Explainer: Paid Leave Benefits and Funding in the United States

Explainer: Paid Leave Benefits and Funding in the United States

Wage Replacement, Duration, and Funding in U.S. State Paid Family and Medical Leave Programs

Brief

Monkey Business Images / Shutterstock.com

By

Vicki Shabo

This document has been updated multiple times since its original June 2021 publication to reflect newly passed or modified state paid leave programs, new data on state programs, and benefit and contribution information. It will continue to be updated periodically as new information is available.

As of January 2025, 13 states plus the District of Columbia (DC) have or will soon have statewide paid family and medical leave programs in place.

California, Colorado, Connecticut, DC, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington currently make paid leave benefits available to workers.

Four additional states enacted paid family and medical leave programs in 2022 and 2023 that will begin paying benefits in 2026: Maryland, Delaware, Maine, and Minnesota.[1],[2]

Without a federal paid family and medical leave program-like the U.S. House of Representatives considered and passed in 2021 as part of the Build Back Better Act but the Senate failed to take up-states are laboratories for innovation.

This explainer is a companion to Paid and Unpaid Leave Programs in the United States. It addresses policymakers' questions about paid family and medical leave program design, benefits, and funding methods. It shows that the value delivered by comprehensive paid leave programs comes at an affordable cost.

This explainer also touches on a voluntary paid leave program model in New Hampshire and Vermont and another alternative-the authorization of private paid leave insurance coverage for employers to purchase in Alabama, Arkansas, Florida, Kentucky, South Carolina, Tennessee, Texas, and Virginia. However, these are not comprehensive programs and do not guarantee access to private-sector workers.

Wage Replacement Supports Workers and Families

Paid leave prevents workers and their families from falling down a financial rabbit hole when breadwinners need time away from their jobs to care for a loved one or address their own serious health issue. This is a critically important matter of equity and security because just 27 percent of workers have paid family leave through their jobs absent a state policy, and low-wage workers are 10 times less likely to have access to paid family leave than the highest-paid workers.

In 2018, Brandeis University researchers estimated that a typical worker would forgo more than $9,500 in lost wages to take 12 weeks of family or medical leave without pay. While on leave, workers still need to afford basic expenses to keep their families afloat. Paid leave can provide the security to meet these basic financial obligations.

Urban Institute research released in 2024 estimates that a comprehensive paid family and medical leave program modeled on the federal FAMILY Act would reduce poverty among leave-takers by 16 percent, especially for Black and Latine families. Access to FAMILY Act benefits would also increase net income for nearly 90 percent of families, with the largest increases benefiting families with low incomes.

The country's first two paid family leave programs, in California and New Jersey, began by replacing a fixed percentage of a worker's typical wages when the worker needed to take paid family or medical leave (55 percent and 67 percent, respectively). These two states have subsequently raised their wage replacement rates and one-California-abandoned a fixed percentage of wages for a sliding-scale approach.

• In 2017, California implemented a temporary rate increase to 60 percent for most workers and 70 percent for the lowest-wage workers-but research showed this still was not enough for lower-wage workers to make use of leave. In January 2025, the implementation of a law passed in 2022 raised wage replacement rates to 90 percent for California workers making less than 70 percent of the state's average quarterly wage and 70 percent for other workers, up to a maximum benefit amount. This blended rate mirrors innovations in newer state programs' wage replacement, described below. The program improvement is financed by eliminating a cap on taxable wages that existed prior to 2024, making the contribution less regressive.
• In July 2020, New Jersey implemented a suite of changes, including raising its wage replacement from a flat 67 percent to a flat 85 percent of workers' typical wages and substantially increasing the maximum benefit amount.

The next two programs to pass-Rhode Island and New York-also take a fixed percentage approach but have not updated their wage replacement rates of 60 percent and 67 percent, respectively.

Most newer programs have adopted a sliding-scale approach to paid leave benefit payments and provide higher wage replacement to lower-wage workers. This helps to make leave more affordable and accessible to people often living paycheck to paycheck.

