Washington State Payroll: Employer Tax Guide

Washington has no state income tax, which removes an entire layer of payroll work: no state withholding calculation, no state W-4, no withholding return. That is the part everyone knows, and if another founder asked me about hiring here, I would call it the easy part.

This guide covers the harder and less familiar part: what Washington actually requires of employers, the three deductions that replace income tax withholding, and how 10 payroll providers price and handle the work at 5, 15, and 50 employees.

Washington runs two mandatory employee-funded programs that most states do not have, operates workers compensation through a state monopoly fund with no private market to shop, and sets an overtime exemption salary threshold more than double the federal one. The minimum wage is the highest statewide rate in the country, and eight local jurisdictions set higher rates on top of it.

No income tax, three deductions instead

The absence of income tax is real, and it does save work. It does not make a Washington pay stub simpler than one from a state with income tax, though, because three separate programs sit where the withholding line would be.

Those three are Paid Family and Medical Leave (PFML, or Paid Leave for short), the WA Cares long-term care fund, and the employee share of workers compensation, a program the Department of Labor and Industries (L&I) runs. The table below adds a fourth program, unemployment insurance, which the employer pays alone.

Paid Family and Medical Leave

According to the Employment Security Department, the premium rose to 1.13 percent of gross wages for 2026, up sharply from 0.92 percent in 2025. It applies up to the Social Security cap of $184,500 and excludes tips. Employees pay up to 71.43 percent of that and employers pay 28.57 percent.

The small business provision is the one to understand precisely. Businesses classified by the Employment Security Department as having fewer than 50 employees are not required to pay the employer portion, but they must still collect the employee premium or pay it on the employee's behalf.

Being exempt from the employer share is a genuine cost saving for a business that size, and it comes with a condition: an employer that takes a small business assistance grant owes the employer share for all employees for three years afterward.

How the Paid Leave premium is categorized for federal tax

The employee premium is categorized as an after-tax deduction rather than a pre-tax one. Under IRS Revenue Ruling 2025-4, a mandatory employee contribution to a state paid leave program counts as the employee paying state income tax, so the amount stays inside federal gross income and inside wages for Social Security, Medicare, and income tax withholding.

The employer share is categorized differently. Washington imposes that portion on the business, so it is deductible by the employer as a tax and never lands in employee income. An employer that chooses to cover the employee share as well turns that pick-up into additional taxable compensation rather than a tax the business paid.

On the W-2 the premium has no box of its own. It sits inside the wage figures in boxes 1, 3, and 5, and an employer that wants the amount visible separately lists it in box 14a, the catch-all Other field. When an employee asks what the line is, the answer is a state income tax payment they can deduct if they itemize, within the federal cap on state and local tax deductions.

WA Cares Fund

WA Cares is a long-term care program funded entirely by a 0.58 percent employee deduction with no wage cap of any kind, unlike the Paid Leave premium, which stops at the Social Security cap. The employer withholds and remits alongside the Paid Leave premium through the same quarterly reporting system but contributes nothing itself. Benefits became available July 1, 2026 with a lifetime maximum of $36,500.

The administrative wrinkle sits at onboarding. Some employees hold permanent exemptions granted during the private insurance opt-out window that closed December 31, 2022, and the state statute RCW 50B.04.085 requires each exempt employee to give written notice of the exemption to every current and future employer.

The exemption letter therefore becomes an onboarding document: it has to be collected, stored, and retrievable, because withholding from an exempt employee is an error, and so is failing to withhold from a covered one.

Unemployment insurance

Unemployment insurance is paid entirely by the employer on a taxable wage base of $78,200 for 2026, up from $72,800. The wage base is among the highest in the country, which makes unemployment a materially larger employer cost in Washington than in states using bases near the federal floor.

Rates follow each employer's claims history. According to the Employment Security Department, total 2026 rates run from 0.27 to 6.02 percent, with the social tax (a shared charge for benefits not tied to any one employer) and the administration fund fee already included. A new employer pays 115 percent of the average rate for its industry.

