The offer letter says $55,000. Federal payroll obligations alone add nearly $4,250 on top of that. Washington then stacks on L&I workers' comp, paid family and medical leave, state unemployment, and the WA Cares long-term care program. The total mandatory cost of a $55,000 hire at a WA service business ends up well above $59,000, with L&I and the state unemployment rate pushing it further depending on what your employees actually do. Most employers find the gap somewhere between extending the offer and getting the first L&I audit notice.

Washington piles six separate programs on top of every paycheck: Social Security and Medicare taxes, federal unemployment insurance, Washington's state unemployment system, L&I workers' compensation, paid family and medical leave, and the WA Cares long-term care fund. The federal programs you share with every employer in the country. The Washington programs are where it gets specific, and where most accounting software runs out of answers.

Here is what each one actually costs in 2026.

The federal layer: FICA and FUTA

These do not vary by state. Every employer, everywhere, pays them.

Social Security: 6.2% on wages up to $184,500 per employee in 2026. On a $55,000 salary, that is $3,410 out of your pocket, per year. Wages above $184,500 are exempt from the Social Security portion (though not Medicare).

Medicare: 1.45% on all wages, no cap. On the same $55,000 salary, that is another $797.50. Your employee pays a matching 1.45%, plus an additional 0.9% on any earnings above $200,000. You withhold that additional amount but do not match it.

FUTA: The gross rate is 6.0% on the first $7,000 of each employee's wages per year. In practice, you receive a credit of up to 5.4% for paying your state unemployment taxes on time, which drops the effective rate to 0.6%. On the $7,000 federal wage base, that is $42 per employee annually, so long as Washington does not fall into credit reduction status in a given year. States enter credit reduction when they have borrowed from the federal unemployment fund and not repaid it; Washington has not been in that situation recently, but the risk is worth monitoring when you file Form 940.

That puts your confirmed federal employer cost at roughly $4,249.50 on a $55,000 salary, or about 7.7% before Washington's programs start.

What Washington adds

L&I workers' compensation

Washington runs its own state-funded workers' compensation system. You do not buy private workers' comp insurance here. Instead, you report employee hours by risk classification each quarter and remit premiums directly to L&I.

Rates vary by what your employees actually do. An office coordinator at a consulting firm and a crew member at a landscaping company are not in the same cost universe. The difference between a low-risk desk job and an outdoor or trades classification can be a factor of five or more in the quarterly premium. If you have workers doing different types of work, L&I assigns each job type its own risk class, and you report hours separately for each.

Misclassifying workers into a lower-risk category means back premiums with interest when L&I audits, which happens. The rate lookup is at lni.wa.gov.

One more thing that catches a lot of new WA employers off guard: no payroll platform handles L&I filings or payments. Gusto, ADP, QuickBooks Payroll, Paychex: none of them file your L&I quarterly report or remit your L&I premiums. Your payroll software gives you the wage and hours data to build the report. The actual filing and payment happen through the L&I portal on your side, on a separate quarterly deadline. A business that has everything else set up correctly still has to manage L&I directly.

Paid Family and Medical Leave (PFML)

The PFML obligation in Washington depends on how many employees you have.

If you have fewer than 50 employees in Washington, you are not required to pay the employer share of PFML premiums under RCW 50A.10.030. You are still required to collect the employee portion through payroll deductions and remit it to ESD quarterly. For most small service businesses in WA, PFML is an administrative obligation rather than a direct payroll cost.

If you have 50 or more employees, you must pay the employer share on top of collecting and remitting the employee share. ESD sets the combined total premium rate annually (the rate cannot exceed 1.20% of wages under state law), and it applies to wages up to the Social Security taxable maximum, which is $184,500 in 2026. The current year rate is posted at paidleave.wa.gov.

PFML and WA Cares are reported on the same quarterly ESD filing, which is separate from your L&I filing.

WA Cares Fund

The WA Cares Fund is Washington's long-term care insurance program. The premium is 0.58% of each employee's gross wages, with no wage cap (unlike Social Security, it applies to every dollar of wages, not just the first $184,500).

Employers do not pay a separate employer share of WA Cares. The cost is entirely the employee's. Your obligation is to withhold 0.58% from each paycheck and remit it quarterly on the same ESD report as PFML. You also need to track which employees hold valid exemptions and stop withholding for those workers.

Some employees qualify for permanent or conditional exemptions. An employee who has private long-term care insurance, for example, may apply to DSHS for an exemption. It is the employee's responsibility to notify you of their exempt status and provide documentation. If they fail to do so and the exemption lapses, the back payment and penalties fall on the employee, but you will still be the one fielding the question.

State unemployment insurance (SUTA)

Washington's unemployment insurance tax is experience-rated: your rate is based on how many former employees have collected benefits charged to your account and the size of your payroll. For new employers, ESD assigns a rate based on your industry, set at 115% of the average rate for all businesses in that industry, with a 1% federal minimum.

