Maryland Payroll: Employer Tax and Software Guide

If a founder asked me which state's payroll to study before hiring there, Maryland would be near the top of my list: two of its rules depend on geography and point in opposite directions. This guide covers what Maryland requires from private employers as of October 2026, the deadlines and thresholds that change, and how 10 payroll providers compare, with every published rate priced at 10, 25, and 50 employees.

The two rules are local income tax, which follows where the employee lives, and county minimum wage, which follows where the employee works. An employer in Bethesda with a warehouse worker who commutes from Frederick has to get both right, in different directions, on the same paycheck.

That is the shape of Maryland payroll generally. The state income tax mechanics are ordinary. What is not ordinary is 24 local rates riding on top of them, a default withholding rule whenever a form is missing, three counties running their own minimum wage on their own schedules, a retirement mandate that has no penalty attached, and a paid family leave program whose start date has moved repeatedly.

Looking for the Payroll Online Service Center?

The Payroll Online Service Center, usually shortened to POSC, is a self-service portal for employees of Maryland state government, not payroll software a private business can use. The Central Payroll Bureau within the Office of the Comptroller of Maryland operates it, and state staff use it to view and print recent pay stubs, download W-2 forms, and update direct deposit details.

Registering for it requires an agency number and a check or advice number taken from an existing state paycheck, which means only people already on the state payroll can use it at all. The name sounds like a payroll service for any business, but the two audiences have nothing in common.

If that is what you were looking for, this page will not help and the Comptroller's site will. Everything below is for the other audience: private employers who need to pay staff in Maryland, register for state tax accounts, handle county rates and the state programs, and choose payroll software.

What Maryland requires from employers

Five obligations sit on top of federal payroll, and unlike some states, Maryland splits the first registration across two agencies rather than combining it.

Registration and state accounts

Withholding and unemployment are handled separately. For income tax withholding, the Comptroller of Maryland issues a Central Registration Number, and you apply through Maryland Tax Connect. For unemployment insurance, the Maryland Department of Labor's Division of Unemployment Insurance issues a separate account number.

A federal Employer Identification Number (EIN) is worth getting first. The Comptroller's 2026 withholding guide says the agency will assign a Central Registration Number to an employer without one, but expects the EIN as soon as the IRS issues it.

Neither registration covers insurance. Workers compensation coverage is obtained separately through a private carrier or the state-designated carrier, and an employer that registers for tax accounts and stops there is not compliant.

New hire reporting

Every new hire and rehire must be reported to the Maryland State Directory of New Hires within 20 days, a requirement administered by the Child Support Administration within the Department of Human Services. The penalty is $20 per month for a late report and $500 where an employer and employee conspire to avoid reporting.

Twenty days is tighter than it sounds when onboarding paperwork arrives late, and it is one of the few Maryland deadlines that starts on the hire date rather than the first payroll. Most full-service providers file these reports automatically once an employee record exists, which is worth confirming during setup rather than assuming.

County income tax and the form that decides the rate

Maryland withholds state income tax on graduated brackets, which is conventional. The local layer is not: all 23 counties plus Baltimore City set their own local income tax rate, and the state collects it through the same withholding system rather than through separate municipal filings.

There is one return and one payment, with the local portion built into the rate applied to each employee. That single-filing design is simpler than the multi-jurisdiction local tax found in states like Ohio or Pennsylvania.

What makes it error-prone is which address controls. The applicable county rate is the one where the employee lives, not where the employer is located and not where the work is performed. A Baltimore City business with three employees living in Baltimore County, Howard County, and Anne Arundel County withholds three different local rates.

Form MW507 and the one-exemption default

Form MW507, the Employee's Maryland Withholding Exemption Certificate, is where the employee declares filing status, exemptions, and county of residence. It is the state counterpart to the federal Form W-4, and it is the input that determines the local rate.

Two related points. Employees who expect to earn more than $100,000 and file as married or head of household should have a current MW507 in place, because the rate schedule diverges by filing status above that income level. Nonresidents who work in Maryland follow separate rules, which matters constantly for Maryland payroll in the Washington and Philadelphia commuting areas.

Residents of the District of Columbia, Virginia, and West Virginia can claim exemption from Maryland withholding on the MW507 under reciprocal agreements, and Pennsylvania residents can claim exemption from the state portion. Most other nonresidents are withheld at a special 2.25 percent nonresident rate in place of a county rate.

State withholding rates and the 4.75 percent floor

The Maryland state rate schedule runs across ten brackets from 2.00 percent to 6.50 percent, but payroll never uses the bottom of it. State law bars any rate below 4.75 percent for withholding purposes, so the 2, 3, and 4 percent brackets show up on the annual return rather than in a paycheck.

