Maryland Payroll Compliance Guide 2026: Complete Employer Reference

Maryland Payroll Overview

Maryland imposes more distinct payroll obligations than most mid-Atlantic states. You have state income tax withholding that uses a graduated rate schedule, plus a county or city piggyback tax that varies by the employee’s county of residence. That means your withholding calculation changes for each employee based on where they live—not just where they work. Maryland publishes combined withholding tables that incorporate both state and local rates, which simplifies the math, but you still need to know each employee’s county.

On top of that, 2026 brings the Time to Care Act (PFML), Maryland’s paid family and medical leave program. The program adds a 0.9% combined contribution and new quarterly reporting obligations. The minimum wage reached $15.00/hr statewide in 2024, and the Healthy Working Families Act requires paid sick leave for most employers.

Maryland SUI has the highest experienced-employer maximum rate in this group at 10.5%, though the $8,500 wage base limits how much that ceiling actually costs per employee.

Maryland Payroll Taxes: 2026 Rates and Wage Bases

Maryland State and Local Income Tax Withholding

Maryland’s income tax has eight brackets at the state level, ranging from 2% on the first $1,000 of taxable income up to 5.75% above $250,000 (single filers). Most working adults fall primarily in the 4.75% or 5% brackets. On top of state tax, Maryland imposes a local piggyback tax based on the county where the employee lives, not where they work.

Local County Tax Rates

The Comptroller of Maryland publishes combined withholding tables that bake in both the state brackets and each county’s local rate. Download the current Maryland Employer Withholding Guide and the county-specific tables at taxes.marylandtaxes.gov. You select the table matching each employee’s county of residence and filing status.

Employees Who Live Outside Maryland

If an employee lives in another state but works in Maryland, Maryland income tax withholding still applies to wages earned in Maryland. However, you do not withhold the local county tax for out-of-state residents—instead you withhold at a special non-resident rate of 2.25%. These employees may owe income tax to their home state as well; that is their responsibility to manage, not yours.

Maryland MW507 Form

Each Maryland employee completes a Maryland MW507 withholding exemption certificate. The MW507 captures county of residence, filing status, and exemptions. Without a completed MW507, withhold at the maximum rate (no exemptions, single). Employees update their MW507 when their county or filing status changes.

Maryland Time to Care Act: PFML 2026

Maryland’s Time to Care Act created a state paid family and medical leave program that launched in 2026. Contributions fund a state insurance program that pays benefits directly to eligible employees who take qualifying leave.

Contribution Rate and Split

The total contribution rate is 0.9% of covered wages, split between employer and employee. The Maryland Department of Labor determines the exact split—consult the current guidance at labor.maryland.gov/paidleave for the employer and employee share percentages in effect for 2026, as these can be adjusted by the state annually.

Benefit Coverage

Maryland PFML covers:

• Up to 12 weeks of family leave—for birth, adoption, foster placement, or care for a seriously ill family member
• Up to 12 weeks of medical leave—for the employee’s own serious health condition

The two leave types may not be taken simultaneously for the same qualifying reason. Benefits replace a portion of the employee’s wages up to a weekly cap tied to the state average weekly wage.

Employer Obligations

Employers must register with the Maryland PFML program, withhold the employee contribution from each paycheck, and remit combined employer and employee contributions quarterly. Maryland also requires employers to provide employees with a written notice of their PFML rights and post the PFML notice at each work location.

Private Plan Option

Maryland allows employers to substitute an approved private paid leave plan for the state program. The private plan must meet or exceed the state program’s benefit levels. Employers with an approved plan are exempt from state PFML contributions while the private plan remains in effect. Apply through the Maryland Department of Labor.

Maryland SUI: Unemployment Insurance

Maryland SUI is administered by the Maryland Department of Labor. The taxable wage base in 2026 is $8,500 per employee per year.

New Employer Rate and Experience Rating

New Maryland employers pay SUI at 2.3% on the first $8,500 per employee, capping new-employer SUI at $195.50 per employee per year. The experienced-employer range spans 1.0% to 10.5%—one of the highest ceilings in the region. At the 10.5% maximum, the per-employee cap is $892.50 per year. Heavy layoff history can push rates toward that ceiling.

Maryland calculates experience rates using a reserve ratio method. Your account balance (contributions paid minus claims charged) divided by your average annual taxable payroll determines your rate band. Maryland sends annual rate notices before the new year.

Quarterly SUI Filing

File Maryland SUI returns quarterly through the Maryland Unemployment Insurance (MUI) portal at uiportal.labor.maryland.gov. Report total wages, taxable wages, and individual employee wage detail. Quarterly deadlines follow the standard schedule: April 30, July 31, October 31, and January 31.

Maryland Healthy Working Families Act: Paid Sick Leave

Maryland requires employers to provide paid sick and safe leave under the Healthy Working Families Act:

• Employers with 15 or more employees: Provide paid sick and safe leave
• Employers with fewer than 15 employees: Provide unpaid sick and safe leave

Accrual rate: 1 hour per 30 hours worked, up to 40 hours per year. Employees can carry over up to 40 hours of unused leave into the next year. Leave may be used for the employee’s own illness, care for a family member, or for matters related to domestic violence, sexual assault, or stalking.

