How to Choose a Payroll Company or PEO in Washington

Payroll software, payroll services, and PEOs

Washington runs payroll through two agencies, with no state income tax to withhold and four separate state programs to fund. Workers’ compensation is sold by the state and by no one else.

There are three kinds of companies to choose from, and what separates them is how much of the work they take on and whether they become a co-employer.

• Payroll software. You register with the Employment Security Department and the Department of Labor and Industries, then run the system yourself. More on payroll and HR software
• A payroll service. Files under your own EIN and handles the state returns for you. More on payroll services
• A PEO. Reports your Washington wages, bundles benefits, and takes on HR administration. Requires co-employment. More on PEOs

Washington narrows what a PEO delivers. Workers’ compensation comes from Labor and Industries whichever model you pick, and WAC 192-300-220(1) assigns each PEO and each client employer an individual unemployment rate based on its own experience.

Payroll and PEO companies based in Washington

A company based here files the same three quarterly reports you do, and works the same EAMS and MyL&I portals.

Payroll and HR providers based in Washington 26 results

Organization	Type	Headquarters	Coverage	Description
	PEO	Bellevue, Washington	50 states	Full-service PEO providing payroll, benefits administration, and HR support to small and mid-sized employers.
	Payroll service	Seattle, Washington	WA, OR, ID	Regional payroll bureau handling processing, tax filing, and time tracking for multi-state employers.
	Software	Seattle, Washington	50 states	Cloud payroll and HR platform covering onboarding, time tracking, and benefits enrollment.
	PEO	Spokane, Washington	22 states	PEO offering co-employment, group health benefits, and HR compliance support across the Northwest.
	PEO	Tacoma, Washington	12 states	PEO serving small employers with bundled payroll, benefits, and HR administration.
	Payroll service	Vancouver, Washington	WA only	Payroll bureau focused on Washington employers, including quarterly Employment Security and Labor and Industries filing.

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What Washington costs an employer in 2026

Washington employers pay into four state programs. Unemployment insurance is entirely employer-funded, workers’ compensation splits roughly three to one in the employer’s favor, Paid Family and Medical Leave splits by employer size, and WA Cares comes wholly out of the employee’s check.

The workers’ compensation premium is set by the state and bought from the state.

Take a clerical employee earning $60,000 a year and working 1,920 hours, at an employer with fewer than 50 Washington employees and a new-employer unemployment rate of 1%.

Social Security and Medicare are excluded because they are federal and identical in every state. At 50 or more Washington employees the same employer also owes the Paid Leave employer share of $194, taking the employer total to $1,160.

The employer side and the employee side land within $31 of each other.

Unemployment insurance

Washington’s unemployment insurance tax is paid entirely by the employer and administered by the Employment Security Department. The 2026 taxable wage base is $78,200, up from $72,800 in 2025, and it rises again to $82,000 in 2027.

Rates for qualified employers run from 0.27% at rate class 1 to about 6.0% at the top rate classes. Each rate combines an experience rate, a graduated social cost rate capped at 0.72%, and a 0.03% Employment Administration Fund charge.

New employers pay 115% of the average rate for all businesses in their industry, with a federal floor of 1%. Employment Security stops treating a business as a new employer after 2.5 to 3 years.

Rate notices go out each December and apply to the whole following calendar year. An employer behind on taxes or reports as of September 30 picks up a delinquency surcharge of 0.5% to 2.0% on top of its rate.

Federal unemployment tax applies on top at 0.6% on the first $7,000 per employee. Washington was not a FUTA credit reduction state for tax year 2025, so employers here take the full 5.4% credit.

Paid Family and Medical Leave

Every Washington employer participates in Paid Family and Medical Leave regardless of size. The 2026 premium is 1.13% of each employee’s gross wages excluding tips, up to the Social Security cap of $184,500.

