Washington State Payroll: Employer Tax Guide
Washington payroll for employers: no income tax but three mandatory deductions, a monopoly workers comp fund, and 10 providers compared on price.
Washington State Payroll: The Employer Guide
No income tax, three mandatory deductions instead, a workers compensation system with no private market, and the highest overtime exemption threshold in the country
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.
What replaces it is less widely understood. 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 seven cities set higher rates on top of it.
This guide covers 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.
No income tax, three deductions instead
The absence of income tax is real and it does save work. What it does not mean is that a Washington pay stub is simpler than one from a state with income tax, because three separate programs sit where the withholding line would be.
| Program | 2026 rate | Wage cap | Who pays | Note |
|---|---|---|---|---|
| Paid Family and Medical Leave | 1.13% of gross wages | $184,500 | Employee 71.43%, employer 28.57% | Employers under 50 pay no employer share |
| WA Cares Fund | 0.58% of gross wages | No cap | Employee only | Exemption holders must notify the employer |
| Workers compensation (L&I) | By risk class, hourly | No cap | Employer, part deductible | State monopoly fund, no private carriers |
| Unemployment insurance | 0.27% to 6.02% plus social cost | $78,200 | Employer only | New employer rate around 1 percent |
Paid Family and Medical Leave
The premium rose to 1.13 percent of gross wages for 2026, up sharply from 0.92 percent in 2025, applied up to the Social Security cap of $184,500 and excluding 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. That is a genuine cost saving at the size most readers of this page operate at, and it is conditional: an employer that has taken a small business assistance grant does owe the employer share.
WA Cares Fund
A long-term care program funded entirely by a 0.58 percent employee deduction with no wage cap of any kind, which makes it the only uncapped item on a Washington pay stub. The employer withholds and remits alongside the Paid Leave premium through the same quarterly reporting system but contributes nothing itself.
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 under the statute it is the employee's responsibility to formally notify the employer of that exemption. In practice that means an exemption letter has to be collected, stored, and retrievable, because withholding from an exempt employee is a problem and failing to withhold from a non-exempt one is a different problem. Benefits became available July 1, 2026 with a lifetime maximum of $36,500.
Unemployment insurance
Paid entirely by the employer on a taxable wage base of $78,200 for 2026, up from $72,800. Experienced employer rates run roughly 0.27 to 6.02 percent plus a social cost factor capped at 0.90 percent, with new employers near 1 percent. 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. Our guide to state unemployment tax covers how the bases compare.
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.
| Element | How it works in Washington | Difference from most states |
|---|---|---|
| Coverage source | State fund only | No private carriers or market comparison |
| Premium basis | Per hour worked, by assigned risk classification | Most states charge a percentage of payroll |
| Employee share | Part of the premium may be deducted from employees | Usually entirely employer-paid elsewhere |
| Reporting | Quarterly on Form F212-055-000, zero report required | Often handled by the carrier rather than the employer |
The per-hour premium basis is the operational consequence 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 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 must pay at least $1,541.70 per week, which is $80,168.40 annually, effective January 1, 2026. That applies to employers of every size and is set at 2.25 times the state minimum wage, rising to 2.5 times by 2028 on the Department of Labor and Industries implementation schedule.
| Standard | Weekly minimum | Annual equivalent | Which applies |
|---|---|---|---|
| Washington 2026 | $1,541.70 | $80,168.40 | The higher standard governs in Washington |
| Federal FLSA | $1,128.00 | $58,656.00 | Insufficient on its own for a Washington employee |
| Computer professional, hourly | $59.96 per hour | 3.5 times minimum wage | Alternative basis for exempt computer roles |
The gap is more than $21,000 a year. A salaried manager at $70,000 satisfies federal law comfortably and is non-exempt in Washington, meaning overtime is owed on every hour past 40. That misclassification produces unpaid overtime liability that accrues quietly and is discovered late. Our guide to exempt versus non-exempt classification covers the duties tests that apply alongside the salary test.
Minimum wage, statewide and local
The statewide rate is $17.13 per hour for 2026, the highest in the country, adjusted annually for inflation. Seven localities set higher rates on top of it.
| Jurisdiction | 2026 rate | Note |
|---|---|---|
| Washington statewide | $17.13 | Highest statewide rate in the United States |
| Tukwila | $21.65 | Highest local rate in the state |
| Burien | $21.63 | |
| Renton | $21.57 | |
| Seattle | $21.30 | Applies regardless of employer size |
| Everett | $20.77 | |
| SeaTac | $20.74 | Hospitality and transportation employees |
| Bellingham | $19.13 | Set at exactly $2.00 above the state rate |
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, and it recurs every January when rates change.
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. Our guides to paid sick leave laws by state and pay transparency laws cover how these compare nationally.