The workers compensation system with no market

Washington is one of a handful of states that runs workers compensation as a state monopoly. There are no private carriers to quote, no broker to shop the renewal, and no option to self-insure below a substantial size threshold. Every employer registers with the Department of Labor and Industries and buys coverage from the state.

The per-hour premium basis is the practical consequence for payroll, and it is easy to underestimate. Because premiums attach to hours worked rather than to wages paid, the quarterly report needs accurate hour counts by risk classification, not just a payroll total.

For a business with staff in more than one classification, hours have to be attributed correctly to each. A payroll platform that tracks wages precisely but hours loosely will produce a report that is wrong in a way the wage figures do not reveal.

Wage rules that outrun federal law

Washington sets several thresholds well above the federal equivalents, and in each case the higher standard governs. Two of them, the overtime exemption salary and the minimum wage, catch small employers regularly.

The overtime exemption threshold

To classify someone as exempt from overtime under the executive, administrative, or professional exemptions, a Washington employer with 50 or fewer employees must pay at least $1,595.70 a week, which is $82,976.40 a year, from January 1, 2027. An employer with 51 or more employees must pay at least $1,773 a week, or $92,196 a year.

Both figures come from the Department of Labor and Industries salary threshold schedule, which sets the threshold as a multiple of the state minimum wage: 2.25 times for small employers and 2.5 times for large ones in 2027.

Small employers move to 2.5 times in 2028, and even the small-employer figure is more than double the federal floor of $684 a week under the Fair Labor Standards Act (FLSA).

The gap is more than $47,000 a year even at a small employer. A salaried manager at $70,000 clears the federal salary test comfortably and is non-exempt in Washington, meaning overtime is owed on every hour past 40. Paying that manager as exempt is a misclassification, and the unpaid overtime liability it produces accrues quietly and is discovered late.

Minimum wage, statewide and local

The statewide rate is $17.73 an hour from January 1, 2027, the highest of any state, and the Department of Labor and Industries adjusts it every year for inflation. Eight local jurisdictions set higher rates on top of it, several only for larger employers.

Seattle, unincorporated King County, and Bellingham (pegged $2.00 above the state rate) have published 2027 rates. The other five rows in the table below show the 2026 rate, the latest published as of October 2026. Burien's figures come from the city's own minimum wage page, because the state summary table still lists a repealed council ordinance.

Where more than one rate applies, the highest governs. Seattle adds a separate obligation worth knowing: individual written notice to each affected employee before any change to their wage rate or other terms of employment, under the city wage theft ordinance. That is a document requirement rather than a payroll calculation.

Paid sick leave and pay transparency

Employees accrue one hour of paid sick leave for every 40 hours worked, with carryover up to 40 hours, and this applies to all employers regardless of size. Separately, the Equal Pay and Opportunities Act requires employers with 15 or more employees to disclose a salary range and a general description of benefits in every job posting, and prohibits asking for salary history.

What payroll services in Seattle have to handle

A Seattle employer carries a city layer on top of the state programs, and four rules make it up. Three of them attach at the first Seattle employee, so company size does not decide whether they apply. Only the payroll expense tax has a threshold high enough to exclude a small team.

The notice requirement is the one employers forget, because it recurs every January when the city rate moves and it goes to each affected employee individually rather than onto a poster. Ask any provider whether it assigns wage rates by work location rather than by company address, since a Bellevue office with Seattle job sites needs both rates.

10 payroll providers for Washington employers compared

Every provider below handles the Paid Leave and WA Cares deductions. The column that genuinely separates them is L&I filing, which is the piece most likely to come back to you.

OnPay

One payroll plan at $49 per month plus $6 per employee with no tier to climb, and HR tools and time tracking sold as add-ons. The first month is free.

For Washington specifically, the OnPay state guide lists the Paid Leave and WA Cares return and the Department of Labor and Industries quarterly report among the filings it handles once registration is complete. All three state obligations are covered on the base plan.