• Washington state's program, which began paying benefits in January 2020, pioneered progressive wage replacement, replacing 90 percent of wages for low-wage workers and a blended rate for everyone else.
• DC's program, which began making benefits available on July 1, 2020, also adopts this sliding scale model, providing low-wage workers 90 percent of their typical wages and a blended rate for middle- and higher-wage earners.
• Massachusetts' program, which made benefits available for most purposes on January 1, 2021, and all covered purposes on July 1, 2021, replaces 80 percent of wages for lower-wage workers and offers a blended rate for others.
• Connecticut's program, which began accepting applications in December 2021 and paying benefits on January 1, 2022, provides 95 percent of wages for lower-wage workers and a blended rate for all others.
• Oregon's program, which began accepting applications in August 2023 and paying benefits on September 3, 2023, provides low-wage workers 100 percent of their wages and a blended rate for all others.
• Colorado's program, which began paying benefits on January 1, 2024, provides low-wage workers with 90 percent of wages and a blended rate for all others.

Three of the four soon-to-be-implemented state programs also embrace this model: Maine, Maryland, and Minnesota will provide up to 90 percent of low-wage workers' typical wages. Delaware will follow the older model using one wage replacement rate but follows best practices recommended by researchers to set wage replacement at 80 percent of a worker's average weekly wage-allowing lower-wage workers to use needed paid leave without falling into poverty and enabling middle-wage workers to continue to meet their basic household expenses.

The figure below shows the approximate benefit that workers at different wage levels can expect to receive in each state's current or forthcoming program. A supplementary table shows approximate wage replacement for workers who are paid minimum wage, average weekly wages, or fractions or multiples of the state average weekly wage (SAWW) in each state. (Notes [3] to [16] provide more information about wage replacement rates.)

To compare apples to apples, we calculate benefits using the 2025 minimum wage and SAWW used to calculate paid leave, workers' compensation, or unemployment benefits in 2025. For programs that have not yet been implemented, benefit amounts shown are lower than they will be at implementation because of scheduled minimum wage increases and likely increases in the SAWW. Benefit amounts are also not exact since most states use a look-back period on recent wages rather than the exact wage a worker typically receives when they take leave.

Paid Leave Is Funded Sustainably and Affordably

Comprehensive state programs are funded through small, mandatory payroll deductions from employers, employees, or both. Tax rates are no more than 1.4 percent in any state in 2025, and most are 1 percent or less. In each state other than New York, the money is pooled into a statewide social insurance fund from which benefits are paid; in New York, private insurers and a state insurance fund, similar to a public option, exist side by side.[17]

Each state's program covers, at a minimum, core reasons for leave: care for a new child, care for a family member with a serious health issue, and care for one's own serious health issue. Some also cover military families' need for leave related to deployment and safe leave for people dealing with domestic violence, stalking, and sexual assault.

The two tables below show the contribution levels for employees and employers and the taxable wage base on which premiums are calculated and provide context for what these contributions "buy" in terms of the paid family and medical leave available to workers, including each state's duration of paid leave. (Notes [18] to [31] provide more information about payroll tax rates, benefit caps, and duration.)

In brief, each state passed programs to provide paid leave and collect payroll contributions, and most administer benefits to eligible workers. States need to build up their funds before making wage replacement benefits available to workers, which means there is usually a lag between the passage of legislation, the collection of premiums, and the availability of benefits to workers.

• California, New Jersey, New York, and Rhode Island have funded personal medical leave programs through Temporary Disability Insurance (TDI) through payroll contributions for decades, and each added paid family leave benefits funded in a similar way in 2002 (California), 2008 (New Jersey), 2013 (Rhode Island), and 2016 (New York). These programs began paying benefits to workers in 2004 (California), 2009 (New Jersey), 2014 (Rhode Island), and 2018 (New York).
• In July 2019, Washington state and DC started collecting premiums to fund their new programs, the first two created from scratch. Washington began paying benefits in January 2020 and DC began paying benefits in July 2020.
• Massachusetts' premium collections began in October 2019, and benefits became available to workers in 2021 over a six-month phase-in: Personal medical leave, military exigency leave, and new child bonding leave began in January, and family caregiving leave began in July 2021.
• Connecticut began collecting premiums for its program in 2021 and paying benefits in 2022.
• Oregon began collecting premiums in January 2023 and delivering benefits to workers in September 2023.
• Colorado began collecting premiums in January 2023 and delivering benefits in January 2024.
• Maryland will begin collecting premiums in July 2025 and start paying benefits in July 2026, timelines that have been pushed back from those originally set out to allow more time for program implementation.
• Delaware's contributions will begin in January 2025 and begin paying benefits in January 2026. Delaware's model is different from other states: Employers will administer the program for their employees (e.g., determine eligible claims, make payments), and the state will reimburse employers and adjudicate appeals.
• Minnesota will begin collecting contributions and delivering benefits in January 2026; the legislation creating the program provided general fund appropriations to allow benefits and contributions to begin simultaneously-a novel feature of Minnesota's legislation relative to other states.
• Maine will begin collecting contributions in January 2025 and paying benefits in May 2026.

