Maryland’s New Family and Medical Leave Insurance Program: What Employers Need to Know

At a glance

• The main takeaway: A new law in Maryland created the Family and Medical Leave Insurance program, which will be applicable for all employers starting on July 1, 2026.
• Impact on your business: Funded by both employers and employees, the Family and Medical Leave Insurance Program will provide employees with up to 12 weeks of paid leave, and eligible for an additional 12 weeks.
• Next steps: Aprio’s Employment Tax team can help your company prepare for the employer contributions beginning July 1, 2025. 

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Full story

Effective July 1, 2025, Maryland’s Family and Medical Leave Insurance (FAMLI) program will require most employers with Maryland-based employees to fund FAMLI benefits for employees. These benefits will be funded through both business taxes paid for by the employer and amounts withheld from employee wages and administered by the State’s new FAMLI Division of the Department of Labor (FAMLI Division).  Alternatively, an employer may apply for and use a commercial or self-insured plan to fulfill its FAMLI obligations.

Then, starting in July 2026, eligible employees may receive leave insurance benefits covering a portion of their regular compensation up to $1,000 per week for up to 12 weeks when they take leave for:

• A personal serious health condition,
• A family member’s serious health condition,
• The birth of their child, the placement of a child with them for adoption or foster care, or
• To attend to matters arising from a family member being on active military duty.

Employers will be required to register as FAMLI covered with the FAMLI Division online beginning in the spring of 2025. (It’s important to note that this website is not live at the time this article is published).

Covered Employers: Employers will be deemed a “covered employer” with respect to the FAMLI program when they employ at least one employee in Maryland. The employer does not need to be based in Maryland and is considered a covered employer if they have employees who are localized in Maryland for their work responsibilities (pursuant to the State Unemployment Insurance localization testing rules). 

• Employers of home workers/domestic employees are considered to be covered employers for FAMLI. 
• Nonprofit employers are subject to FAMLI requirements on a tax basis. 
• Governmental employers are not covered by FAMLI.
• Self-employed Maryland residents may also opt into the FAMLI program.

Private-Plan Exclusion: Employers that offer their own family and medical leave insurance benefits that are at least equal to those provided under the measure may apply to be exempt from the state program. To be exempt, employer plans must provide insurance through an insurer that holds a certificate of authority issued by the state insurance commissioner.

Covered Employees: Employees are covered by the family and medical leave insurance law when they have worked at least 680 hours performing services under employment in the state over the four most recently completed calendar quarters for which quarterly reports have been required. The law doesn’t exclude seasonal or part-time employees, provided that the locality and hour minimums are met. Employees cannot opt-out of the plan.

It is important to note that eligibility is not dependent on an employee being a resident of Maryland.  Anyone working in a position located in Maryland could be eligible for benefits and is considered a covered employee for FAMLI. Employees performing their services remotely from Maryland, even in a home office setting, may be considered covered employees if they meet the hours eligibility.

FAMLI taxable wages and contribution rates

Taxable Wages: Wages are taxable for FAMLI purposes up to the federal Old-Age, Survivors, and Disability Insurance (OASDI) taxable wage base, which is $176,100 for 2025. Taxable wages incorporates all compensation paid for employment, including:

• Hourly wages or salaries
• Commissions
• Compensatory pay
• Severance pay
• Standby pay
• Tips or gratuities
• Holiday or vacation pay
• Sick pay
• Any other paid leave

Tax Rate: The FAMLI contribution rate for 2025 is 0.45% of taxable wages for employers with fewer than 15 employees and 0.90% of taxable wages for employers with 15 or more employees. Future rates should generally be released in February of the year they pertain to and cannot exceed 1.2% in total.

Covered employees and employers are each required to fund half of the tax due, employee withholding deductions must occur on a pay-period basis, and the combined amounts must be deposited electronically to the State on a quarterly basis. Employers with fewer than 15 employees are exempt from the employer portion of the contribution but must still withhold and remit the employee portion of the contribution. Employers may opt to pay the employee share of the tax on behalf of the employee, but this may result in taxable compensation to the employee.

Employers will be required to submit wage and hour reports each quarter, even if they are self-funding, and the State will utilize those reports to determine the amount of contributions due to the State.

