Paid Leave Oregon Tax: Employer Responsibilities

Paid Leave Oregon is a state-mandated program providing paid time off for workers to address personal or family health conditions, bond with a new child, or handle needs related to domestic violence or sexual assault. This benefit system is funded through payroll tax contributions from both employees and employers. All employers must withhold and remit employee contributions, but their own financial obligation depends on their size. The contribution rates and division of responsibility are updated annually to maintain the program’s solvency.

Contribution Rates and Responsibilities

The total contribution rate for Paid Leave Oregon is set annually as a percentage of an employee’s gross wages. For 2025, the rate is 1% of gross wages up to a maximum wage limit of $176,100, though this rate can change in future years. The financial responsibility for this 1% is divided between the employee and the employer, contingent on the size of the business.

Employers with 25 or More Employees

Employers with a workforce of 25 or more individuals are required to pay a portion of the total contribution. The 1% total is split, with employees responsible for 60% and employers responsible for the remaining 40%. This means the employer must pay a contribution equal to 0.4% of each employee’s gross wages up to the annual cap, while also withholding and remitting the employee’s 0.6% share.

Employers with Fewer Than 25 Employees

Businesses with fewer than 25 employees are not required to pay the 40% employer portion of the contribution. Their mandatory role is to withhold the 60% employee portion from their workers’ paychecks and remit those funds to the state. This amounts to a 0.6% payroll deduction from employee wages, though these employers can voluntarily choose to pay the employer share.

Calculating and Reporting Contributions

To correctly calculate contributions, an employer must first identify an employee’s gross wages for the pay period. Wages include salary, hourly pay, overtime, commissions, bonuses, and paid time off such as vacation and sick pay. This amount is then multiplied by the applicable contribution rates.

For example, for an employee at a large company earning $2,000 in gross wages, the total contribution is $20. The employer withholds $12 from the employee’s paycheck (0.6% share) and contributes $8 of its own funds (0.4% share). An employer with fewer than 25 employees would only remit the $12 withheld.

The reporting and payment of contributions are integrated into the state’s payroll tax system. Employers report Paid Leave Oregon contributions on the Oregon Combined Payroll Tax Report, Form OQ, which streamlines the process by including state income tax withholding and unemployment insurance. These combined reports must be filed quarterly, with deadlines on the last day of the month following the quarter’s end. Payments are made electronically through the state’s online revenue portal.

Employer Assistance and Equivalent Plans

The Paid Leave Oregon program includes provisions to support small businesses. Employers with fewer than 25 employees who voluntarily pay the employer portion of the contributions may be eligible for employer assistance grants. These grants are intended to help mitigate the financial impact of an employee taking paid leave, such as covering the cost of hiring a temporary replacement worker or paying overtime to other staff.

An alternative to participating in the state-run program is for an employer to offer an approved “equivalent plan.” An equivalent plan is a private plan, either self-insured or fully insured, that provides benefits that are equal to or greater than those offered by Paid Leave Oregon, including leave duration and wage replacement.

To be exempt from paying state contributions, an employer must submit their plan to the state for approval and pay a $250 application fee. The plan must cover all employees and cannot require them to contribute more than they would under the state plan. If the plan is approved, the employer and its employees are exempt from mandatory contributions, and employees file for benefits directly through the private plan.