Care for All Family

The family caregiving portion of nearly all state paid leave programs allows workers to take paid leave to care for a range of family members-parents, spouses, children, and grandparents in all; and grandchildren, siblings, parents-in-law, and domestic partners in most-and seven newer or newly expanded laws also include "chosen" family members.

The funding for the programs is sufficient to cover all the caregiving purposes and relationships that the laws include. The inclusion of extended family members does not add appreciably to program costs, and broad family coverage is particularly important to ensure that people of color (who disproportionately have extended family care responsibilities), LGBTQ+ people, and people with disabilities and their caregivers can realize the promise of paid leave programs.

Comprehensive, universal state paid leave models provide substantial financial security to working people at minimal individual cost, usually for an adequate number of weeks. Federal lawmakers can use these parameters in assessing paid leave policy options and designing a national program.

Voluntary Approaches

Two new approaches to paid family and medical leave policy were implemented in 2023 but have yet to show real impact.

In New Hampshire, the Governor created a program that covers public sector workers with six weeks of paid family leave at 60 percent of their typical wages-this is substantially less time and lower rate replacement than most programs in states with comprehensive, universal policies. Private employers can purchase paid family and medical leave insurance through this plan if they choose to do so, and workers whose employers do not offer paid family leave insurance can purchase insurance privately and have premium contributions deducted from their paychecks.

Only one insurer (MetLife) bid for a contract with New Hampshire to provide this insurance product, and the rates they estimate charging employers are higher in most cases than payroll contributions in states with paid family and medical leave programs. In 2023, less than 15,000 workers, or just under 2.2 percent of the New Hampshire workforce, were covered through this program. Of these, just over 8,800 were state employees who were automatically covered, while just under 6,000 private sector workers were either covered through an employer's voluntary plan or opted into individual coverage; fewer than one percent of employers chose to participate.

Vermont is in the process of adopting a similar system as New Hampshire, administered by the Hartford insurance company; state workers were covered as of mid-2023 while private employers were able to participate beginning in July 2024 and individuals will be able to buy coverage beginning in July 2025. There is currently no publicly available data about enrollment for private sector employers or worker utilization.

In Virginia in 2022, the state legislature granted the state insurance commission the authority to approve the sale of family leave insurance products in the state. There are no specific parameters that insurance products must offer in terms of duration, wage replacement, family members covered, or any other specific details. As of December 2024, just one insurer is approved to offer a family leave insurance product, and there is no public information on whether employers have purchased it. In 2023, five additional states (Alabama, Arkansas, Florida, Tennessee, and Texas) enacted similar laws based on an insurance industry model bill. In 2024, Kentucky and South Carolina did the same. No state agency information is available to show whether insurance companies have applied to offer products for sale to employers or individuals, though SunLife, one of the nation's largest and most pro-paid leave insurers, advertises that it has been approved to sell policies for companies located in Alabama, Arkansas, Florida, Kentucky, Tennessee, Texas, and one additional state where authorizing legislation was unnecessary (Oklahoma).

Footnotes

[1]Maryland's program was initially set to begin collecting contributions in October 2023 and begin paying benefits in January 2025; the bill had passed in a veto override vote in 2022, and the outgoing administration did not make as much progress as was needed to meet this timeline. In 2023 and 2024, Governor Wes Moore signed legislation making some adjustments to the program and providing for a longer implementation timeline. See Maryland SB 828 and SB0485. The timeline was delayed again in the 2024 legislative session. Contributions will begin on July 1, 2025, and benefits will begin on July 1, 2026.

