined PFML premium rate for 2026 is 0.9% of each employee’s gross wages, up to the Social Security wage base. This combined rate is split between the employer and employee as follows:

Small Employer Exemption

Employers with fewer than 50 employees are exempt from paying the employer portion of PFML premiums. However, small employers are still required to:

• Withhold the employee’s share from each paycheck
• Remit the withheld premiums to ESD quarterly
• Report employee wages to ESD
• Allow employees to use PFML benefits when they qualify

Leave Benefits

Eligible employees can receive up to 12 weeks of family leave, 12 weeks of medical leave, or up to 18 weeks combined when both family and medical leave apply (such as pregnancy complications followed by bonding time). Leave benefits are paid by ESD directly to the employee, not by the employer.

Employees qualify for PFML benefits after working at least 820 hours in Washington during the qualifying period. This is a state-level threshold — the hours don’t have to be with a single employer.

Voluntary Plans

Employers can apply to ESD for approval of a voluntary plan that provides benefits equal to or better than the state program. If approved, you collect premiums and manage claims yourself (or through an insurer) instead of paying into the state fund. This can sometimes offer cost savings for employers with low claims.

4. WA Cares Fund

The WA Cares Fund is a first-in-the-nation public long-term care insurance program funded through a payroll tax. It provides a lifetime benefit to help cover long-term care costs like in-home care, assisted living, or nursing facility services.

Tax Rate and Wage Base

The WA Cares premium is 0.58% of all gross wages with no wage cap. Unlike PFML (which caps at the Social Security wage base) or SUI (which caps at $72,800), the WA Cares tax applies to every dollar an employee earns.

For a high-earning employee making $200,000 per year, the WA Cares tax is $1,160 annually. For an employee earning $50,000, it’s $290 per year.

Who Pays

WA Cares is 100% employee-paid. The employer’s role is to:

• Withhold the 0.58% premium from each employee’s paycheck
• Remit the collected premiums to ESD quarterly
• Report wages accurately on your quarterly reports

While the employer doesn’t pay the tax directly, you are responsible for the administrative burden of withholding and remitting. Failure to withhold correctly creates liability for the employer.

Private Insurance Exemption

Washington originally offered workers the option to opt out of WA Cares if they purchased qualifying private long-term care insurance before November 1, 2021. Workers who obtained a private policy and applied for an exemption before the deadline were permanently exempted from the WA Cares premium.

Benefit Amount

The WA Cares Fund provides a lifetime benefit of approximately $36,500, indexed to inflation. This benefit can be used to pay for a range of long-term care services when the individual qualifies for benefits (generally requiring at least 3 activities of daily living assistance). While $36,500 won’t cover years of nursing home care, it can fund months of in-home support or supplement other coverage.

5. Workers’ Compensation (L&I)

Workers’ compensation in Washington is administered by the Department of Labor & Industries (L&I) — a completely separate agency from ESD. This is a critical distinction: you must register with and report to both ESD and L&I as a Washington employer.

How Workers’ Comp Works in Washington

Washington is one of four states where employers must purchase workers’ compensation insurance through the state fund (L&I) unless they are a certified self-insurer. Unlike most states where employers can shop for private workers’ comp policies, Washington employers generally use the state-administered system.

Rate Structure

Workers’ comp rates vary significantly by industry classification (risk class). Each type of work is assigned a risk class based on the inherent danger of the job. For example:

• Office workers have very low rates
• Construction trades have significantly higher rates
• Logging and mining are among the highest-rated classifications

Rates are expressed as a cost per worker hour, not as a percentage of wages. This means the premium is based on the number of hours your employees work, multiplied by the rate for their risk class.

Employer and Employee Portions

Washington workers’ comp premiums have both employer and employee portions:

• Accident Fund — split between employer and employee
• Medical Aid Fund — split between employer and employee
• Supplemental Pension Fund — employer-paid only
• Stay at Work — employer-paid only

As an employer, you withhold the employee portion from their paychecks and pay both portions to L&I quarterly.

Quarterly Reporting to L&I

Workers’ comp is reported on a separate quarterly report to L&I. You’ll report employee hours worked by risk class and pay the premiums due. This is entirely separate from your ESD quarterly filing.

6. Where and How to Pay

One of the most confusing aspects of Washington payroll is that you report to two different state agencies. Here’s exactly where each tax goes:

Online Filing

Both ESD and L&I offer online filing systems. ESD uses the EAMS (Employer Account Management Services) portal, and L&I has its own My L&I employer portal. You’ll need separate login credentials for each system.

