Washington Workers’ Take-Home Pay Falls as Payroll Tax Rises

This article is based on analysis and reporting from the Washington Policy Center on Washington’s payroll tax increase.  

Beginning January 1, 2026, Washington’s Paid Family and Medical Leave (PFML) payroll tax increased to 1.13% of gross wages, up from 0.92%—the program’s third rate hike since launching at 0.4% in 2019. The tax nears the 1.2% statutory cap while the PFML program, funded largely by employee payroll deductions, is projected to run a $350 million deficit by 2029. Analysts note that while minimum wages have risen, higher payroll taxes may offset gains in take-home pay for many workers. Data cited in the reporting suggests higher-income earners use the program more frequently, even as lower-income workers continue contributing through payroll deductions. 

For payroll departments, this increase triggers immediate withholding adjustments across all Washington employees. The average worker earning $95,160 annually will see $768 in PFML deductions in 2026, requiring updated tax tables and employee communication. Staffing agencies must recalculate burden rates for Washington placements and prepare for potential further increases—proposed legislation could raise the cap to 2% of wages. With program expansions reducing minimum eligibility from eight to four hours weekly, expect increased claim volume and administrative complexity throughout 2026. 

Source: Washington Policy Center

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