Oregon PLO Tax: How It Affects Your Finances
The Oregon PLO tax is a payroll tax that impacts both employers and employees in the state. The tax was implemented to fund Paid Leave Oregon, a program that provides eligible workers up to 12 weeks of paid leave for reasons such as illness, injury, or having children.
Both employers and employees share the cost of the program, with the total contribution rate set at 1% in 2023, though this may be subject to change in future years.
What is Oregon PLO tax?
Oregon PLO tax refers to the Paid Leave Oregon tax, which is a statewide program that allows employees to take paid leave for various reasons. This includes sick leave, parental leave, and bereavement leave.
The program is funded through a payroll tax that is paid by both employees and employers. Starting from January 1, 2023, all employees, regardless of employer size, and large employers with 25 or more employees are required to contribute to the program.
The total contribution rate for 2023 is 1%, with large employers paying 40% of the contribution rate, and employees paying the remaining 60%. The contribution rate may change from year to year but will never exceed 1%.
Impact on Finances
One of the significant impacts of the Oregon PLO tax is on finances, specifically affecting the budget of the employees. Both the employer and the employee share the cost of Paid Leave Oregon, but starting January 1, 2023, employees have to pay 60% of the 1% total contribution rate, which is a definite increase in the share they have to pay.
For large employers with 25 or more employees, they have to pay 40% of the contribution rate, while small employers pay the entire contribution rate. The contribution rate may change from year to year, but it will never exceed 1%.
Therefore, it is essential for employees to be aware of the changes in the contribution rate and budget for it accordingly. The Oregon Employment Department (OED) released the 2023 PFMLI rates, and it reflects the contribution rate changes that will begin next year.
Alternatives to PLO
While the Paid Leave Oregon (PLO) program is mandatory for employees, there are alternatives available for employers who wish to opt-out and provide their own paid leave benefits. One such alternative is setting up a private plan that provides equivalent benefits to employees.
Employers who opt for a private plan must obtain approval from the Oregon Employment Department (OED) by submitting an application.
Employers who offer an equivalent plan may be exempted from the PLO program and would not need to pay the required 60% of the 1% total contribution rate. This means that employees may also be exempted from paying the remaining 40% of the contribution rate.
However, it is important to note that the equivalent plan must provide comparable or greater benefits than those offered under the PLO program.
For employers who cannot or do not wish to opt-out of the PLO program, there are options available to help offset the cost. One such option is to offer voluntary benefits to employees.
These benefits can include programs that cover short-term disability, life insurance, critical illness, and accident insurance. Another option is to consider adjusting employees’ compensation packages to account for the required contributions to the PLO program.
Regardless of the approach an employer chooses to take, it is important to carefully consider the financial impact on both the company and its employees. Seeking advice from a qualified financial professional can help in determining the best course of action given the specific circumstances.
Frequently Asked Questions
Who is eligible for the Oregon PLO tax?
How is the Oregon PLO tax payment calculated?
What are the benefits of the Oregon PLO tax?
Conclusion
Starting Jan. 1, 2023, Paid Leave Oregon (PLO) will affect all employees in the state of Oregon, regardless of employer size. Employers and employees will share the cost of the program, with a 1% total contribution rate, which may change from year to year but will never exceed 1%.
Large employers with 25 or more employees will pay 40% of the contribution rate, while employees will pay the remaining 60%. PLO contributions will be post-tax and included in wages subject to Oregon income tax withholding.
Employers may opt out of the PLO program if they choose to offer an equivalent plan. Stay updated with the 2023 PFMLI rates and limits released by the Oregon Employment Department.