Maryland is one of a smaller group of states that requires all employers—not just those above a size threshold—to provide some form of sick leave. Track accruals carefully. The Maryland Department of Labor enforces the Act.

Wage Payment Laws and Final Paychecks

Maryland wage payment law appears in the Maryland Labor and Employment Article (§3-501 et seq.), enforced by the Maryland Department of Labor, Division of Labor and Industry.

Pay Frequency

Maryland employers must pay wages at least twice per month on regular paydays established in advance. The paydays must be no more than 15 days apart. Exempt employees may be paid monthly.

Final Paycheck Deadline

Maryland requires final wages by the next regular payday after separation, for both discharges and voluntary resignations. There is no accelerated same-day deadline for terminations in Maryland.

Overtime and FLSA

Maryland has its own overtime law that mirrors FLSA for most employers: 1.5× the regular rate for hours over 40 in a workweek. Maryland also applies special overtime rules to agricultural employees and exempt classifications. The state white-collar exemption threshold tracks the federal FLSA at $684 per week.

Maryland’s overtime law extends to some employees not covered by FLSA, particularly at smaller employers. If your business is too small to fall under federal FLSA coverage (generally less than $500,000 in annual revenue and not engaged in interstate commerce), Maryland state law still requires overtime pay for qualifying hours.

Maryland Minimum Wage 2026

Maryland’s statewide minimum wage reached $15.00 per hour in 2024 after a phased schedule. The rate remains at $15.00 for 2026 barring legislative changes.

Some Maryland counties have passed higher local minimums. Montgomery County implemented its own higher minimum wage phase-in. Howard County and Prince George’s County have also enacted local rates. If your employees work in these counties, the higher local rate governs. Verify current local minimum wages for any county where you employ workers.

Tipped Employees

Maryland’s tipped employee minimum wage is $3.63 per hour in direct wages for employees who regularly receive tips, provided tips bring total hourly compensation to at least $15.00. The employer must make up any shortfall.

New Employer Registration

Maryland new employers register with the Comptroller of Maryland for income tax withholding, the Maryland Department of Labor for SUI and PFML, and the IRS for federal obligations.

Federal EIN

Apply at irs.gov/ein first. Free, same-day issuance online.

Maryland Withholding Registration (Comptroller)

• Where: Maryland Business Registration at bfile.taxes.marylandtaxes.gov
• What you get: Maryland Central Registration Number, withholding account, assigned filing frequency
• Information needed: EIN, business name, address, entity type, first Maryland payroll date

Maryland SUI Registration

• Where: Maryland Unemployment Insurance portal at uiportal.labor.maryland.gov
• Trigger: $1,500 in wages in a quarter, or one or more employees for 20 weeks in a year
• What you get: Maryland UI Employer Account Number, new-employer rate of 2.3%

Maryland PFML Registration

• Where: Maryland Dept. of Labor at labor.maryland.gov/paidleave
• Required for: All Maryland employers

New-Hire Reporting

Report new hires within 20 days to the Maryland State Directory of New Hires at mdnewhire.com. Required fields: employee name, address, SSN, start date, employer FEIN and address.

Maryland Payroll Compliance Calendar 2026

Frequently Asked Questions

How does Maryland income tax withholding work with county taxes?

Maryland withholding combines state and local rates. Each employee’s state tax depends on their income level (rates from 2% to 5.75%), and their county tax adds on top based on their county of residence (2.25% to 3.2%). The Comptroller publishes combined tables that already incorporate both rates—select the table matching each employee’s county and filing status. File all withholding with the Comptroller; the Comptroller distributes the county portion.

When does Maryland’s paid family and medical leave program start?

Maryland’s Time to Care Act launched in 2026. The combined contribution rate is 0.9% of all covered wages, split between employer and employee. Benefits cover up to 12 weeks of family leave and 12 weeks of medical leave. All Maryland employers must register, withhold the employee share, and remit contributions quarterly.

What is the Maryland SUI rate for new employers in 2026?

New employers pay 2.3% on the first $8,500 per employee, capping at $195.50 per employee per year. Experienced employers range from 1.0% to 10.5%. Maryland’s 10.5% ceiling is among the highest in the country, though the low wage base limits absolute cost.

What is the minimum wage in Maryland for 2026?

Maryland statewide minimum wage is $15.00 per hour, reached in 2024. Several counties—Montgomery, Howard, and Prince George’s—have enacted higher local minimums. If your employees work in those counties, verify the current local rate, which may be above $15.00.

When must Maryland employers pay a terminated employee?

Final wages are due by the next regular payday after separation. Maryland doesn’t impose an accelerated deadline for involuntary terminations. Both discharges and resignations follow the same rule.

Which county has the highest local income tax rate in Maryland?

Baltimore City, Prince George’s County, Montgomery County, and Howard County all charge the maximum local rate of 3.2%. An employee living in one of these jurisdictions at the 5.75% state bracket faces a combined Maryland income tax rate of 8.95% on wages above the state’s top bracket threshold.

Does Maryland require employers to provide paid sick leave?

Yes. The Healthy Working Families Act requires employers with 15 or more employees to provide paid sick and safe leave. Accrual is 1 hour per 30 hours worked, up to 40 hours per year. Employers with fewer than 15 employees must provide unpaid sick leave on the same accrual schedule.