CLIENT ALERT: Maryland Family and Medical Leave Insurance (FAMLI)

What Small Business Employers Need to Know Now

On March 30, 2026, the Maryland Department of Labor published final regulations for the Family and Medical Leave Insurance (FAMLI) program at COMAR 09.42. FAMLI, established under the Time to Care Act of 2022, creates a state-run paid family and medical leave insurance program funded by employer and employee contributions. The final regulations cover general provisions, contribution mechanics, equivalent private insurance plan (EPIP) requirements, the claims process, and dispute resolution. In April 2026, MD Labor reaffirmed the total contribution rate at 0.9% of wages.

With regulations now final and the first payroll deductions less than nine months away, employers should begin preparing immediately

Executive Summary

Maryland’s FAMLI program will require every employer with at least one employee in Maryland to participate in a paid leave insurance system, with no exemptions for small businesses. Payroll contributions begin January 1, 2027, and employees will be able to claim paid leave benefits starting January 2028. Companies under 100 employees face the same core obligations as larger employers, though businesses with fewer than 15 total employees (counting both in-state and out-of-state workers) pay only 0.45% of wages, half the standard 0.9% rate. Employers with 15 to 99 employees owe the full 0.9% but may withhold up to half (0.45%) from employee paychecks.

Employers with employees in D.C., Virginia, or Delaware see our companion article, Paid Family Leave in the Mid-Atlantic: How Maryland Compares to Surrounding States, for a multi-state compliance overview.

Key Requirements

Now Through Fall 2026: Preparation Phase

Sign up for FAMLI Division email updates to receive program announcements and sample forms as they become available.
Budget for contributions based on the confirmed 0.9% total contribution rate, which applies to wages paid from January 1 through December 31, 2027.
Identify an Authorized Officer who will create your employer profile on the FAMLI website.
Evaluate your plan options. Registered employers are automatically enrolled in the State Plan, but you may also purchase a commercial private plan or, if eligible, apply for a self-insured plan. Employers with fewer than 50 employees can only self-insure if they already have a FAMLI-compliant plan in place by July 31, 2026.
If pursuing a private plan: Submit a Declaration of Intent (DOI) between September 1 and November 15, 2026.

Fall 2026: Registration

All employers with at least one Maryland-based employee must register online at paidleave.maryland.gov starting Fall 2026. One registration is required per EIN; all divisions or subsidiaries sharing an EIN are covered together.

January 1, 2027: Contributions Begin

Begin payroll deductions from employee wages on January 1, 2027.
First quarterly payment to the State is due April 30, 2027.
Quarterly wage and hour reports must be electronically filed starting April 2027, even if you participate in a private plan.

July 2027: Employee Notifications Begin

Employers must provide employees with a written notice about FAMLI benefits no later than July 2027 (six months before benefits begin).

January 2028: Benefits Available

Eligible employees may begin filing claims for paid leave benefits.

Employee Eligibility and Benefits

Who Qualifies

An employee is eligible for benefits after working at least 680 hours in a position localized in Maryland during the four most recently completed calendar quarters before the claim is filed or the leave begins, whichever is earlier. Hours can come from more than one employer, and eligibility is not tied to tenure at a specific job. There is no minimum age or income requirement. Federal employees are excluded from the program.

Qualifying Events

Employees may take FAMLI leave to:

Welcome a child (birth, adoption, foster care, or kinship care)
Care for their own serious health condition
Care for a family member with a serious health condition
Make arrangements related to a family member’s military deployment

“Family member” is defined broadly to include spouses, domestic partners, children, parents, grandparents, grandchildren, siblings, legal guardians, and individuals who stood in loco parentis.

Duration of Leave

Up to 12 weeks per 12-month benefit year per employer.
Up to 24 weeks if the employee experiences both their own serious health condition and a new child in the same year.
Leave may be taken continuously or intermittently. Under the State Plan, intermittent leave cannot be taken in increments of less than 4 hours (unless the employee’s scheduled shift is shorter).

Wage Replacement Rates

If the employee’s average weekly wage (AWW) is 65% or less of the State Average Weekly Wage (SAWW): benefit = 90% of the employee’s AWW.
If the AWW exceeds 65% of the SAWW: benefit = 90% of 65% of the SAWW, plus 50% of the AWW exceeding that threshold.
Maximum weekly benefit: $1,000.
No waiting or elimination period. Benefits are payable starting the first day of leave.

Job Protection

Employers must hold an employee’s position while the employee is on FAMLI leave and return them to the same or an equivalent position. Employers must also maintain health benefits during the leave period.

Employer Contributions and Payroll Obligations

Contribution Rate

The total contribution rate for 2027 is 0.9% of gross wages, up to the Social Security wage base. The rate is the same for salaried and hourly employees. MD Labor will announce each subsequent year’s rate every November, and the total rate cannot exceed 1.2% under current law.