After roughly two and a half to three years in business, ESD recalculates your rate from your actual claims history. The tax applies against a taxable wage base that ESD adjusts annually. Your rate is mailed to you each December for the following calendar year. You can also find it through the Employer Account Management System at esd.wa.gov.

A worked example (illustrative)

This is a single employee at $55,000, at a WA service business with fewer than 50 employees. L&I rates are labeled illustrative because they vary by risk class.

Obligation Employer cost
Social Security (6.2% on $55,000) $3,410
Medicare (1.45% on $55,000) $797.50
FUTA (0.6% on first $7,000) $42
WA Cares employer share $0 (employee-funded, employer remits)
PFML employer share $0 (fewer than 50 employees)
L&I (varies by risk class) Variable: see lni.wa.gov
SUTA (new employer min 1%; rate varies) Variable: see esd.wa.gov
Confirmed federal total $4,249.50

Federal obligations alone add about $4,250 to a $55,000 salary. For a typical office-based WA service firm, L&I and first-year SUTA together add more on top of that, with the combined total depending on your risk class and experience rating. For trades, outdoor work, or any higher-risk classification, L&I can push the number significantly higher than the office baseline.

When the contractor model actually works

Some of this cost disappears if a worker genuinely qualifies as an independent contractor. No Social Security or Medicare employer match, no FUTA, no PFML obligation, no L&I, no SUTA. The savings are real when the classification is correct.

Washington applies its own multi-factor test to worker classification, and the core question is whether the worker performs services free from your control and direction, doing work that is outside your core business. If the honest answer to either of those is no, the contractor label is unlikely to survive scrutiny. Whether the worker operates an independent business is a third factor that tends to cut the same way. Back liability for misclassification covers payroll taxes, L&I premiums, and PFML contributions, often going back to the date of hire.

What to do with this before you post the job

Build the real number before you budget the hire, not after. Federal obligations are predictable: Social Security at 6.2% on wages up to $184,500, Medicare at 1.45% on all wages with no cap, and $42 in FUTA per employee per year. Washington's L&I and SUTA are variable, but L&I rates by risk class are public at lni.wa.gov and SUTA history becomes yours once you have a few years in. For a first hire at a typical service business, plan for at least 10% above base salary in total mandatory obligations before you finalize the number on the offer letter.

If your payroll setup in Washington has never been reviewed for L&I compliance specifically, or if you are setting up payroll for the first time, our payroll service includes WA-compliant setup with L&I tracking, PFML and WA Cares collection and remittance, and SUTA filings alongside your bookkeeping. What is included and what it costs is on our pricing page. For service businesses in Washington generally, our service businesses page covers what makes WA payroll different from most other states.

Questions owners ask about this

Do I have to pay Washington PFML premiums as an employer?

It depends on your headcount. Employers with fewer than 50 employees in Washington are not required to pay the employer share of PFML premiums under RCW 50A.10.030. You are still required to collect the employee share through payroll and remit it to ESD quarterly. If you have 50 or more employees, you must also pay the employer portion. ESD sets the total premium rate annually: check paidleave.wa.gov for the current rate.

What does the WA Cares Fund cost me as an employer?

The WA Cares Fund long-term care premium is 0.58% of each employee's gross wages, with no wage cap. Employers do not pay a separate employer share: the cost is entirely the employee's. Your role is to withhold the amount from each paycheck and remit it quarterly on the same ESD report as PFML. You also need to track which employees hold valid exemptions from WA Cares and stop withholding for those workers. If an employee claims an exemption they do not qualify for, the back payment and penalties fall on them, though the paperwork question still lands on your desk.

Does my payroll software handle WA L&I?

No payroll platform handles WA L&I filings or payments. Washington is a state-funded workers' compensation system, which means you file quarterly reports and remit premiums directly through the L&I online portal. Your payroll software provides the wage and hours data to build that report, but the actual filing and payment are a separate step you manage outside the platform. A lot of WA businesses that are otherwise well set up on payroll discover this gap at their first L&I audit.

What is the new employer SUTA rate in Washington?

New employers in Washington are assigned an unemployment insurance rate based on their industry: 115% of the average rate for all businesses in that industry, subject to a 1% federal minimum. After roughly two and a half to three years, ESD recalculates your rate based on your actual claims history. The rate applies against a taxable wage base that adjusts annually. Find your assigned rate class and current wage base at esd.wa.gov.

Can I use a 1099 contractor to avoid all of this?

You can use contractors for genuinely independent work, but Washington applies a multi-factor test to worker classification. If someone works primarily for you, under your direction, doing core business work, the contractor label usually does not hold. The cost of misclassifying an employee as a contractor includes back payroll taxes, L&I premiums, and potentially PFML contributions, often going back years. The savings look real until the audit.