The county rate is computed on the same taxable income rather than on the state tax, then added to it. Local rates run from 2.25 percent in Worcester County to 3.30 percent in Dorchester and Kent, and the Comptroller of Maryland groups them into nine brackets for employers working from printed tables. Each exemption claimed on the MW507 is worth $3,200.

Three counties, three minimum wages, and one that moves every July

The statewide minimum wage is $15.00 per hour under the Maryland Fair Wage Act, and no further statewide increase is currently scheduled. Three counties sit above it on their own schedules.

Montgomery County is the one that requires attention. Its rate depends on employer headcount, it has three tiers, and it moves every July rather than every January. An employer that updates wage floors once a year in January will be non-compliant in Montgomery County for six months without noticing.

Howard County simplified in the other direction, ending its employer-size tiers and moving all employers to a single $16.00 rate as of July 1, 2026, with annual inflation adjustments beginning in 2027.

The tipped cash wage is $3.63 per hour statewide, with tips required to bring total pay to the applicable minimum, according to the Maryland Department of Labor. Montgomery County sets its tipped base higher at $4.00.

Unemployment insurance and what it actually costs

Maryland runs six unemployment tax tables, labeled A through F, and applies whichever one matches the balance of the state trust fund. Table A carries the lowest rates and is in effect for 2026, the same as 2025.

The 7.50 percent standard rate deserves a note because of how it is triggered. It is not a penalty for high claims. It is applied when an employer has no taxable wages on record for the fiscal year because quarterly tax and wage reports were never filed. An employer that assumes filing is optional when no tax is due ends up at the highest rate in the table.

Nonprofit organizations recognized under section 501(c)(3) and government entities can elect to be reimbursing employers instead, paying the state back dollar for dollar for benefits actually charged rather than paying quarterly contributions.

MarylandSaves and the paid leave program that keeps moving

Two state programs touch payroll, and neither behaves the way employers expect: MarylandSaves is a mandate with no penalty, and the paid leave program has moved its start date repeatedly.

MarylandSaves: a mandate with no penalty

Under Maryland law, an employer is required to enroll in MarylandSaves, the state-facilitated Roth IRA program, or to offer a plan of its own when it meets three tests: it pays staff through a payroll system, it has been in business throughout the current and preceding calendar years, and it does not already offer a qualified retirement plan.

Employees are enrolled automatically at a default 5 percent deferral with annual escalation, and they can opt out. Employers make no contributions and carry no fiduciary responsibility.

What separates Maryland from states like California is enforcement. Maryland has not attached financial penalties to non-compliance.

The state offers a carrot instead: employers that either participate or certify an exemption receive a waiver of the $300 annual report filing fee charged by the State Department of Assessments and Taxation (SDAT). The certification is filed annually through MarylandSaves, and the deadline for a given year's waiver falls at the end of the prior calendar year.

FAMLI: the paid leave program has not started yet

Maryland enacted its Family and Medical Leave Insurance (FAMLI) program in 2022 and the start date has moved repeatedly since. Under the most recent legislative amendment, payroll contributions begin January 1, 2027, quarterly wage and hour reports and contribution remittances to the state begin in April 2027, and benefits become available no later than January 3, 2028. Final program regulations were published in March 2026.

Two points matter now rather than in 2027. Registration is universal: any employer with at least one Maryland employee is required to register, with no small-employer exception. And employers may apply to the Maryland Department of Labor to use an equivalent private insurance plan in place of the state program, which is a decision worth making before the contribution period opens rather than during it.

The contribution rate for 2027 is set. In April 2026 the Maryland Department of Labor reaffirmed a total rate of 0.9 percent of wages up to the Social Security wage base, and employers may withhold up to half of it from employee pay.

Employers with fewer than 15 employees, counted inside and outside Maryland, remit only half the rate. The department announces each following year's rate every November starting in 2027, and current law caps the total at 1.2 percent, so a payroll platform has to apply whatever rate takes effect each January.

Paid sick leave applies now

Paid sick leave is separate from FAMLI and already in force. Under the Maryland Healthy Working Families Act, employers with 15 or more employees must provide paid sick and safe leave, and employers with fewer than 15 must provide the same leave unpaid, accruing at a minimum of one hour for every 30 hours worked.

The threshold at 15 means a growing business crosses from unpaid to paid at a foreseeable point, so plan the accrual and payroll changes before the hire that triggers it.

10 payroll providers for Maryland employers compared

Every provider below files Maryland withholding and unemployment insurance. The differences that matter here are whether the platform assigns the local rate from the employee's residence rather than the work site, whether it applies three county minimum wages by work location, and what a second state costs when staff commute across the DC or Virginia line.

