Washington State Payroll Compliance: What Out-of-State Employers Get Wrong

Linx Team · 10/02/2025

Washington State's lack of personal income tax makes it attractive for remote workers and expanding companies. But don't mistake 'no income tax' for 'simple payroll.' Between Paid Family & Medical Leave, L&I premiums, and local taxes, there's plenty that can trip up out-of-state employers.

Paid Family & Medical Leave (PFML)

Washington's PFML program provides up to 12 weeks of paid leave for qualifying events. Both employers and employees contribute, and the rules around exemptions and voluntary plans are nuanced.

Labor & Industries (L&I) Premiums

Washington requires workers' compensation coverage through the state fund (L&I) for most employers. Premiums vary significantly by job classification and claims history.

Local Taxes and Nexus Issues

While Washington has no state income tax, it does have Business & Occupation (B&O) tax—and several cities have their own taxes. Out-of-state employers often overlook these.

What Out-of-State Employers Should Do

If you're hiring in Washington without a local presence, here's the practical checklist to avoid compliance surprises.