Employers with 50 or more Washington employees pay up to 28.57% of the premium and employees pay 71.43%. Employers below 50 owe no employer portion, and they still collect the employee premium, remit it, and file a quarterly report.

Employment Security sets employer size each September using the prior four completed quarters, and that determination governs the entire following calendar year. Only in-state employees count toward the number.

A premium an employer fails to withhold cannot be recovered from that employee in a later pay period. Starting August 1, 2026, Paid Leave applies penalties to past due reports and interest to overdue premium balances.

Employers with fewer than 50 employees may qualify for a small business assistance grant of up to $3,000 to offset costs tied to an employee’s leave.

Second Substitute House Bill 2345, effective June 11, 2026, reallocated the premium between the family leave and medical leave shares to match 2025 IRS guidance. The total premium rate and the overall employer and employee split are unchanged.

WA Cares

WA Cares is Washington’s long-term care insurance program, funded by a premium of 0.58% of gross wages with no cap. The employee pays it and the employer collects and remits it on the same quarterly report as Paid Leave.

Employees can apply to Employment Security for an exemption. Once an employee provides an approval letter, the employer keeps a copy on file and stops withholding.

Workers’ compensation

Washington runs its own workers’ compensation fund and bars private carriers from writing coverage in the state. Every employer buys from the Department of Labor and Industries or qualifies as a certified self-insurer.

Nearly every employer with a worker is covered, with no employee-count minimum. RCW 51.12.020 lists the exempt categories, and an employer with only exempt workers is outside the requirement.

An employer cannot shift the obligation by contract. RCW 51.04.060 voids any agreement, rule, or regulation that tries.

How L&I prices coverage

Rates are charged per hour worked by risk class rather than as a percentage of payroll. A full-time employee counts as 1,920 hours. When wages rise, the hourly rate paid stays the same.

Labor and Industries adopted a 4.9% average rate increase for 2026, worth about $71 a year per full-time employee, or $1.37 a week. Averaged across all classes, 2026 coverage works out to $1.50 per $100 of payroll before Retro refunds.

Out of 327 risk classes, 293 carry higher base rates in 2026 than they did in 2025.

Base rates assume an experience factor of 1.0000. The spread from the cheapest class on that list to the most expensive runs about 23 times.

The worker’s share

Washington workers pay part of the workers’ compensation premium. Labor and Industries states this is the only state where the worker share is significant, averaging about 24%, or 26% once Retro refunds that reduce the employer side are counted.

The total rate has four components. Employers pay all of the accident fund rate, and employers and workers each pay half of the medical aid rate, the supplemental pension rate, and the Stay at Work rate.

Retrospective Rating

Any employer with an industrial insurance account in good standing can enroll in Retrospective Rating, either individually or as a member of a sponsored group. Labor and Industries evaluates each coverage year three times, roughly 12 months apart, and pays a partial premium refund when claim costs come in below what was expected.

An employer whose retrospective premium comes in above the standard premium it paid is assessed the difference, up to a preselected limit chosen at enrollment.

Claim-Free Discount

Labor and Industries offers a Claim-Free Discount that can lower an employer’s average base rate by 10% or more.

Minimum wage

Washington’s minimum wage is $17.13 an hour in 2026, a 2.8% increase over 2025 and the highest statewide rate in the country. Workers aged 14 and 15 can be paid 85% of that, or $14.56.

The state allows no tip credit. Tipped employees receive the full minimum wage before tips, and tips and service charges belong to the employee.

Eight local jurisdictions set rates above the state floor. Several are tiered by employer size, one applies only to two industries, and two step up again on July 1, 2026.

The rate that applies is the one for the place where the work is physically performed. Each jurisdiction defines employer size on its own terms.

Overtime and the exempt salary threshold

Overtime in Washington is owed after 40 hours in a workweek at 1.5 times the regular rate. The state has no daily overtime rule, so working more than 8 hours in a day triggers nothing on its own.