An employer can request an official determination regarding payroll size which could result in a lower employer contribution rate. Employers will be required to disclose the average number of workers who are out-of-state, and the FAMLI Division will add that number to the average number reported in wage and hour reports during the four previous quarters. If the total is below 15, employers will qualify for the lower contribution rate. The determination will be effective for one year.

While the Department of Labor sets the contribution rate for the state plan, private plans will set their own rates. Employees cannot be charged more in a private plan than they would be through the state plan.

Benefits of FAMLI

Types of Leave: Eligible employees may receive family and medical leave benefits if they take leave for one or more of the qualifying matters:

• To receive treatment for a personal serious health condition.

• To care for their family member’s serious health condition.

• To care for an infant for the first year after the child’s birth.

• To be with a child after the child’s placement with them for adoption or foster care.

• To attend to matters arising from a family member being on, or about to start, active military duty.

Benefits Amounts: The FAMLI program pays cash benefits to eligible employees to partially replace their loss of earnings during periods of leave. An employee’s first benefit payment will be sent within five days of filing a claim or taking leave, whichever is later. Subsequent benefits are paid every two weeks.

Weekly benefits for FAMLI will be payable:

• At 90% of the employee’s average weekly wage for the portion of the wage that is up to 65% of the state average weekly wage, and
• At 50% of the employee’s average weekly wage for the portion of the wage that is more than 65% of the state average weekly wage. 

An employee’s average weekly wage is calculated by dividing the total wages in the highest of the previous four completed calendar quarters by 13.

Effective from July 1, 2026 to Dec. 31, 2026, weekly benefits will range from $50 to $1,000. Starting in 2027, the maximum weekly benefit will be adjusted for inflation. Benefit increases may be temporarily suspended if the state’s seasonally unadjusted employment is negative.

Paid leave is available for up to 12 weeks per year, with an additional 12 weeks available in a year if they initially took leave to care for a child and then became eligible for leave because of a serious personal illness or vice versa.

Convergence with the federal Family and Medical Leave Act: When an employee takes leave under the FAMLI program, the employer may designate a period of the leave to be covered under the federal Family and Medical Leave Act instead. If an employer decides to do so, they must inform employees of their eligibility for benefits under Maryland’s family and medical leave insurance program, and the employee must decline to apply for those benefits.

Employer-provided paid leave: Employers may require benefit payments to be made concurrently with payments made under an employer-provided paid leave policy. Employees and employers may agree to use paid leave under an employer-provided policy while employees receive benefits under the family-leave insurance program to replace up to 100% of their average weekly wages. Family and medical leave benefits and any additional paid leave cannot total more than 100% of an employee’s average weekly wage.

FAMLI notification requirements 

The Maryland Labor Department/FAMLI Division will notify employers of family and medical leave insurance benefit claims within five days of receiving a claim.

Employers must provide employees with written notice about the family and medical leave insurance program at the time of hiring and annually afterward. An employer also must notify an employee of their eligibility to take leave within five business days of receiving a request for qualifying leave.

Employers may require employees to give advance notice of leave at least 30 days before the leave is to begin. If the need for leave is not foreseeable, the employee must notify the employer as soon as possible.

Employer penalties and remedies 

Employers that fail to pay family and medical leave insurance tax may be assessed the amount of contributions and interest due, plus an assessment of up to two times the amount of contributions due. The state labor secretary may also order an audit for the employer for the following fiscal year to investigate and ensure compliance.

Employers that willfully make false statements or fail to report crucial information pertaining to a benefit claim may be subject to a civil penalty of up to $1,000 per occurrence.

Employment Protection: Employees generally are entitled, upon returning from leave, to be restored to an equivalent employment position. However, an employer may deny the restoration if the denial is necessary to prevent substantial economic loss and the employer notifies the employee of the intent to deny restoration.

Retaliation Prohibition: Employers may not discharge, demote, retaliate, or otherwise discriminate against employees who take leave.

The bottom line

As July 1, 2025 nears, if your organization is based in Maryland or has employees who reside in the state, it’s important to make sure you are prepared to properly align your payroll reporting system to comply with the new FAMLI program requirements. Aprio’s Employment Tax team can help you navigate the new the new employer requirements for the FAMLI programs and help you remain compliant.