Gusto

A common first payroll purchase for US small businesses, at $49 per month plus $6 per employee on the Simple plan. Paid Leave and WA Cares are calculated and filed automatically. According to its Washington tax guide, Gusto also files the quarterly workers compensation report and pays the premium to the state fund once you sign the third-party authorization it generates for L&I.

Square Payroll

Full-service payroll at $35 per month plus $6 per person paid, with explicit support for the Washington programs. Paid Leave and WA Cares are calculated, withheld, and reported quarterly to the Employment Security Department, and Square files the quarterly workers compensation report on Form F212-055-000 and pays the premium.

For a Seattle or Tacoma restaurant or retail business already on Square, hours flow in natively, which matters because L&I premiums attach to hours.

Patriot Software

The lowest total cost among the published full-service plans here, with the Full Service tier at $37 per month plus $5 per employee. It calculates Paid Leave and WA Cares on both tiers, but files taxes and the L&I report only on Full Service.

The Basic tier at $17 plus $4 leaves all filing to the employer, which in a state with three separate state-program filings is a meaningful amount of work to take on.

QuickBooks Payroll

Workforce Payroll, formerly Payroll Core, runs $50 per month plus $7 per employee after the per-employee fees on the Workforce plans rose on July 1, 2026. Paid Leave and WA Cares are calculated automatically, and full-service payroll pays and files the Paid Leave premium.

Workers compensation is the gap. The Intuit help article for Washington says the employer must pay and file Form F212-055-000 with L&I directly, with QuickBooks supplying a worksheet of the figures. That is exactly the worksheet-versus-filing distinction that separates Washington providers.

SurePayroll

Owned by Paychex and aimed at very small and household employers at $29 per month plus $7 per employee. It files and deposits federal and state payroll taxes, which covers the state program deductions.

SurePayroll's own workers compensation insurance is not sold in Washington, where coverage comes from the state fund, so ask how it handles the L&I quarterly report. It suits a very small Washington employer for whom simplicity matters more than depth.

Paylocity

A full HR and payroll platform aimed above the smallest end of the market, with published Washington tax facts and compliance alerts, including notices on WA Cares and Paid Leave. For a Washington company crossing 50 employees, where the Paid Leave employer share begins to apply, it becomes a reasonable candidate. Pricing is quote-only, and the L&I quarterly report is worth raising in the same conversation.

ADP RUN

ADP RUN calculates, files, deposits, and reconciles payroll taxes in every package, and ADP pays the resulting fines if it makes a filing error. ADP publishes no rates for any of its four RUN packages (Essential, Enhanced, Complete, and HR Pro), so every price comes from a quote.

Workers compensation coverage in Washington comes from the L&I state fund, though, so ask whether ADP files the quarterly report for your account.

Paychex Flex

A service relationship rather than a software subscription, with the option of a dedicated payroll specialist. Every Paychex Flex package is priced by quote, and its Taxpay service calculates, files, and pays payroll taxes with the agencies.

The Washington argument is specific: when a Department of Labor and Industries classification question arises, having someone to call about risk class assignment is worth real money because the classification drives the premium.

Rippling

A unified employee record where payroll, HR, and IT provisioning share one data model. The pricing page is a quote form, though Rippling's small-business page starts payroll at $8 per user a month plus a $40 monthly base fee. Rippling's blog prices the core platform and payroll as separate modules at $8 per employee each, so configured quotes run higher than that start.

Native time tracking is a genuine advantage under an hour-based workers compensation premium. In Washington that coverage comes from the L&I state fund, so ask how Rippling handles the quarterly report.

What each provider actually costs a Washington employer

Published software rates land where they do everywhere: roughly $62 to $85 per month at 5 employees, $112 to $155 at 15, and $287 to $400 at 50 for the six providers whose pricing pages publish rates. Rippling's small-business payroll start comes to $80, $160, and $440 at those sizes before other products, and ADP RUN, Paychex Flex, and Paylocity quote individually.