[2]Minnesota will simultaneously begin paying benefits and taking in payroll contribution premiums in January 2026. The state bill appropriated general revenue to enable benefits and contributions to begin simultaneously, rather than contributions beginning a year or more in advance of benefit payment availability; see Article 3. The Maine law passed as part of a budget agreement in 2023; the program will begin collecting premiums in January 2025 and paying benefits in May 2026. Delaware passed as stand-alone legislation in 2022; payroll contributions begin in January 2025 and benefits will begin in January 2026.

[3]In California, the benefit amount depends on highest quarter of earning during a base period (first four of last completed calendar quarters before starting date of claim). Beginning in 2025, workers with quarterly wages of at least $722.50 up to 70 percent of the average quarterly wage will receive 90 percent of their wages, and workers with higher wages will receive 70 percent of their usual wages, up to a cap of $1681/week in 2025 (which is 63 percent of the SAWW). See this 2025 benefit FAQ from the California Employment Development Department.

[4]In New Jersey, as of July 1, 2020, claimants are paid 85 percent of their average weekly wage. In 2025, the maximum weekly benefit is $1,081 per week. See New Jersey Department of Labor. Prior to July 2020, claimants were paid two-thirds of their average weekly wage, up to a maximum of $667 per week.

[5]In Rhode Island, wage replacement is equal to 4.62 percent of the wages paid to employees in the highest quarter of the base period. In 2025, the maximum benefit is $1,070. See Rhode Island Department of Labor.

[6]In New York, as of 2021 after four years of scaling up, the wage replacement rate reached its full amount of 67 percent of employee's weekly wage up to 67 percent of SAWW. The maximum benefit in 2025 is $1,177.32. See New York Paid Family Leave. Temporary disability insurance has different wage replacement in New York, and the maximum benefit is just $170 a week; this is the only state in which TDI and PFL programs have different payment rates. Advocates are working to update TDI in New York.

[7]In Washington state, the wage replacement rate is 90 percent of the employee's wage up to 50 percent of SAWW plus 50 percent of employee's wage over 50 percent of SAWW. Maximum benefit in 2025 is $1,542 (90 percent of SAWW). See Washington Paid and Medical Leave.

[8]In DC, the wage replacement calculation is based on the minimum wage. The replacement rate is 90 percent of the employee's wage up to 150 percent of DC's minimum wage x 40 plus 50 percent of the employee's wage over 150 percent of DC's minimum wage x 40. Maximum benefit is $1,153 a week for 2025. See DC Benefits Calculator.

[9]In Massachusetts, wage replacement rate is 80 percent of the employee's wage up to 50 percent of SAWW plus 50 percent of the employee's wage over 50 percent of SAWW. Maximum benefit for 2025 is $1,170.64, which is 64 percent of SAWW. See Massachusetts Benefit Calculations.

[10]In Connecticut, the wage replacement calculation is based on minimum wage. Replacement rate is 90 percent of employee's wage up to minimum wage x 40 plus 60 percent of employee's wage over minimum wage x 40. Maximum benefit is minimum wage x 60, $981 in 2025. See Connecticut Paid Leave.

[11]In Oregon, the wage replacement rate is 100 percent of the employee's wage up to 65 percent of SAWW plus 50 percent of the employee's wage over 65 percent of SAWW. Maximum benefit is 120 percent of SAWW and minimum benefit is 5 percent of SAWW. The maximum benefit when the program begins to compensate workers for paid leave in 2025 is $1,568.60. See Paid Leave Oregon June 2024 Bulletin.

[12]Colorado's wage replacement formula follows Washington state's: 90 percent of the employee's wage up to 50 percent of SAWW plus 50 percent of the employee's wage over 50 percent of SAWW, and the maximum benefit is 90 percent of SAWW. For 2025, the maximum benefit is $1,324.21. See Colorado FAMLI explainer.

[13]Maryland's wage replacement rate is 90 percent for workers with an individual average weekly wage that is 65 percent or less of SAWW plus 50 percent of wages that are above 65 percent of SAWW. The maximum benefit will be $1,000 a week beginning in July 2026 (the program's six months) and will be adjusted on January 1, 2026, and annually thereafter; the minimum benefit is $50 a week. See Maryland FAMLI FAQ.

[14]Delaware's wage replacement rate is 80 percent of the individual's average weekly wage, up to a cap of $900 per week in the program's first two years (2026 and 2027), with annual adjustments thereafter. The minimum benefit is $100 a week (including full wage replacement for workers who make less than $100 per week but are otherwise eligible for the program). See Delaware DOL.