OnPay

OnPay sells one payroll plan at $49 per month plus $6 per worker, with no tiers; HR tools and time tracking are paid add-ons. Tax filing covers all 50 states with no multi-state surcharge, and year-end forms sit in the base price.

For a Maryland employer anywhere near the Washington beltway, where staff routinely live in Virginia or the District, OnPay's pricing structure removes the most common billing surprise in the category.

Patriot Software

Patriot has the lowest total cost of the full-service plans priced here: $37 per month plus $5 per employee, including federal, state, and local tax filing. Local filing still matters in Maryland, though less than in states with separate municipal returns, since Maryland collects county tax through the state system.

Additional states cost $12 per month each, which erodes the advantage for an employer with staff across the DC or Virginia line. Payroll runs are unlimited with no per-run fee, which is worth noting for weekly payrolls.

Gusto

Gusto is built for small businesses buying payroll for the first time. Tax filing is automatic, the interface is pleasant, and pricing is published. The Simple plan runs $49 per month plus $6 per employee, after its base rose from $40 during 2025.

The constraint for Maryland employers is geographic. Simple covers single-state payroll only, and Maryland borders the District of Columbia, Virginia, Pennsylvania, Delaware, and West Virginia. One hire across any of those lines moves you to Plus at $80 plus $12 per employee, which roughly doubles the bill for a 25-person team.

Paychex Flex

Paychex Flex competes on service rather than software: the Complete package includes premium support with a dedicated payroll specialist, and the lower packages can add it. Paychex no longer publishes prices, and its Basic, Foundations, Advanced, and Complete payroll packages on Paychex Flex are all quote-only.

The commercial terms deserve scrutiny. Setup fees, year-end form charges, and contract length are not published, so get each one in writing before signing.

ADP RUN

ADP RUN has the deepest tax compliance engine in the category. For a Maryland employer, the practical argument is the multi-jurisdiction layer: 24 local rates reach ADP's tax tables without anyone at your company tracking Annapolis.

The cost is opacity. ADP publishes no RUN pricing: the Essential, Enhanced, Complete, and HR Pro packages are all quote-only, and contract terms arrive with the quote.

QuickBooks Workforce Payroll

Intuit's payroll, formerly sold as QuickBooks Payroll, now carries the QuickBooks Workforce name. The entry Workforce Payroll plan is $50 per month plus $7 per employee.

The reason to pick QuickBooks Workforce is unchanged: if your books already live in QuickBooks Online, payroll entries reach the general ledger without an export step. If they do not, it is a mid-priced product with no particular Maryland advantage.

SurePayroll

SurePayroll is owned by Paychex and aimed at very small employers and household employers. The Small Business plan is $29 per month plus $7 per worker, with a flat $9.99 monthly multi-state fee regardless of how many states are involved.

Square Payroll

Square's full-service plan runs $35 per month plus $6 per person, with state tax filing, multi-state payroll, and unlimited pay runs included. The reason to choose it is the ecosystem: if you already run Square point of sale, timecards flow into payroll with no manual entry, which for a restaurant in Annapolis or a retail shop in Frederick removes the most error-prone step.

Homebase Payroll

Scheduling and time tracking come first at Homebase, and payroll is added on. For Maryland employers running hourly staff across multiple counties, the time tracking side does real work: it records where hours were performed, which is exactly the input the county minimum wage rules need.

Wave Payroll

Wave is on this list because its accounting software is genuinely free. Payroll is $40 per month plus $6 per employee, and since April 2025 a single tier includes automatic tax filing in all 50 states. For a micro business wanting books and payroll from one vendor at the lowest total cost, the combination is hard to beat.

What each provider actually costs a Maryland employer

The table below models published rates at three headcounts, plus what happens when a second state enters the picture. The second-state column carries unusual weight in Maryland, which borders five jurisdictions and where a single commuting hire crosses a line.

Two patterns stand out. Patriot stays cheapest at every headcount modeled here. But the second-state column reorders things: Gusto Simple is competitive until one hire in Virginia or the District forces the Plus tier, at which point a 25-person payroll goes from $199 to $380 per month.

Software price is also not the whole Maryland number. Three statutory costs stay the same whichever provider you pick: unemployment insurance at about $221 per employee a year for a new employer, workers compensation premiums, and from 2027 the FAMLI contribution. They belong in the budget alongside the subscription line.

Choosing a payroll provider for Maryland

Four questions separate providers that will work here from providers that will quietly generate correction notices.

One job sits outside the payroll engine entirely: collecting new-hire paperwork. Every Maryland new hire needs a federal I-9 and W-4 and a state Form MW507 for county withholding.

Each hire also needs a new hire report filed with the state within 20 days, and not every provider files it for you.

Before you choose

FirstHR is an onboarding and HR platform, not a payroll provider. Payroll runs, payroll tax filing, and benefits administration come from the providers above, so if running payroll is the problem in front of you, one of them is the answer.

