A couple of Washington Research Council posts highlight an issue that has received perhaps less attention than it deserves: The likelihood of several payroll tax increases next year.
The WRC itemizes them here. The Council notes that there’s some discretion associated with the paid family and medical leave premium.
According to the Employment Security Department (ESD), premiums for paid family and medical leave will increase to 0.6% beginning Jan. 1, 2022…
The increase from 0.4% to 0.6% may or may not be reflected in employee paychecks. For 2019 to 2021, the premium rate is split so that one-third is for family leave benefits and two-thirds is for medical leave benefits. Under the statute, the employee pays the full amount of the family leave premium and 45% of the medical leave premium. The employer statutorily pays 55% of the medical leave premium.
However, the employer may choose to pay the full premium and not deduct anything from an employee’s paycheck (as is the case with workers’ compensation).
Somebody pays, clearly. More detail at the post. And, the WRC notes,
Regardless of who pays the premium, this increase is one of several payroll tax increases expected for next year:
- Workers’ compensation rates could go up 3.1% on average.
- The unemployment insurance average tax rate is forecast to increase from 1.22% in 2021 to 1.45% in 2022. (We wrote about unemployment insurance and the pandemic in a policy brief earlier this year.)
- Unemployment insurance taxes will be paid on a larger taxable wage base. It is increasing from $56,500 in 2021 to $62,500 in 2022.
- The new 0.58% long-term care payroll tax begins in January.
These things add up. Further, the WRC reports that Washington continues to have the nation’s highest workers’ compensation benefit costs.
The National Academy of Social Insurance (NASI) reports that workers’ compensation benefit costs per covered worker in Washington were $777.33 in 2019 (up from $769.52 in 2018). This is the highest in the country; the second highest was California, with $713.52 benefits per covered worker.
Washington’s workers’ compensation benefit costs are also high as a percent of covered wages: In 2019, Washington ranked 6th highest (1.12%). According to NASI, Washington’s covered wages increased 35.9% from 2015 to 2019, which was the strongest growth in the country.
Why does this matter?
Benefit costs (as reported by NASI) are the best way to measure workers’ compensation system costs and compare them across states.
And, yes, they’re scheduled to go up.
Average workers’ compensation premium rates were reduced by the Department of Labor & Industries in 2018, 2019, and 2020. There was no change in 2021, but L&I has proposed a 3.1% increase for 2022. The supplemental pension component of the rate would increase by 14% under the proposal.
Again, these things add up.