[15]Minnesota's wage replacement is in three tiers: 90 percent up to half of SAWW; 66 percent of workers' wages that fall between over half and the full SAWW; and 55 percent for wages that exceed the SAWW. The maximum benefit is the same as the SAWW, which is calculated annually and is $1,372 in 2025. See Section 12, subdivision 3.

[16]Maine's wage replacement rate is 90 percent for workers with an individual average weekly wage that is 50 percent or less of SAWW plus 66 percent of wages that are above 50 percent of SAWW. The maximum benefit is the SAWW, which is $1,144.67 in 2025. See Section 850-C, page 327.

[17]Some states permit employers to self-insure or purchase third-party insurance; the state regulates and enforces this process but, with the exception of New York, very few employers participate in these voluntary plans and participate in the state fund.

[18]California's law was passed in 2002, implemented in 2004, and has been amended multiple times, including in 2022 to greatly increase wage replacement beginning in 2025. The maximum length of family leave increased from six to eight weeks on July 1, 2020. See SB 83 and tax rates and wage bases. On January 1, 2021, individuals became eligible to receive up to six weeks of military exigency leave; see California Employment Development Department. In 2025, payroll tax contributions are 1.2 percent, a slight increase from 2024 (1.1 percent).

[19]In New Jersey, 2019 legislation made changes to the state paid family leave program. Some changes took effect in January 2020, and others took effect on July 1, 2020. See tax rates and wage bases, and see TDI for workers and employers. Note that TDI contributions for employers vary based on how often their workforce uses TDI ("experience rating"); this is the only state to experience-rate its TDI contributions. In 2025, workers will once again pay TDI premiums, ending a two-year holiday on employee-paid premiums. Rates for FLI are also rising to .33 percent, which is closer to other state's premiums than New Jersey's have been in many years.

[20]See Rhode Island tax rates and wage bases. Rates for 2025 are 1.2 percent; they came down between 2021 and 2022, from 1.3 percent to 1.1 percent of an employee's wages, up to the taxable cap and remaining there for 2023 and 2024. Note that Rhode Island allows for a maximum of 30 weeks of combined annual disability and family leave. See Rhode Island Department of Labor.

[21]See New York tax rates and wage bases. The taxable wage base cap is equal to the SAWW. Employers are required to provide TDI and may take up to a 0.50 percent payroll tax from employees to cover benefits (but only up to $0.60 per week). New York's paid family leave can be used for military exigency leave. Workers' family leave contribution rate came down in 2023, from .511 percent to .455 percent, a 10 percent decrease, and dropped further in 2024 to .373 percent before climbing slightly to .388 percent in 2025.

[22]See Washington state tax rates and wage bases. The taxable wage base cap is the Social Security cap. Small businesses with fewer than 50 employees are not required to contribute to premiums but are incentivized to do so. Some individuals can qualify for up to 16 to 18 weeks combined leave (e.g., individuals who experience complications in pregnancy may be eligible for 18 weeks of leave). Washington's law includes military exigency leave; see Washington Paid Leave. In 2023, Washington began to allow seven days for a pregnancy loss or loss of a child. Washington's contribution rate rose by .2 percentage points in 2023, from .6 percent to .8 percent, but dropped in 2024 to .74 percent before rising again in 2025 to .92 percent. The state has explained the need for higher premiums as resulting from increased utilization and a mismatch between pandemic and post-pandemic employment, including the inclusion of workers with collective bargaining agreements beginning in 2024. See more here.

[23]See DC tax rates. DC extended the duration of paid family and medical leave to a total of 12 weeks beginning in October 2022, up from an interim increase in 2021 and the program's initial offering of just two weeks of paid medical leave, six weeks of paid caregiving leave, and eight weeks of paid parental leave. DC also offers two weeks of prenatal leave, as of October 2021; see DC Paid Family Leave. DC reduced employer payroll contributions from .62 percent to .26 percent in 2022 and kept premiums there for 2023 and 2024. In 2025, the Council approved a premium increase to .75 percent-though this increase will likely flow for purposes other than paid leave due to a simultaneous statutory change allowing excess funds to be transferred to DC's general fund. See more here (section 12a, page 18).

