Your Ultimate Guide to Washington Payroll

Employers have to navigate a variety of regulations and requirements to ensure proper payroll withholding in each US state. This guide serves as an introduction to what employers need to pay and withhold from payroll in Washington State, including unemployment insurance, personal income tax, paid family and medical leave, and workers' compensation.

Paying unemployment insurance

Unemployment insurance is a national program administered by US DoL. It provides temporary financial assistance to individuals who become unemployed through no fault of their own. Employers in Washington State are responsible for paying unemployment insurance on behalf of their employees.

In Washington state, the SUI (State Unemployment Insurance) tax rates are determined based on an experience-based system. The tax rate depends on how much former workers collect in unemployment benefits and the size of the employer's payroll.

For 2024, the lowest delinquent-tax rate for experienced employers is 1.25%, and the highest is 8.15%. New employers will pay 90 percent of the average rate for all businesses in their respective industries, with the minimum rate being 1.00% as set by federal law. The 2024 average tax rate is 1.35%.

To manage Washington State's unemployment insurance, the state offers an online portal provided by the Washington Employment Security Department. This portal allows employers to make necessary payments and ensure compliance with the program’s requirements. Employers can find more detailed information on paying unemployment insurance on Washington Employment Security Department's website.

Withholding personal income tax from your Washington employee

Washington state does not have a personal income tax. That means, employers are not required to withhold any personal income tax from their employees' payroll.

B&O tax in Washington

In Washington state, businesses are subject to the Business and Occupation (B&O) tax, which is calculated based on the gross receipts of the business. This tax applies regardless of profit or loss and varies by the type of business activity. Additionally, businesses engaged in retail sales or services are required to collect and remit retail sales tax.

Withholding and paying Family and Medical Leave

Paid Family and Medical Leave (PMFL) is a new benefit for Washington workers. PMFL is for when a serious health condition prevents your employee from working or when your employee needs time to care for a family member, bond with a new child or spend time with a family member preparing for military service overseas. You can withhold a portion of your employee’s income for PMFL contributions.

The state of Washington provides an online portal to facilitate the process of managing and remitting these contributions. For comprehensive information on the employer’s role and responsibilities, go to the Washington Employment Security Department website.

Paying your Washington State Workers’ Compensation

Washington State requires employers to provide Workers' Compensation (WC) insurance coverage for their employees. This insurance provides financial protection to employees who may sustain injuries or illnesses while performing their job duties.

Unlike some other states, Washington does not allow private carriers to provide Workers' Compensation coverage. Employers are required to purchase coverage from the state itself. The Washington State Department of Labor & Industries offers assistance in registering and making payments for Workers' Compensation insurance.

Each year, the Washington State Department of Labor & Industries reviews several factors to set the workers' compensation rates for the upcoming year. These factors include anticipated compensation payouts, the size of the contingency reserve, wage inflation, and other financial indicators. For the year 2024, the average workers' compensation premium rate increase in Washington State is projected to be 4.9%.

Payroll tax deadlines and submissions in Washington

In Washington state, all employers are required to file a quarterly tax-and-wage report.

Failure to do so results in penalties. The report must include employees covered by unemployment insurance, corporate officers, and any domestic service workers earning over $1,000 per quarter. The report should detail the employee's name, Social Security Number, gross wages, hours worked, and their Standard Occupational Classification (SOC).

For filing, employers must round reported hours to the nearest whole number, with specific guidelines for salaried, commissioned, and other types of employees. Monthly returns are due by the 25th of the following month, quarterly returns by the end of the month following the quarter, and annual returns by April 15th. If these dates fall on a weekend or holiday, the due date is the next business day.

Businesses with minimal activity may qualify for active non-reporting status if they meet certain income thresholds and do not owe other taxes or fees to the Department of Revenue.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Washington payroll taxes, payroll compliance, and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.