Paid family and medical leave (PFML) is a paid leave policy that allows workers time off for qualifying medical or family-related reasons, such as bonding with a new child, recovering from a serious health condition, or caring for a loved one with a serious health condition.
Similar to paid sick leave and other types of paid time off (PTO), there’s no national comprehensive paid family and medical leave program. Several state legislatures, however, have recently enacted a family medical leave act, usually paid by a payroll tax on earned wages.
Most of these state family and medical leave laws provide at least 12 weeks of benefits and generally cover all, or nearly all, private sector employees. Some state programs, though, also cover state and local government employees.
Eligibility for paid benefits is typically determined by meeting minimum requirements, such as the amount of earned wages, length of employment, or some combination of factors.
The Family Medical Leave Act (FMLA) is a federal law that provides employees with up to 12 weeks of protected leave for eligible health or family reasons. Unlike PFML, however, FMLA leave is not paid, though some states base their PFML eligibility requirements on FMLA standards. For example, some PFML programs use the FMLA definition of “serious health condition” when determining medical leave eligibility.
PFML policies support workers and their families, helping employees balance work demands with their personal health and family’s well-being. Moreover, providing such leave can help employees recover and return to work more quickly, minimizing financial insecurity for employers.
Currently, 14 jurisdictions (13 states and Washington D.C.) have an active or soon-to-be active PFML program funded by payroll taxes. Plan requirements vary by state, but most allow employers special permission to provide benefits through a private plan, so long as those benefits meet strict requirements guaranteeing they’re at least as generous as state-funded plan benefits.
Penalties for failing to comply with state-mandated standards (e.g., minimum employee headcount, remitting amounts and filing returns on time, providing program information to workers, etc.) can result in fines ranging from $500 to $4,000 total or $250 per violation, civil action, and possible imprisonment.
The number of states with a tax-funded paid family and medical leave program continually expands. Delaware and Maine were the most recent states to add such a program in January 2025. Minnesota is scheduled to debut their new program in 2026, and Maryland’s new program will begin collecting contributions in January 2027.
A recent trend among existing programs has been the expansion of the definition of “family member.” Most states define family as spouses and immediate relatives (e.g., parents, children, siblings, etc.), though some have started including domestic partners, extended relatives, and “chosen” family members.
Most state-based PFML programs are funded by a mandatory PFML tax from employers, employees, or both. New Hampshire and Vermont, however, have programs where participation is voluntary.
When mandatory, these tax “contributions” are typically a percentage of each employee’s earned wages up to a set wage base limit, though rates and limit amounts can change from year to year or based on new legislation.
In January 2025, the IRS announced new guidance clarifying the federal tax treatment of state PFML contributions and benefits, effective immediately. Calendar year 2025, however, has been designated as a transition year to allow employers to make any necessary payroll and reporting adjustments.
|
Jurisdiction |
Employer or Employee Contributions |
PFML Tax Rates |
|
Employees only |
1.2% |
|
|
Both |
|
|
|
Employees only |
0.50% |
|
|
Both |
0.80% (0.32% for parental leave; 0.40% for family leave; 0.08% for caregiver leave) | |
|
Employers only |
0.75% |
|
|
Both |
|
|
|
Both* |
No more than 1.20%, split evenly between employers and employees |
|
|
Both |
|
|
|
Both** |
0.70% (split evenly between employers and employees, though employers may contribute a greater portion if they want) |
|
|
Employees only |
0.33% | |
|
Employees only |
0.388% |
|
|
Both
|
|
|
|
Employees only |
1.30% (provided by the Temporary Disability Insurance tax paid by employees) |
|
|
Both
|
|
*Contribution collections will begin January 1, 2027.
**Contribution collections will begin January 1, 2026.
Employers are usually responsible for managing all collected contributions and informing employees about the state’s program and their rights. Some states also allow employers to share or cover part of an employee’s contribution.
In addition to the resulting tax implications, employers should prioritize being informed of all program requirements, including:
Meanwhile, employees must ensure they’re familiar with program requirements to meet PFML eligibility standards, properly submit claims, and understand how the benefits will impact their financial situation. Some states, for example, provide a PFML calculator for estimating how much an employee may receive while on leave.
To ensure a smooth work transition, employees should also:
Keeping up with PFML tax rates and state standards is a constant balancing act. One missed contribution or overlooked requirement can snowball into expensive penalties and administrative headaches. That’s where modern HR and payroll software, like Paylocity, can lighten the load.
Paylocity simplifies compliance with features such as:
Request a demo today and see how much easier payroll taxes can be with Paylocity.
PJ joined Paylocity in 2015 as a Government Relations Specialist and earned her M.A. in Finance from Southern New Hampshire University in 2017. PJ currently leads a team of tax professionals and works with tax and payroll operations groups.
