Virginia’s HB 1207 payroll tax is a new Paid Family and Medical Leave (PFML) contribution that most Virginia employers must begin withholding from employee wages and remitting to the Virginia Employment Commission on April 1, 2028. It sits on top of existing unemployment insurance taxes, not in place of them, and the amount is shared between employer and employee.1Virginia State Legislative Information System. HB1207 – Paid Family and Medical Leave Insurance Program
What the Contribution Funds
The money collected under HB 1207 funds a statewide insurance program that pays eligible workers up to 12 weeks of leave per benefit year. Qualifying reasons include bonding with a new child within the first year of birth, adoption, or foster placement; caring for a family member with a serious health condition; the employee’s own serious health condition; caring for a covered service member who is a family member or next of kin; needs arising from a family member’s active duty or call to active duty; and, capped at four weeks, seeking help related to domestic violence, sexual assault, or stalking affecting the employee or a family member.1Virginia State Legislative Information System. HB1207 – Paid Family and Medical Leave Insurance Program
Benefits pay 80 percent of the employee’s average weekly net earnings, capped at 100 percent of Virginia’s statewide average weekly wage. The cap adjusts each year with statewide wages. Self-employed individuals may opt in voluntarily.
Contribution Rate and How the Cost Splits
The VEC has not yet published a final rate. Early Commission estimates put the contribution at roughly 0.72 percent of wages, with annual recalculation based on program solvency.2Virginia Employment Commission. First in the South: Virginia Enacts Paid Family and Medical Leave
How the cost splits depends on headcount. If you have more than 10 employees, you may withhold up to 50 percent of the required contribution from employee wages and cover the remainder yourself. If you have 10 or fewer employees, you are only required to collect and remit 50 percent of the rate that applies to larger employers, and no additional employer share is owed. That distinction meaningfully reduces the cost for small businesses.
Dates to Put on the Calendar
Two dates matter most. Contribution collection starts April 1, 2028, which is when payroll systems need to be withholding and remitting the PFML premium. Employees can begin applying for benefits on December 1, 2028, eight months later, so the fund has time to build reserves before paying claims.2Virginia Employment Commission. First in the South: Virginia Enacts Paid Family and Medical Leave
Between now and April 2028, the work is practical: confirm that your payroll software can add a new withholding line tied to VEC remittance, budget for the employer share if you have more than 10 employees, and decide whether the state program or a private plan is the better fit.
The Private Plan Option
Employers are not required to use the state-run program. HB 1207 allows a private plan alternative if it meets or exceeds the state benefits and receives VEC approval.3Virginia Employment Commission. Virginia Paid Family and Medical Leave FAQ If you already offer short-term disability or paid parental leave, compare those benefits against the PFML requirements to see whether the existing policy qualifies or needs to be enhanced. Approval has to be in hand before contribution collection begins on April 1, 2028, so this is not a decision to leave until the last quarter.
How This Fits With Existing UI Tax
The PFML contribution is a separate obligation from Virginia’s unemployment insurance tax, and UI rules do not change. UI is still calculated on the first $8,000 of each employee’s wages per calendar year, with rates assigned by the VEC based on each employer’s experience rating.4Virginia Employment Commission. What Is the Wage Base for Each Employee That I Will Pay Taxes On? Quarterly UI reporting on the FC-20 and FC-21, due at the end of the month after each calendar quarter, continues as before.5Virginia Employment Commission. Form FC-20 / FC-21 – Employer’s Quarterly Tax and Payroll Report
One point worth flagging: HB 1207’s taxable wages are not limited to the UI wage base. The PFML contribution is described as a percentage of wages, not a percentage of the first $8,000, so expect to withhold on a broader wage figure than the UI tax uses. The VEC’s final implementation guidance will confirm the exact wage definition.
Classification Matters More Now
The PFML contribution only applies to workers classified as employees. Under Virginia law, any individual performing services for pay is presumed to be an employee unless the worker qualifies as an independent contractor under IRS guidelines.6Virginia Code Commission. Virginia Code 40.1-28.7:7 – Misclassification of Workers Once contributions start flowing in 2028, misclassifying a worker means unpaid PFML contributions for every quarter that worker should have been on payroll, on top of the unpaid UI tax exposure that already exists. A misclassified worker can also sue the employer for lost wages, salary, and benefits, plus attorney fees and court costs, when the employer knew of the misclassification. Reviewing borderline contractor arrangements before contribution collection begins is cheaper than fixing them afterward.
What to Do Between Now and April 2028
The practical checklist is short. Confirm with your payroll provider that PFML withholding will be supported and mapped to the VEC. Count your employees and know which side of the 10-employee line you fall on, because it changes the employer share. Compare any existing paid leave policy against the PFML benefits to decide whether a private plan makes sense, and start the VEC approval process early if you go that route. Review worker classifications so the wage base you contribute on is the correct one. And keep the two dates in view: April 1, 2028 for contributions, December 1, 2028 for employee claims.