What we handle is the layer that feeds payroll: onboarding workflows that put the I-9 and W-4 on each new hire’s first-day task list, e-signatures on offer letters, employee records, and document management for small and growing US teams at a flat $98 a month for up to 10 people or $198 for 11 to 50.

Maryland gives that layer more to do than most states. The MW507 has to be collected before the first run, or withholding defaults to one exemption and a commuter cannot claim the reciprocal exemption. Work location has to be recorded, not assumed, because three counties price labor differently from the state. And every employer with even one Maryland employee now has to register for FAMLI.

If the recurring problem is that paperwork arrives late and nobody is certain what a given employee signed, that is a document collection failure rather than a payroll processing failure, and it is the kind of gap we built for.

Frequently Asked Questions

Is Maryland Payroll Online Service Center the same as running payroll in Maryland?

No. The Payroll Online Service Center, or POSC, is a self-service portal run by the Central Payroll Bureau in the Office of the Comptroller for employees of Maryland state government to view pay stubs and W-2 forms. Registration requires an agency number from an existing state paycheck. A private employer paying staff in Maryland needs commercial payroll software or a payroll service instead.

How do I register a business for Maryland payroll taxes?

Two separate registrations. The Comptroller of Maryland issues a Central Registration Number for withholding, and the Department of Labor's Division of Unemployment Insurance issues a separate unemployment account number. The Comptroller can register you before your federal EIN arrives, but expects it once the IRS issues it. Workers compensation coverage is obtained separately through a carrier.

What is Form MW507 and what happens if an employee does not file one?

Form MW507 is the Maryland withholding exemption certificate, recording filing status, exemptions, and county of residence, which sets the local tax rate. Without a completed form the employer withholds as if the employee claimed one exemption until it is provided.

How does Maryland local income tax work for employers?

All 23 counties and Baltimore City set their own rate, collected through the same state withholding system rather than through separate local returns. The applicable rate follows where the employee lives, not where the employer is located or where the work is done. Most nonresidents pay a special nonresident rate instead of a county rate, and residents of reciprocal jurisdictions can claim exemption.

What is the Maryland minimum wage?

$15.00 per hour statewide with no scheduled increase. Montgomery County is $18.00 for employers with 51 or more employees, $16.50 for 11 to 50, and $15.95 for 10 or fewer as of July 1, 2026. Howard County is $16.00 for all employers, and Prince George's County is $15.30. The tipped cash wage is $3.63 statewide and $4.00 in Montgomery County.

What are Maryland unemployment insurance tax rates?

Table A is in effect for 2026, with contributory rates from 0.30 to 7.50 percent and new employers at 2.6 percent. The taxable wage base is the first $8,500 per employee, so a new employer pays at most roughly $221 per employee a year. The 7.50 percent standard rate applies when quarterly reports were not filed.

When does Maryland new hire reporting have to be filed?

Within 20 days of hire or rehire, to the Maryland State Directory of New Hires operated by the Child Support Administration. Late reports carry a $20 monthly penalty, rising to $500 where an employer and employee conspire to avoid reporting. Most full-service providers file these automatically.

Is MarylandSaves mandatory for employers?

It is required for employers that use a payroll system, offer no qualified retirement plan, and have been in business throughout the current and preceding calendar years, but Maryland has attached no financial penalty to non-compliance. The incentive is a waiver of the $300 SDAT annual report filing fee for employers that either participate or certify an exemption, and that certification must be refiled annually.

When do Maryland paid family leave contributions start?

January 1, 2027, after several delays. Quarterly wage reports and contribution remittances begin in April 2027, and benefits become available no later than January 3, 2028. Final regulations were published in March 2026. Every employer with at least one Maryland employee must register, and equivalent private plans require approval from the Department of Labor.

Does Maryland require paid sick leave?

Yes, under the Healthy Working Families Act. Employers with 15 or more employees provide it paid; employers with fewer than 15 provide the same leave unpaid. Accrual is at least one hour for every 30 hours worked.

How much does payroll software cost for a Maryland small business?

At 10 employees, published October 2026 rates run roughly $87 for Patriot Full Service, $95 for Square, $99 for SurePayroll, $109 for OnPay or Gusto Simple, and $120 for QuickBooks Workforce Payroll. At 50 employees the same plans land between about $287 and $400. ADP and Paychex quote on request.

When is a final paycheck due in Maryland?

On or before the regular payday for the last pay period worked, for both resignations and terminations. Maryland does not require same-day payment. Accrued vacation is payable unless a written policy communicated at hire limits it, and unpaid wages can expose an employer to treble damages and attorney fees unless there was a good-faith (bona fide) dispute over the wages.