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.
| Provider | Best For | Starting Price | PFML Filing | WA Cares | L&I Filing | Onboarding Tools | Trial |
|---|---|---|---|---|---|---|---|
| OnPay | All-in pricing, every state | $49 + $6/ee | 1 month | ||||
| Gusto | First payroll purchase | $49 + $6/ee | Until 1st run | ||||
| Square | Retail and hourly teams | $35 + $6/ee | Free trial | ||||
| Patriot | Lowest cost, Full Service tier | $37 + $5/ee | 30 days | ||||
| QuickBooks | Books already in QuickBooks | $50 + $6.50/ee | 30 days | ||||
| SurePayroll | Micro and household employers | $29 + $7/ee | Varies | ||||
| Paylocity | Growing past 50 employees | Quote | Demo | ||||
| ADP RUN | Compliance depth under 50 staff | ~$79 + $4/ee | 3 months | ||||
| Paychex Flex | A person to call about a notice | Quote | Varies | ||||
| Rippling | Payroll tied to HR and IT | $35 + $8/ee+ | Demo |
OnPay
One plan at $49 per month plus $6 per employee with every feature included and no tier to climb. For Washington specifically it files Paid Leave, WA Cares, and the Department of Labor and Industries report once registration is complete, which puts it in the smaller group of providers covering all three state obligations at the base price. The first month is free without a credit card.
Gusto
The most common first payroll purchase for US small businesses, at $49 per month plus $6 per employee on the Simple plan after a March 2026 base increase. Paid Leave and WA Cares are calculated and filed automatically, and workers compensation is handled through an insurance partner rather than direct L&I filing, which is a distinction worth confirming against your own setup.
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 the workers compensation report is covered. For a Seattle or Tacoma restaurant or retail business already on Square, hours flow in natively, which matters given that L&I premiums attach to hours.
Patriot Software
The cheapest legitimate full-service payroll 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
Core runs $50 per month plus $6.50 per employee following a per-employee price increase across the Workforce plans on July 1, 2026. Paid Leave and WA Cares are calculated automatically. Workers compensation is the gap: QuickBooks produces a worksheet with the figures and leaves the Form F212-055-000 filing to the employer, which is exactly the distinction the section above describes.
SurePayroll
Owned by Paychex and aimed at very small and household employers at roughly $29 per month plus $7 per employee. It handles the state program deductions, though workers compensation coverage arrives through Paychex insurance channels rather than as a direct filing. Suitable for a very small Washington employer where simplicity matters more than depth.
Paylocity
A full HR and payroll platform aimed above the smallest end of the market, with published Washington tax reference material that is maintained closely and multi-jurisdiction handling that covers the local minimum wage patchwork. For a Washington company crossing 50 employees, where the Paid Leave employer share begins applying, it becomes a reasonable candidate. Pricing is quote-only.
ADP RUN
The deepest compliance operation in the category, which in Washington means the three state programs plus the seven local minimum wage jurisdictions are routine rather than configuration work. Third-party estimates put the Essential tier near $79 per month plus $4 per employee, but ADP does not publish rates and most buyers report paying more once add-ons land. Workers compensation runs through a pay-as-you-go arrangement.
Paychex Flex
A service relationship rather than a software subscription, with a named contact at higher tiers. Pricing is quote-only and quarterly administrative charges are a recurring theme in customer reports. 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, starting at $35 per month plus $8 per employee for the core platform with payroll as a separate module. Native time tracking is a genuine advantage under an hour-based workers compensation premium. Real configurations land well above the headline figure, and workers compensation runs through a partner arrangement worth clarifying in the quote.
What each provider actually costs a Washington employer
Published software rates land where they do everywhere: roughly $62 to $83 per month at 5 employees, $112 to $148 at 15, and $287 to $375 at 50 for the providers that publish. ADP RUN, Paychex Flex, and Paylocity quote individually at every size.
What is worth keeping in proportion is that the subscription is not the significant Washington number. At 15 employees averaging $60,000, the Paid Leave employer share alone would run into four figures annually if the business were over the 50-employee threshold, and unemployment on a $78,200 wage base is 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. For a wider view, see the payroll software for small business comparison and the payroll pricing guide.
Choosing a payroll provider for Washington
Four questions, and the first two are specific to this state rather than generic.
The Washington HR compliance guide covers the surrounding employment law, and our guide to overtime rules covers the calculation once someone falls below the exemption threshold.
Before you choose
FirstHR does not process payroll, file payroll taxes, or administer benefits. Every provider above does something we do not, and 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, document collection and retention, and employee records for US teams of 5 to 50 people at a flat $98 to $198 per month, 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, so there is 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, and pay unemployment insurance plus workers compensation through a state monopoly fund.
What is the Washington PFML premium?
1.13 percent of gross wages excluding tips, up from 0.92 percent, applied 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 formally notify the employer, 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?
$1,541.70 per week, or $80,168.40 per year, for all employer sizes in 2026, set at 2.25 times the minimum wage and rising to 2.5 times by 2028. That is more than double the federal threshold, and the higher standard governs. Exempt computer professionals paid hourly need at least $59.96 per hour.
What is the Washington minimum wage?
$17.13 per hour statewide, the highest in the country, with $14.56 for employees aged 14 and 15. Seven localities set higher rates, from $19.13 in Bellingham to $21.65 in Tukwila, with Seattle at $21.30 regardless of employer size. The highest applicable rate governs.
Does the Seattle payroll expense tax apply to small businesses?
Almost never. 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 a business of 5 to 50 employees, so for most small employers it is an item to confirm does not apply.
How much does payroll software cost for a Washington small business?
At 5 employees, published July 2026 rates run roughly $62 for Patriot Full Service, $64 for SurePayroll, $65 for Square Payroll, $79 for OnPay or Gusto Simple, and $83 for QuickBooks Core. At 50 employees the same plans land between $287 and $375. The Washington-specific check is whether the provider files the workers compensation report or only prepares it.