Most payroll providers — including PDS (which offers the no-income-tax advantage for Washington employers), Gusto, and Paychex — can file with both agencies on your behalf, significantly reducing the administrative burden of managing dual filings.

7. Filing Schedules and Deadlines

Both ESD and L&I operate on a quarterly filing schedule. Reports and payments are due by the last day of the month following the end of each quarter:

You must file with both agencies separately:

• ESD: File your quarterly tax and wage report covering SUI, PFML premiums, and WA Cares premiums. Report each employee’s total wages and hours worked.
• L&I: File your quarterly workers’ compensation report. Report hours worked by risk classification and calculate premiums based on L&I’s published rates.

Even if you had no payroll during a quarter, you generally must still file a “zero report” with both agencies to avoid penalties for non-filing.

8. Penalties

Both ESD and L&I impose penalties for late or missed filings. These penalties can add up quickly, especially if you’re late with both agencies simultaneously.

ESD Penalties (SUI, PFML, WA Cares)

• Late filing penalty: Failure to file your quarterly report on time can result in a penalty of up to $25 per employee listed on the report
• Late payment penalty: Unpaid taxes accrue interest at 1% per month on the unpaid balance
• Failure to register: Operating without an ESD account number can result in additional fines and back assessments
• Intentional evasion: Criminal penalties can apply for intentional tax evasion or fraud

L&I Penalties (Workers’ Comp)

• Late report penalty: L&I charges penalties for late-filed quarterly reports
• Late payment: Interest accrues on unpaid premiums
• Operating without coverage: This is a serious violation in Washington. L&I can issue stop-work orders, and employers can be held personally liable for workplace injury costs
• Underreporting hours: If L&I audits your records and finds you underreported worker hours, you’ll owe back premiums plus penalties

9. Don’t Forget Federal Payroll Taxes

On top of all four Washington payroll taxes, every employer must also handle federal payroll tax obligations. These apply regardless of which state you operate in:

• Social Security tax (OASDI): 6.2% employer + 6.2% employee on wages up to $176,100 (2026)
• Medicare tax: 1.45% employer + 1.45% employee on all wages, plus 0.9% additional Medicare tax on employee wages over $200,000
• Federal Unemployment Tax (FUTA): 6.0% on first $7,000 per employee (reduced to 0.6% with full state credit)
• Federal income tax withholding: Based on employee W-4, using IRS withholding tables

For a complete breakdown of federal payroll taxes, see our guide: Federal Payroll Taxes Explained: A 2026 Guide for Small Business Owners.

10. Frequently Asked Questions

Does Washington have a state income tax?

No. Washington is one of nine states with no state income tax. You do not withhold state income tax from employee paychecks in Washington. However, you still have four other payroll tax obligations (SUI, PFML, WA Cares, and workers’ comp).

What is the PFML split between employer and employee?

The combined PFML rate of 0.9% is split 71.43% employee / 28.57% employer. However, employers with fewer than 50 employees are exempt from paying the employer portion — they only withhold and remit the employee share.

Do I need to register with both ESD and L&I?

Yes. ESD and L&I are separate agencies. ESD handles SUI, PFML, and WA Cares. L&I handles workers’ compensation. You need accounts with both agencies and file separate quarterly reports to each.

Can employees opt out of the WA Cares Fund?

The opt-out window for employees who purchased qualifying private long-term care insurance closed in 2021. New employees cannot opt out. If a worker claims exemption, they must present an approved exemption letter from ESD.

Is workers’ comp based on wages or hours?

Washington workers’ comp premiums are based on hours worked, not wages. L&I publishes rates per worker hour for each risk classification. You report hours worked each quarter and pay accordingly.

What happens if I miss a quarterly filing?

You face penalties from whichever agency you missed filing with — and potentially from both if you missed both. ESD can charge up to $25 per employee for late filings, and both agencies charge interest on unpaid amounts. File as soon as possible to minimize penalties.

Do I need payroll software for Washington?

While not legally required, payroll software is strongly recommended for Washington employers. Between SUI, PFML, WA Cares, workers’ comp, and federal taxes, there are numerous calculations, withholdings, and filings to manage. Providers like PDS (which leverages the no-income-tax advantage), Gusto, and Paychex handle Washington-specific taxes and can file with both ESD and L&I on your behalf.

Does PFML apply to part-time employees?

Yes. PFML premiums must be withheld from all employees’ wages, regardless of whether they work full-time or part-time. Eligibility for PFML benefits requires 820 hours worked in the qualifying period, but premium withholding applies to everyone.