[24]See Massachusetts tax rates and wage bases. Small businesses with fewer than 25 employees are not required to contribute to premiums. The taxable wage base cap is the Social Security cap. Note that the maximum length of leave is capped at 26 weeks per year (12 weeks of family leave, 20 weeks of medical leave, and 26 weeks to care for a wounded service member). See Massachusetts Family and Medical Leave. Massachusetts' contribution rate dropped from .68 percent in 2022 to .63 percent in 2023, but jumped to .88 percent in 2024 and will remain there for 2025.

[25]See Connecticut tax rates and wage bases. Workers pay the .5 percent payroll tax rate, which has been stable for all program years from 2022 through 2025. The taxable wage base cap is the Social Security cap. Note that the maximum annual length of leave is 12 weeks plus an additional two weeks for a health condition resulting from pregnancy. Connecticut's law includes both military exigency leave and "safe" leave for survivors of family violence. Connecticut caps military exigency leave at 26 weeks per two-year period.

[26]See Oregon tax rates and wage bases. In 2025, workers and businesses will continue to contribute a combined 1 percent of payroll, just as in 2024. The taxable wage base cap is the Social Security cap. Oregon's law includes "safe leave" for survivors of domestic violence, sexual assault, and stalking. Small businesses are not required to contribute to the program.

[27]In Colorado, the statute prescribes tax rates and wage bases set at .9 percent with contributions split between workers and employers for the program's first two years, 2024 and 2025. The taxable wage base is the Social Security cap. Small businesses are not required to contribute to the program. Colorado's law includes both military exigency leave and "safe" leave for survivors of domestic violence, stalking, and sexual assault. See Colorado Department of Labor and Employment.

[28]In Maryland, the rate that workers and employers will contribute had initially been set at .9 percent, shared equally, but subsequent legislation now sets February 1, 2025, as a new date by which a final rate must be specified. That date is six months before contributions are set to begin. See SB 485 (2024). Maryland's law also includes employer-side contribution exemptions for businesses with fewer than 15 employees. The taxable wage base is the Social Security cap. Maryland's law covers military exigency leave. See Maryland FAMLI FAQ.

[29]In Delaware, the statute prescribes the tax rate but does not specify a limit on the taxable wage base. Delaware's contribution amounts are subdivided by statute for each type of leave-parental (.32 percent), medical (.4 percent), and family care (.08 percent)-and the statute includes a trigger that would reduce benefit levels if contribution amounts exceed 1 percent. In addition, coverage and eligibility rules are restrictive: Businesses with fewer than 10 employees are not covered, either for contributions or for benefits to workers, and businesses with 11 to 24 workers only contribute for parental leave, and their employees are only covered for parental leave. Even within covered businesses, only workers who meet FMLA eligibility criteria are eligible for paid family and medical leave benefits. Delaware's law includes military exigency leave. See Delaware Department of Labor.

[30]In Minnesota, the statute sets the initial contribution rate at .7 percent for the full suite of paid family and medical leave benefits through the public program-though amendments allow a final rate to be set during 2025 for 2026. The statute also permits employers to purchase either type of leave separately, with the other type covered by the state program at a reduced cost. Employers can seek 50 percent of the premium cost from employees. Businesses with fewer than 30 employees may exclude a portion of payroll expenses ($12,500 for each employee, up to $120,000) for the first 20 employees and $12,000 for the 21st through 29th employee. Employees must still pay the employee portion of the premium and are not affected by this wage exclusion. See Section 19, subdivision 5, and Minnesota employer FAQ. Minnesota's law includes both military exigency leave and safe leave.

[31]In Maine, the statute sets a maximum initial contribution rate of 1 percent. Employers with 15 or more workers must pay 100 percent of premium costs and may seek 50 percent from their employees; in businesses with fewer than 15 workers, employers remit only 50 percent of the premium, which is deducted from employees' pay. See Maine Department of Labor. Maine's law covers both "safe" leave and military exigency leave.

[32]MetLife's filings in New Hampshire are available here (tracking numbers META-133327697 and META-133327714). A spreadsheet submitted with likely rates for employers in different industries and with different workforce demographics shows a huge variation in expected rates, many exceeding the cost of paid leave in states with universal, mandatory contributions.

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