Keep the subscription in proportion: it is not the number that matters most in Washington. At 15 employees averaging $60,000, the Paid Leave employer share alone would run into four figures annually without the under-50 exemption, and unemployment on a $78,200 wage base costs materially more than in states using bases near $10,000.

The software decision is worth optimizing, but not at the cost of a provider that leaves the L&I filing on your desk.

Choosing a payroll provider for Washington

Ask each provider four questions. The first two come straight from Washington's state-run workers compensation system.

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 payroll is the problem you are solving, one of them is your answer.

What we handle is the layer underneath, and Washington loads that layer with documents rather than calculations. A WA Cares exemption letter has to be collected from the employee and stored somewhere retrievable, because the deduction depends on it. Paid Leave notices go to employees and the acknowledgments need keeping. New hire reporting to the Division of Child Support runs on a 20-day clock from hire, not from the first payroll.

FirstHR covers onboarding workflows, e-signatures on offer letters and acknowledgments, document collection with expiry dates, and employee records for US small businesses at a flat $98 a month for up to 10 people or $198 for 11 to 50, alongside whichever payroll platform you pick.

If the recurring failure is a document that was never collected rather than a number that was miscalculated, that is a different problem, and it is the one we built for.

Frequently Asked Questions

Does Washington have a state income tax?

No. That means no state withholding, no state W-4, and no withholding return. In its place, employers withhold Paid Family and Medical Leave at 1.13 percent and WA Cares at 0.58 percent, pay unemployment insurance, and pay workers compensation premiums into a state monopoly fund. A 9.9 percent tax on individual income above $1 million begins January 1, 2028, but it is paid through estimated tax rather than payroll withholding.

What is the Washington PFML premium?

For 2026, 1.13 percent of gross wages excluding tips, up from 0.92 percent in 2025, applied up to the Social Security cap of $184,500. Employees pay up to 71.43 percent and employers 28.57 percent, but businesses classified as having fewer than 50 employees owe no employer share while still collecting the employee portion.

What is the WA Cares Fund and who pays it?

A long-term care program funded by a 0.58 percent employee deduction with no wage cap. The employer withholds and remits but contributes nothing. Employees holding permanent exemptions must notify the employer in writing, which makes the exemption letter a document the employer needs to collect and retain.

How does workers compensation work in Washington?

Through a state monopoly fund with no private carriers. Employers register with the Department of Labor and Industries and report quarterly on Form F212-055-000, including a zero report when no hours were worked. Premiums are calculated per hour worked by risk classification, and part may be deducted from employees.

What is the Washington overtime exemption salary threshold?

From January 1, 2027, $1,595.70 a week ($82,976.40 a year) at employers with 50 or fewer employees and $1,773 a week ($92,196 a year) at larger ones. Both are more than double the $684 federal threshold, and the higher standard governs. Exempt computer professionals paid hourly need at least $62.06 an hour.

What is the Washington minimum wage?

$17.73 an hour statewide from January 1, 2027, the highest in the country, with $15.07 for employees aged 14 and 15. Eight local jurisdictions set higher rates, led by Seattle at $22.14 for every employer size from the same date. The highest applicable rate governs.

Does the Seattle payroll expense tax apply to small businesses?

Almost never. According to the Seattle finance department, it applies in 2026 only where 2025 Seattle payroll exceeded roughly $9.07 million and at least one employee earns $194,452 or more. Those thresholds sit far outside the reach of a small business, so for most small employers it is a tax to rule out rather than plan around.

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

Among the six providers whose pricing pages publish October 2026 rates, a 5-person payroll costs about $62 a month on Patriot Full Service and up to $85 on QuickBooks Workforce Payroll, with SurePayroll, Square, OnPay, and Gusto Simple in between. At 50 employees the spread is $287 to $400.

Rippling's small-business page starts payroll at $8 per user plus a $40 base fee, about $80 at 5 employees and $440 at 50 before other products. The Washington-specific check is whether the provider files the workers compensation report or only prepares it.