Paid Leave Oregon Tax: Split, Wage Cap, and Penalties

The Paid Leave Oregon tax is a 1% payroll contribution on employee wages in 2026, split so that employees pay 0.6% through payroll withholding and large employers pay 0.4%. It applies to wages up to $184,500 per employee for the year, and employers report and pay it quarterly through Frances Online.¹

How the 1% Splits Between Employee and Employer

The 1% total is divided 60/40. Employees pay 0.6% of their subject wages, withheld from each paycheck. Employers pay 0.4%, but only if they qualify as a large employer.²

A large employer is one with an average of 25 or more employees. That count includes workers in every state, not just Oregon. A company with 30 employees spread across several states but only 5 in Oregon still owes the 0.4% employer share on its Oregon wages.²

Small employers, those below 25, owe nothing on the employer side. They must still withhold and remit the 0.6% employee share from every covered worker’s paycheck. Any employer can voluntarily cover part or all of the employee’s 0.6% as a benefit, but this is optional. The total rate is capped by statute at 1% and cannot rise higher without legislative action.³

What Wages the Tax Applies To

Subject wages track Oregon Unemployment Insurance wages closely. Salary, hourly pay, bonuses, commissions, vacation pay, sick pay, and PTO all count. The main things that don’t count are pre-tax benefit deductions: employee contributions to flexible spending accounts and health savings accounts under a Section 125 cafeteria plan are excluded, as is retirement and pension income.⁴ In practice, you strip out those pre-tax items first, then calculate 0.6% and 0.4% on what’s left.

The Annual Wage Cap

Contributions stop once an employee’s cumulative wages for the year hit the Social Security taxable wage base, which is $184,500 for 2026.⁵ Both the employee and employer shares shut off at that point for the rest of the calendar year. The cap resets each January 1 and moves with the Social Security base annually.¹

At the cap, the maximum annual employee contribution is $1,107 (0.6% of $184,500). A large employer pays at most $738 per employee (0.4% of $184,500).

Which Workers’ Wages Are Covered

If someone physically performs their work in Oregon, contributions are owed on their wages regardless of where the employer is headquartered or where the employee lives. For workers who split time across state lines or work remotely, a four-step localization test decides whether Oregon gets the contribution:⁶

If the employee works entirely in Oregon, all wages are reported to Oregon. If entirely in another state, none are.
If they work in multiple states, look at their base of operations. If they physically start and return to work in Oregon, all wages go to Oregon.
If there’s no clear base of operations, the state directing or controlling the work controls, so long as the employee also performs some work there.
If none of the above resolves it, Oregon residency is the tiebreaker. Oregon residents’ wages are reported to Oregon; non-residents’ are not.

You stop at the first step that produces a clear answer.

Reporting and Paying Quarterly

Employers file and pay through Frances Online, Oregon’s centralized payroll reporting system for both Paid Leave and Unemployment Insurance.⁷ Setting up an account requires your Business Identification Number and Federal Employer Identification Number.

Contributions are reported on Form OQ, the Oregon Combined Quarterly Payroll Tax Report. Each filing includes the total number of employees, total Paid Leave subject wages paid during the quarter, and the calculated contribution amounts for both employee and employer shares.⁸

The quarterly deadlines are:⁹

Q1 (January through March): due April 30
Q2 (April through June): due July 31
Q3 (July through September): due October 31
Q4 (October through December): due January 31 of the following year

When a due date lands on a weekend or holiday, the deadline moves to the next business day. Payment for the full liability, combining the withheld employee share and any employer portion, goes through Oregon’s Revenue Online system.

Self-Employed Contributions

Self-employed workers and independent contractors are not automatically enrolled. Coverage is voluntary. If you opt in, the contribution rate is 0.6% of your net self-employment income, up to the same $184,500 cap.¹⁰ The rate matches the employee share because there is no employer to pay the 0.4%.

To be eligible, you must work in Oregon and have earned at least $1,000 in Oregon net self-employment income (revenue minus business expenses) in the prior tax year. Enrollment goes through Frances Online, and it commits you to paying contributions for at least three years. Payments are due quarterly on the same schedule employers follow. Your net income figure comes from your federal and state tax returns for the prior year.¹⁰

Equivalent Plans as an Alternative

An employer can apply to run a private paid leave plan instead of paying into the state program. These equivalent plans must provide benefits at least equal to Paid Leave Oregon, cover all Oregon employees, and cannot deduct more from employee wages than the state program would.¹¹

Approval comes from the Oregon Employment Department. The initial application costs $250 (nonrefundable), and the employer must reapply annually for the first three years at $150 per renewal. After that, reapplication is required only when the plan changes. Once approved, the employer is exempt from quarterly contributions to the state trust fund.¹¹

Penalties for Late or Missing Contributions

Withheld employee contributions are held in trust for the state, so failing to remit them is more than a paperwork problem. Penalties escalate quickly:³

Interest on late contributions runs at 1.5% per month from the due date. Any partial month counts as a full month.
If you don’t pay within 10 days of a written demand from the Employment Department, a 10% penalty is added to the outstanding amount.
If all required reports and contributions for the year aren’t filed by September 1, the penalty is 1% of the prior calendar year’s total employee wages.
After a written warning, each additional late quarterly report can trigger a penalty of 0.02% of employee wages, rounded to the nearest $100.
Fraud adds 50% of the deficiency on top of the full amount owed.

Criminal exposure exists as well. Violating any provision of the Paid Leave statute is a Class A misdemeanor. Willful violations without a separately prescribed penalty are a Class C misdemeanor, and each day the violation continues counts as a separate offense.³

One risk that catches people off guard: officers, members, and partners of corporations, LLCs, and limited liability partnerships who have payroll duties are personally liable for unpaid contributions if the business defaults. The state can pursue the individuals responsible for withholding and paying, not just the entity.³

1
State of Oregon. Current Tax and Contribution Rates
2
Paid Leave Oregon. Employers – Paid Leave Oregon
3
Oregon State Legislature. Oregon Revised Statutes Chapter 657B – Family and Medical Leave Insurance
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Paid Leave Oregon. Common Questions – Paid Leave Oregon
5
Social Security Administration. Contribution and Benefit Base
6
Oregon State Legislature. Place of Performance Fact Sheet
7
State of Oregon. Frances Online Help and Resources
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Paid Leave Oregon. What Employers Need to Do – Paid Leave Oregon
9
Oregon Department of Revenue. Withholding and Payroll Tax
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Paid Leave Oregon. Self-Employed and Independent Contractors – Paid Leave Oregon
11
Paid Leave Oregon. Equivalent Plans