What Is OR FLI Tax and How Does It Affect Your Wages?
Understand how OR FLI tax impacts your wages, who contributes, and the importance of compliance for accurate reporting.
Oregon’s Family and Medical Leave Insurance (OR FLI) tax represents a significant development in employee benefits, providing financial support for workers needing time off due to family or medical reasons. This program ensures employees can maintain income while addressing personal health or caregiving responsibilities.
Who Pays Into the Program
The Oregon Family and Medical Leave Insurance (OR FLI) program is funded by contributions from both employees and employers. Starting in 2024, the contribution rate is 1% of an employee’s gross wages, capped at $132,900, consistent with the Social Security wage base. Employees pay 60% of this rate, while employers with 25 or more employees cover the remaining 40%. Employers with fewer than 25 employees are exempt from the employer portion but may choose to contribute voluntarily.
This shared funding model distributes the financial responsibility between workers and businesses. Participating employers can enhance their benefits offerings, which may improve employee satisfaction and retention.
Calculating the Rate
The OR FLI tax is calculated as 1% of an employee’s gross wages, with contributions ceasing once earnings reach $132,900. For larger employers, the rate is split into a 0.6% employee contribution and a 0.4% employer contribution. Accurate payroll management is critical to ensure compliance and prevent discrepancies in employee paychecks.
Deductions From Wages
Employers must carefully integrate OR FLI deductions into payroll systems, which may require updates or adjustments. Transparency with employees about these deductions is essential. Detailed pay stubs that clearly outline OR FLI contributions alongside other withholdings help build trust and understanding. Employers can also provide educational resources to explain the program’s benefits.
Reporting on W-2
Employers must document OR FLI contributions accurately on employees’ W-2 forms. These deductions should appear in Box 14, labeled as “OR FLI,” to avoid confusion. Proper labeling ensures employees understand their contributions and simplifies state tax return preparation. Employers should verify that payroll software correctly processes these deductions to comply with state and federal requirements.
Noncompliance Consequences
Failure to comply with OR FLI tax requirements can result in financial penalties and reputational damage. The Oregon Employment Department enforces strict guidelines, with fines or interest charges applied to overdue contributions. Penalties may be calculated as a percentage of unpaid amounts, and repeated violations can prompt audits or investigations.
Beyond financial repercussions, noncompliance can harm a company’s reputation. Employees may lose trust in employers who fail to meet obligations, potentially impacting morale, productivity, and retention. Public awareness of noncompliance could also damage a company’s image, affecting customer relationships and business partnerships.