As we approach the new year, Washington employers should prepare for an upcoming change to the state's Paid Family and Medical Leave (PFML) program. Beginning January 1, 2027, the PFML premium rate will increase, impacting the amount withheld from employee paychecks and the contributions required from employers.
Understanding these changes now can help businesses prepare their payroll processes, communicate with employees, and stay compliant in 2027.
What's Changing?
Effective January 1, 2027, Washington's Paid Family and Medical Leave premium rate will increase from 1.13% to 1.2% of each employee's gross wages (excluding tips).
The total premium will be divided between employers and employees as follows:
Employees: 70.7% of the total premium
Employers: 29.3% of the total premium
For comparison, the 2026 premium rate is 1.13%, with employees contributing 71.43% and employers contributing 28.57%.
A new law, Second Substitute House Bill 2345, also takes effect January 1, 2027. The legislation adjusts how employer and employee contributions are allocated between the family and medical leave portions of the program in response to updated IRS guidance. However, it does not change the overall percentage of the premium paid by employers versus employees.
What Does This Mean for Small Businesses?
Not every employer will be responsible for paying the employer portion of the premium.
Businesses classified by Washington's Employment Security Department (ESD) as having fewer than 50 employees for the 2027 calendar year are not required to pay the employer portion.
However, these businesses are still responsible for collecting the employee portion of the premium through payroll. Employers may also choose to pay their employees' premiums on their behalf.
It's important to understand your business's employer classification and how it affects your payroll responsibilities.
Important Steps Employers Should Take
To prepare for the January 1 change, Washington employers should keep the following items on their radar:
Step 01: Update Your Payroll Withholding
Beginning January 1, 2027, employers must begin withholding the new 1.2% premium rate each pay period. The premium is calculated on employees' total gross wages, excluding tips.
Step 02: Communicate the Change to Employees
Notify employees that the updated withholding rate will apply to wages paid on or after January 1, 2027. Providing advance notice helps employees understand why they may see a change in their paycheck deductions.
Step 03: Be Aware of the Social Security Wage Cap
Once an employee reaches the annual Social Security wage cap, employers must stop collecting Paid Leave premiums for that employee but continue reporting their wages.
The 2027 Social Security wage cap will increase to $192,300.
Step 04: Keep Quarterly Reporting on Schedule
The first quarterly premium report reflecting the new rate will be due by April 30, 2027.
One important reminder: Employers cannot retroactively withhold premiums from employees, so payroll withholding should be updated on time.
Where Can Employers Find Additional Resources?
The Washington Employment Security Department (ESD) will continue updating its employer resources throughout the remainder of 2026.
Employers can find updated guidance, including the 2027 mandatory workplace poster, paystub insert, and employer guides, at: paidleave.wa.gov/updates
For ongoing updates, employers can also subscribe to the Employment Security Department's monthly Employer Newsletter: ESD Employer Newsletter
A Little Preparation Goes a Long Way
Changes to payroll requirements are a good reminder to review your processes before the start of a new year. Taking time now to understand the updated PFML rates, adjust payroll settings, and communicate with employees can help make the transition into 2027 a smooth one.