The salary threshold for the executive, administrative, and professional exemptions is $1,541.70 a week, or $80,168.40 a year. That is 2.25 times the state minimum wage, it applies to every employer regardless of size, and it is the highest threshold in the country.

Computer professionals paid hourly must earn at least 3.5 times minimum wage, or $59.96 an hour, to stay exempt. The salary multiplier follows a published schedule that reaches 2.5 times minimum wage in 2028.

Paid sick leave

Every Washington employer provides paid sick leave, and every employee accrues it regardless of full-time, part-time, temporary, or seasonal status. Accrual runs at 1 hour for every 40 hours worked and starts on the first day of employment.

All hours worked count toward accrual, including overtime, and the state sets no cap on how much an employee can accrue or use in a year. Employees can begin using accrued leave on the 90th calendar day of employment.

Up to 40 hours of unused leave carries into the following year. Employers can frontload instead of tracking accrual, provided the frontloaded amount equals or exceeds what the employee would have earned.

Seattle payroll taxes

Seattle levies two employer-paid payroll taxes, and neither can be deducted from employee compensation.

The payroll expense tax, known as JumpStart, applies in 2026 to businesses with $9,074,409 or more in 2025 Seattle payroll. It is charged on compensation paid in Seattle to employees earning $194,452 or more, at rates from 0.746% to 2.557% depending on the size of the business and the level of the employee’s compensation.

The Social Housing Tax is 5% of compensation above $1 million paid in Seattle to any one employee. It has no employer payroll threshold at all, so a ten-person company with one seven-figure earner owes it. Filing moved to quarterly beginning with tax year 2026.

Both taxes reach compensation paid in Seattle, which means an out-of-city employer with a remote employee working in Seattle can fall inside them.

Worked at 2026 rates, assuming the employer clears the $9,074,409 payroll threshold and sits in the lowest business tier.

Can you run Washington payroll yourself?

Yes. Washington has no state income tax withholding, so there is no rate table to apply, no employee election form to chase, and no annual income tax reconciliation return.

A Washington employer files a quarterly tax and wage report for unemployment insurance and a combined Paid Leave and WA Cares report through Employment Security, plus a quarterly report to Labor and Industries. All three are due the same day, and all three are required in a quarter with no payroll. Payroll software handles all three for $6 to $25 per employee per month.

Find payroll software that fits your business

Two things trip people up. Labor and Industries premium is charged on hours worked, so hour tracking has to be accurate for salaried staff as well as hourly, and the applicable minimum wage follows the physical location of the work.

Full-service software files all three quarterly reports for you. You stay legally responsible for the taxes either way.

A 12-person office in Seattle

A 12-person marketing agency in downtown Seattle reports all staff in risk class 4904, clerical office, and pays everyone above the exempt salary threshold except one part-time bookkeeper paid hourly.

Seattle’s minimum wage of $21.30 applies to the bookkeeper because the ordinance covers work performed inside city limits, and it sits $4.17 above the state floor of $17.13.

Neither Seattle payroll tax reaches the agency. The payroll expense tax starts at $9,074,409 in prior-year Seattle payroll, and the Social Housing Tax applies only once one employee’s compensation passes $1 million.

With fewer than 50 employees, the agency owes no Paid Leave employer share. It still collects 1.13% of each employee’s wages for Paid Leave, withholds 0.58% for WA Cares, and reports both to Employment Security on one quarterly filing.

Its Labor and Industries premium runs $0.2223 an hour before its experience factor, about $427 a year per full-time employee, and roughly a quarter of that comes out of the employee’s check. Its largest recurring Washington obligation is the unemployment tax at its assigned rate on the first $78,200 of each employee’s wages.

PEO rules specific to Washington

Washington registers professional employer organizations with the Employment Security Department. A PEO and its client company both register, and the requirement holds even when the PEO sits out of state, has no Washington employees of its own, or the client has none.