How the Cost Is Split

Employer Size	Employer Obligation	Maximum Employee Withholding
Fewer than 15 employees (total, including out-of-state)	Remit 50% of the total rate (0.45%)	May withhold the full 0.45% from employees
15 or more employees	Remit 100% of the total rate (0.9%)	May withhold up to 50% of the total rate (0.45%) from employees

Employers may choose to pay the full amount, covering the employee share as a benefit. This may have tax implications and warrants a conversation with your tax advisor.

Employer Size Determination

Employer size is based on the total number of employees to whom the employer paid wages, both within and outside Maryland, under the same EIN. Independent contractors do not count.

During 2027: Size is determined each quarter based on that quarter’s wage and hour report.
Starting 2028: Size is determined annually by averaging the four quarters of the prior calendar year.

If your payroll fluctuates above and below 15 employees seasonally, your classification may change quarter to quarter in 2027 and then lock in annually starting in 2028.

Employers who want to be classified as “small” must report the number of out-of-state employees on each quarterly report. Failure to provide this number means the employer will be deemed to have 15 or more employees and will owe the full rate.

Payroll Deduction Rules

Deductions must be made at the time wages are paid. Employers cannot retroactively collect from employees if they miss a pay period, with one exception: if the employee’s paycheck was insufficient to cover the deduction (e.g., tipped employees), the employer has up to 6 pay periods to collect.
Employers must provide written notice to employees at least one pay period before payroll deductions begin.

Quarterly Schedule FAMLI contribution payments and wage/hour reports follow the same quarterly schedule as Maryland unemployment insurance reporting, with payments due April 30, July 31, October 31, and January 31 for the preceding quarter.

Penalties for Late Payment

Employers who fail to pay required contributions on time are given 30 days to cure. After that, the FAMLI Division may assess 1.5% monthly interest on the unpaid amount and impose an additional penalty of up to two times the delinquent contributions.

Employee Handbooks and Offer Letters

Maryland employers should update their employee handbooks and offer letter templates before payroll deductions begin on January 1, 2027.

Handbooks need a new standalone FAMLI leave section and, more importantly, revisions to existing leave policies. Every employer must define how FAMLI interacts with current PTO, parental leave, short-term disability, and FMLA policies. The regulations create specific rules governing these interactions, including restrictions on requiring employees to exhaust PTO before using FAMLI and a framework called “Alternative FAMLI Purpose Leave” that determines whether employers can require existing paid parental leave to run concurrently with FAMLI benefits. Attendance and absenteeism policies also need carve-outs for FAMLI-protected leave.

Offer letters should be updated to disclose the upcoming FAMLI payroll deduction and, if applicable, note any employer decision to cover the employee’s contribution share as a benefit.

Timing: Handbook drafting and policy audits should happen in Q2-Q3 2026, with finalized updates distributed to employees by Q4 2026, before the first deduction hits payroll. The FAMLI Division will publish sample notice templates that should be incorporated into your materials.

Getting the leave-interaction provisions right is where the complexity and legal risk sit. We are available to review your current handbook, advise on the AFPL designation decision, and draft the required updates. Please reach out to schedule a consultation.

Action Items for Small Employers

Register for FAMLI email updates at the FAMLI Division sign-up page.
Determine your employer size. Count all employees under your EIN, including those working outside Maryland. If you have fewer than 15, you qualify for the reduced contribution rate of 0.45%.
Budget for contributions. At 0.9% of gross wages (or 0.45% for employers under 15), estimate your annual cost. For example, a company with 25 employees averaging $50,000 in annual wages would owe roughly $11,250/year at the full 0.9% rate, with the employer’s minimum share at $5,625/year.
Decide whether to withhold from employees. You may withhold up to 50% of the contribution rate from employee paychecks, or absorb the full cost as an employer-paid benefit.
Contact your payroll provider. Confirm that your payroll system can handle the FAMLI deduction starting January 1, 2027, and quarterly reporting starting April 2027.
Evaluate your plan choice. Most small employers will find the State Plan to be the simplest path to compliance. If you are considering a commercial private plan, begin conversations with insurance brokers now to meet the November 15, 2026 DOI deadline.
Audit your existing leave policies and engage counsel to update your employee handbook and offer letters. (See “Employee Handbooks and Offer Letters” above.)
Identify covered employees. FAMLI applies to employees whose work is “localized” in Maryland. A practical shorthand: if you pay Maryland unemployment insurance for the employee, they are covered under FAMLI.
Prepare employee communications. You will be required to provide formal notice one pay period before deductions begin and again in July 2027. The FAMLI Division will publish sample notice templates.
Register your business when the FAMLI portal opens in Fall 2026, using your federal EIN.