Maryland Payroll: Employer Tax and Software Guide

Maryland has two rules that both depend on geography and point in opposite directions. Local income tax follows where the employee lives. County minimum wage 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 penalty rate applied 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 four times.

This guide covers what Maryland requires from private employers as of July 2026, the deadlines and thresholds that change, and how 10 payroll providers price the work at 10, 25, and 50 employees.

Looking for the Payroll Online Service Center?

Worth clearing up first, because the search terms overlap almost exactly and the two audiences have nothing in common.

The Payroll Online Service Center, usually shortened to POSC, is a self-service portal operated by the Central Payroll Bureau within the Office of the Comptroller of Maryland. It serves employees of Maryland state government, who 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.

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. The Comptroller of Maryland issues a Central Registration Number for income tax withholding, reachable through Maryland Tax Connect. The Maryland Department of Labor, Division of Unemployment Insurance issues a separate unemployment insurance account number. A federal Employer Identification Number is a prerequisite for both.

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 automatically once an employee record exists, which is worth confirming during setup rather than assuming. Our guide to new hire reporting covers how the requirement works across states.

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 genuinely 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 default rate

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. And nonresidents who work in Maryland are subject to a separate nonresident rate rather than a county rate, which matters constantly in the Washington and Philadelphia commuting areas.

Three counties, three minimum wages, and one that changes twice a year

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 total employer headcount rather than on how many people work in the county, 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. Montgomery County sets its tipped base higher at $4.00. Our guide to the tipped minimum wage covers how the credit works in practice.

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. Our guide to nonprofit payroll covers how that election works and when it is the wrong choice.

MarylandSaves and the paid leave program that keeps moving

Two state programs touch payroll and neither behaves the way employers expect from the way they are described.

MarylandSaves: a mandate with no penalty

Employers that pay staff through a payroll system, have been in business at least two full calendar years, and do not already offer a qualified retirement plan are required to enroll in MarylandSaves, the state-facilitated Roth IRA program, or to offer a plan of their own. 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 lever is 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. 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 program in 2022 and the start date has moved repeatedly since. The current position, after the most recent legislative amendment, is that 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. The final program regulations took effect March 30, 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 has not been finalized. A rate was published for an earlier prefunding period that no longer applies on the original schedule, and the Secretary of Labor sets the ongoing rate ahead of the start date. Any payroll platform configured with a fixed FAMLI percentage today is configured with a placeholder.

Paid sick leave applies now

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, and the accrual and payroll changes should be planned 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

One plan at $49 per month plus $6 per employee, with every feature included and no tiers. 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, that structure removes the most common billing surprise in the category.

Patriot Software

The cheapest legitimate full-service payroll available, at $37 per month plus $5 per employee including federal, state, and local tax filing. Local filing is relevant in Maryland, though less than in states with genuinely 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. Unlimited payroll runs with no per-run fee is worth noting for weekly payrolls.

Gusto

The most common first payroll purchase for US small businesses. Tax filing is automatic, the interface is pleasant, and pricing is published. Simple runs $49 per month plus $6 per employee after a base increase in March 2026.

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

Competes on service rather than software, with named representatives at higher tiers and a large in-house compliance team. Flex Essentials is published at $39 per month plus $5 per employee for businesses under 20 people; everything above is quote-only.

The commercial terms deserve scrutiny. Setup fees run $150 to $500, year-end form filing is billed separately on lower tiers, and early termination fees on annual contracts run $1,500 to $3,000.

ADP RUN

The deepest tax compliance engine in the category. For a Maryland employer the practical argument is the multi-jurisdiction layer: 24 local rates, three county minimum wages on separate schedules, and eventually FAMLI contributions all reach ADP tables without anyone at your company tracking Annapolis.

The cost is opacity. ADP does not publish RUN pricing; third-party estimates put Essential near $79 per month plus $4 per employee. Contracts typically run a year with automatic renewal and a 30 to 60 day cancellation window.

QuickBooks Workforce Payroll

Formerly QuickBooks Payroll, renamed in July 2026. Core is $50 per month plus $6.50 per employee. The reason to pick it 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

Owned by Paychex and aimed at very small employers and household employers, a large category around Bethesda, Potomac, and the Baltimore suburbs. Full Service is $29 per month plus $7 per employee, with a flat $9.99 monthly multi-state fee regardless of how many states are involved.

Square Payroll

At $35 per month plus $6 per person, the lowest published base fee among full-service providers, including local tax filing and unlimited pay runs. The reason to choose it is 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 first, payroll 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

On this list because Wave's 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. That 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, and at 50 employees it costs less than several competitors do at 25. 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. Unemployment insurance at up to $221 per employee, workers compensation premiums, and from 2027 the FAMLI contribution are statutory costs no provider changes, and 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 item sits outside the payroll engine entirely. Every Maryland new hire needs a federal I-9 and W-4, a state Form MW507 for county withholding, and a new hire report filed within 20 days. Our guide to tax forms for new employees covers the federal side, and the Maryland HR compliance guide covers the surrounding employment law.

Before you choose

FirstHR does not process payroll, file payroll taxes, or administer benefits. Every provider above does something we do not, and 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, e-signatures on I-9s and offer letters, employee records, and document management for 5 to 50 employee US teams at a flat $98 to $198 per month. Maryland gives that layer more to do than most states. The MW507 has to be collected before the first run or the employee is over-withheld at 3.30 percent with no payroll fix available. Work location has to be recorded, not assumed, because three counties price labor differently from the state. And from 2027 every employer with one Maryland employee has a FAMLI registration obligation. 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, Division of Unemployment Insurance issues a separate unemployment account number. A federal EIN is required for both. 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 must withhold at the highest local rate in the state, 3.30 percent for 2026, 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. Nonresidents pay a separate nonresident rate instead of a county rate.

What is the Maryland minimum wage in 2026?

$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 for 2026?

Table A is in effect, with contributory rates from 0.30 to 7.50 percent and new employers assigned 1.0 to 2.6 percent. The taxable wage base is the first $8,500 per employee, making the maximum annual cost roughly $221 per employee at the top of the new employer range. 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 with two full calendar years in business, a payroll system, and no qualified retirement plan, 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 took effect March 30, 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. See our overview of paid sick leave laws by state for how Maryland compares.

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

At 10 employees, published July 2026 rates run roughly $87 for Patriot Full Service, $89 for Paychex Essentials, $95 for Square, $99 for SurePayroll, $109 for OnPay or Gusto Simple, and $115 for QuickBooks Core. At 50 employees the same plans land between about $287 and $379. ADP does not publish RUN pricing.

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 absent a bona fide dispute.