Every business in Maryland should know about the State and Federal payroll tax regulations to stay compliant and avoid legal issues. Failure to file returns or remit amounts collected as required results in a penalty of 25% of the unpaid tax.
If you are planning to run payroll yourself or need information, here’s everything you need to know about payroll in the state of Maryland.
If you are a business looking for payroll and HR management, PeopleWorX can help.
PeopleWorX specializes in workforce management for small businesses in Maryland. You can reach out here if you need help or want to learn more.
You may also be interested in reading Ten Rules on how to do Payroll.
Maryland Tax Payroll rates and withholding Requirements:
1. Maryland Minimum Wage Rule in 2024: Effective January 1, 2024, the minimum wage for Maryland employees increased to $15. This is a significant increase from the prior rate of $13.50 per hour for employers with 15 or more employees. It is expected that Maryland’s minimum wage is set to increase in the next few years.
This minimum wage rate remains the same for all counties in Maryland except for Montgomery. The minimum wage in Montgomery County is $16.70 per hour for businesses with 51 or more employees. This minimum wage is expected to increase further in July 2024.
It is important to stay updated on the state’s current minimum wage rates to ensure compliance.
2. Maryland Overtime Pay: Maryland follows the Federal Fair Labor Standards Act law for overtime pay regulations to all employers. As per the law, employees who have worked more than 40 hours in a workweek should be paid 1.5 times of their regular pay.
3. Pay Frequency in Maryland: As per Maryland law, employers are required to pay employees every two weeks or twice each month in cash, check, direct deposit, a deposit to a card account, or a debit card.
4. Withholding Taxes: Employers in Maryland are required to withhold state income taxes as well as federal income taxes and FICA taxes from employees’ wages.
5. Maryland Record-Keeping Requirements: All employers are required to register with the Revenue Administration Division by filing a Combined Registration Application form aka CRA. Employers must maintain accurate payroll records for each employee, including hours worked, wages paid, and deductions made, employee details (name address, social security number, period of employment), employee’s exemption certificate and employer identification number.
Also, note that all records should be maintained at least three years after the date the tax to which they relate became due or the date the tax was paid.
6. Unemployment Insurance Taxes: Employers in Maryland are required to pay state unemployment insurance taxes to provide benefits to eligible employees.
In 2024, the Maryland Division of Umemployment has recalculaytred the annual tax rate for all earned and standard rate employers. Visit here to learn more about this recalculation.
7. Worker’s Compensation Insurance: Maryland law requires most employers to carry worker’s compensation insurance to help employees who are injured on the job. The benefits include Temporary Total Disability Benefits, Temporary partial Disability Benefits, Permanent Total Disability Benefits, Permanent Partial Disability Benefits, Medical/Hospitalization Benefits, Wage Reimbursement Benefits, and Vocational Rehabilitation Benefits. Learn more about Maryland Workers’ Compensation Law here.
8. Maryland Paid and Unpaid Leave:
Sick and Safe leave: Employees in Maryland are entitled to sick and family leave options. Per the Maryland Healthy Working Families Act, employers with 15 or more employees should provide paid sick and safe leave for certain employees. And employers with 14 or fewer employees should provide unpaid sick and safe leaves for certain employees.
Flexible Leave: Per Maryland’s Flexible Leave Act, companies with 15 or more employees must provide paid leave time to their workforce to take care of their immediate sick family members.
Parental/Adoption Leave: Employees are eligible for six workweeks of unpaid leave during a 12-month period for the birth or Adoption of a child.
Deployment Leave: Employees may take a day off when their immediate family member serving in the United States Armed Forces leaves or returns from active duty.
9. Pay Transparency in Maryland
Last but not least is Pay Transparency. Maryland’s Equal Pay for Equal Work law was amended in 2020, and the law requires employers to provide a wage range for job positions.
This may seem trivial, but pay transparency is on the increase, and businesses should be aware of its implications and stay compliant.
Finally, it’s important to consult with a professional or legal expert to ensure that your payroll processes comply with all relevant Maryland regulations.
Maryland State Tax Resources:
To help you with resources, here are the information on latest employment legislation and tax documents.
Maryland Division of State Documents
Employer Identification Number (EIN) Application
Maryland Withholding Form
Three different income tax withholding certificates:
If you have any further questions, contact us. Our team will be happy to help you.
Related Posts