What a PEO files

• A Washington business license application through the Department of Revenue, and registration with Employment Security under RCW 50.12.070 for an employer reference number
• A power of attorney for each client employer, which Employment Security confirms to the client by letter
• Client name, address, UBI number, Employment Security number, corporate officers and owners, and a Washington address where payroll records can be inspected
• Notice of a new client relationship within 30 days of its effective date, and notice of the end of one within 30 days
• Quarterly tax and wage reports for each client employer, containing separate and distinct information for each

Unemployment reporting, and what happens when you leave

WAC 192-300-220(1) assigns each professional employer organization and each client employer an individual tax rate based on its own experience. Joining a PEO in Washington does not move a company onto a different unemployment rate, and leaving one does not reset it.

The client company remains liable for its own taxes, penalties, and interest. Employment Security attempts collection from the PEO first and waits at least 10 days from the due date before pursuing the client.

All client employers of a PEO can be assigned the delinquent tax rate when a delinquency cannot be traced to a specific client. Reporting a client’s employees as the PEO’s own counts as a violation, and a third violation is grounds for revoking the PEO’s authority to act for its clients.

Workers’ compensation under a PEO

Washington’s industrial insurance statutes and rules contain no PEO provision. Chapter 296-17 WAC carries a section for temporary staffing services and none for professional employer organizations or employee leasing.

Coverage comes from Labor and Industries or certified self-insurance in every case, and RCW 51.04.060 voids any contract that shifts the obligation. A PEO in Washington cannot price workers’ compensation off its own loss history the way it can in a state with private carriers.

Registration, filing, and deadlines

A Washington employer applies for a state business license through the Department of Revenue and receives a Unified Business Identifier number. Planning to hire employees within the next 90 days is one of the triggers that requires the license, and separate employee accounts with Employment Security and Labor and Industries are needed for each location with employees.

Quarterly reports

A quarter with no payroll still needs all three reports filed. Late or incomplete unemployment reports carry tiered penalties and monthly interest, and an employer not current by September 30 is assigned a delinquent tax rate for the following year.

Other requirements

• New hires and rehires go to the Division of Child Support within 20 days of the hire date. A rehire is anyone returning after a separation of 60 or more consecutive days.
• Failing to report a new hire costs $25 per violation, rising to $500 where the employer and employee conspired to withhold or falsify the report.
• Workers’ compensation coverage is required from the first covered worker, with no employee-count minimum.
• Paid sick leave accrues from the first day of employment for every employee, at 1 hour per 40 hours worked.

Washington payroll reference

Rates and deadlines are current as of August 2026 and change annually. Verify against the linked source before filing.

Frequently asked questions

• Can I buy workers’ compensation from a private carrier in Washington?

  No. Washington does not allow private workers’ compensation coverage. An employer buys from the Department of Labor and Industries or qualifies as a certified self-insurer, and a policy written by a private carrier in another state does not cover Washington work.

• What minimum wage applies to my employees?

  The rate for the place where the work is physically performed, whenever that rate is higher than the state’s $17.13. Eight jurisdictions set higher rates in 2026, running from $19.13 in Bellingham to $21.65 in Tukwila, and several tier the rate by employer size. An employee who works part of the week in Seattle and part in a neighboring city can be owed two different rates.

• How many payroll reports do I file each quarter, and to whom?

  Three. Employment Security takes a tax and wage report for unemployment insurance and a combined Paid Leave and WA Cares report, and Labor and Industries takes a workers’ compensation report. All three are due on the last day of the month following the quarter, and all three are required even when there was no payroll.

• Washington has no income tax, so what do I still owe on payroll?

  Unemployment insurance at your assigned rate on the first $78,200 per employee, workers’ compensation priced per hour worked by risk class, the employer share of Paid Family and Medical Leave if you have 50 or more Washington employees, and federal unemployment tax at 0.6% on the first $7,000. You also collect and remit 1.13% for Paid Leave and 0.58% for WA Cares from employee wages.