Paid Family and Medical Leave: The New Frontier of State Payroll Taxes

Five years ago, paid family and medical leave (PFML) was a compliance concern for employers in a handful of states. Today, it’s a material payroll tax obligation for any company with employees in major employment markets. The list of states with mandatory PFML programs continues to grow, and existing programs continue to evolve—adding new categories of leave, adjusting contribution rates, and refining the administrative requirements employers must navigate.

For payroll teams, PFML represents one of the most dynamic areas of state tax compliance today. Getting it right requires understanding each state’s program individually, because—as with everything else in state payroll tax—no two are alike.

The Current PFML Landscape

As of early 2026, the following states have active mandatory paid leave programs that involve employer-side payroll tax withholding and/or contributions:

California: California’s Paid Family Leave (PFL) program has existed since 2004, making it the oldest. It’s administered by the EDD alongside California SDI, with employee contributions funding both. California PFL provides up to eight weeks of leave to bond with a new child or care for a seriously ill family member.

New Jersey: New Jersey Family Leave Insurance (FLI) provides up to 12 weeks of leave for bonding or caregiving. It’s funded by employee contributions and administered separately from NJ TDI, though both are remitted through the NJ payroll tax system.

New York: New York Paid Family Leave (NY PFL) launched in 2018 and has expanded both its contribution rate and benefit duration since then. It’s funded entirely by employee contributions and administered through the same carrier that provides DBL (disability) coverage. In 2024, NY PFL provides up to 12 weeks at 67% of the statewide average weekly wage.

Washington State: Washington’s Paid Family and Medical Leave program covers both family leave and medical leave (unlike some state programs that cover only family leave). It involves both employer and employee contributions for employers with 50+ employees. Washington’s program is one of the more comprehensive in the country.

Massachusetts: Massachusetts Paid Family and Medical Leave provides up to 20 weeks of medical leave and 12 weeks of family leave. Both employer and employee contributions apply (though small employers have reduced employer obligations). Massachusetts PFML is administered by the state’s Department of Family and Medical Leave.

Oregon: Oregon’s Paid Leave program launched in September 2023. Contributions began in January 2023. Oregon’s program provides up to 12 weeks (or 14 weeks for pregnancy) of paid leave for qualifying events, funded by employer and employee contributions.

Colorado: Colorado’s FAMLI (Family and Medical Leave Insurance) program began payroll contributions in January 2023 with benefits starting January 2024. Like Oregon, it’s a relatively new program still being refined.

Connecticut: Connecticut’s paid leave program launched in 2022, with contributions and benefits both active.

Delaware: Delaware’s Paid Leave program has enacted legislation with phased implementation.

Maryland: Maryland’s Time to Care Act established a paid leave program with contributions launching in 2025 and benefits in 2026.

Rhode Island: Rhode Island’s Temporary Caregiver Insurance (TCI) has existed since 2014 and continues to operate alongside the state’s TDI program.

Minnesota: Minnesota passed PFML legislation in 2023, with contributions and benefits scheduled to launch in 2026.

What Makes Each Program Different

Despite sharing the same policy goal—providing income replacement during family or medical leave—these programs differ across nearly every dimension:

Contribution Structure

Some programs are employee-funded only (California PFL, New York PFL). Others have both employer and employee contributions (Washington, Massachusetts, Oregon, Colorado). The split between employer and employee contributions varies, and the employer obligation sometimes depends on employer size.

For payroll purposes, this means the withholding obligation is different in each state: sometimes you’re withholding from the employee and remitting, sometimes you’re also contributing as an employer, and sometimes the employer obligation differs depending on how many employees you have.

Wage Bases

PFML programs apply their contribution rates to wages up to a taxable wage base. These wage bases often differ from both the state income tax wage base and the SUI wage base—creating yet another set of thresholds to track. Washington State’s PFML wage base, for example, follows the Social Security taxable wage base but is not the same as Washington’s SUI wage base.

Benefit Structures

Weekly benefit amounts, leave duration limits, and qualifying reasons for leave all differ by state. While benefit structure primarily matters for HR and leave administration, it also affects how leave interacts with disability programs—particularly in states where both SDI and PFML exist, and where leaves can run concurrently, consecutively, or under coordination-of-benefits rules.

Administrative Pathways

Most state PFML programs are administered directly through the state (unlike New York PFL, which runs through private insurance carriers). Employers must register with the relevant state agency, remit contributions on the same schedule as other state payroll taxes, and file periodic reports.

A few states allow “voluntary plans”—alternative arrangements where employers provide equivalent or better benefits through a private insurer. These require state approval and ongoing compliance verification.

The Compliance Challenge

PFML’s rapid expansion creates specific challenges that differ from more mature state programs:

New program onboarding: When a new state launches a PFML program, employers may need to register with a new agency, update payroll system configurations, and train HR teams on leave policies—all under time pressure. Oregon’s 2023 launch and Colorado’s 2023 launch both caught some employers unprepared.

Rate changes: PFML programs are new and still being calibrated. Contribution rates have changed more frequently than SUI rates—sometimes multiple times in a program’s first few years—as states adjust for actual claims experience versus initial projections.

Employee questions: PFML is directly visible to employees in a way that SUI is not—employees see the contribution on their pay stub and have questions about it. HR teams need to understand each state’s program well enough to explain it accurately.

Leave coordination: When an employee in California takes leave that qualifies under both California SDI and California PFL, the leave must be coordinated properly—generally SDI runs first, followed by PFL. Getting this wrong creates problems for both the employee and the employer’s compliance record.

Looking Ahead

The PFML trend shows no signs of reversing. Several states are actively considering legislation. Federal PFML legislation has been proposed in multiple congressional sessions, though it has not passed. Even if federal legislation eventually passes, it’s likely to coexist with state programs rather than replace them.

For payroll and HR teams, the practical implication is that PFML will continue to demand more administrative attention over the coming years, not less. Building systematic processes for monitoring new program developments, onboarding new state requirements promptly, and communicating with employees about their leave entitlements is an investment that will pay dividends as the landscape continues to evolve.