PEO Services for Maryland

PEO Guide for Maryland: Benefits & Payroll Taxes

Navigating Maryland’s employment laws and HR management can be challenging. A Professional Employer Organization (PEO) handles tasks like payroll, benefits, and compliance. This guide covers everything you need to know about using a PEO in Maryland.

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Capital City

Annapolis

Timezone

EST

(

UTC-5

)

Paid Leave

Sick & Voting Leave

Income Tax

2% - 5.75%

Employer Tax

23.6% plus workers compensation

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What is a PEO in Maryland

A PEO in Maryland serves as a co-employer, handling essential HR functions like payroll, benefits, and compliance while your business maintains control over operations and decision-making. This arrangement allows companies to focus on growth while reducing the administrative burden and legal risks associated with HR.

By partnering with a PEO in Maryland, businesses can simplify HR, stay compliant with state regulations, and offer competitive employee benefits, all while focusing on growth. Whether you're a startup or an established company, a PEO helps you navigate Maryland’s complex employment landscape.

Mandatory Requirements when Partnering with a PEO in Maryland

In Maryland, it’s mandatory for all employers, including those partnering with PEOs, to have valid workers’ compensation insurance. Failure to do so is a criminal offense with potential fines up to $100,000 USD as per Maryland Labor Code, section 3700.

Benefits Of Using a PEO In Maryland

Payroll Processing and Compliance. A PEO manages payroll processing, tax withholdings, and filings with Maryland state agencies, ensuring compliance with state tax laws and employment regulations.

Benefits Administration. PEOs offer access to comprehensive employee benefits packages, including health insurance, retirement plans, and other perks that help attract and retain top talent in Maryland.

Workers’ Compensation. PEOs ensure your business complies with Maryland’s workers’ compensation requirements, handling claims and minimizing risk.

HR and Legal Compliance. PEOs bring expert HR support, making them especially valuable for small businesses. With constantly changing Maryland labor laws, a PEO offers guidance on employee handbooks, harassment prevention, terminations, and safety regulations, ensuring your business stays compliant.

Employment Laws and regulations in Maryland

A PEO (Professional Employer Organization) is an excellent solution for small businesses in Maryland to manage HR, payroll, and compliance with the state's complex labor laws.

Maryland has some of the most stringent regulations around minimum wage, overtime, paid sick leave, and employee classification, which can be overwhelming for small businesses without dedicated HR resources.

Here’s a brief overview of some key laws and regulations specific to Maryland.

Maryland Employment Laws

A PEO helps businesses comply with both federal and Maryland-specific labor laws, which can be complex and frequently change.

  • Minimum Wage: Maryland’s minimum wage is $15.00 per hour for all employers, regardless of size. 
  • Overtime: Maryland requires overtime pay of 1.5 times the regular rate for hours worked over 40 in a week. 
  • Sick Leave: Under the Maryland Healthy Working Families Act, employers with 15 or more employees must provide paid sick leave, accruing at 1 hour for every 30 hours worked. Employers with fewer than 15 employees provide unpaid sick leave. 
  • Meal and Rest Breaks: Maryland does not mandate meal or rest breaks, so federal guidelines apply.

Payroll Laws In Maryland

  • Payroll Schedule: Maryland does not specify a payroll schedule, but employers must pay consistently. Most use a semi-monthly or weekly pay structure.
  • Tax Compliance: Employers in Maryland contribute 2.3% for state unemployment insurance and must follow federal requirements for Social Security and Medicare. 

Benefits Laws In Maryland

PEOs in Maryland can offer access to competitive benefits like health insurance and retirement plans. Maryland employers with 15 or more employees must provide workers' compensation coverage, and those offering 401(k) plans must comply with federal ERISA standards.

Additional requirements and enforcement in Maryland

  • Workplace Safety: Maryland adopts OSHA regulations to ensure safe work environments. 
  • Workers’ Compensation: Employers must provide workers' compensation insurance, with rates varying by job classification. 
  • Enforcement Agencies: The Maryland Commission on Civil Rights (MCCR) and the Maryland Department of Labor enforce labor and anti-discrimination laws. 
  • Overlapping Laws: Where state and federal laws overlap, the more favorable regulation for the employee generally applies.

Looking to hire employees in Maryland?

Check out our comprehensive state hiring guide.

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How to Choose the right PEO in Maryland

Selecting the right PEO in Maryland is essential for navigating the state's intricate labor laws while ensuring compliance and efficiency. Follow these key steps:

  1. Focus on Maryland-Specific Experience. Ensure the PEO has expertise in navigating Maryland’s labor laws. This includes understanding nuances like mandatory sick leave, wage orders, and workers’ compensation requirements.
  2. Service Flexibility. Choose a PEO that offers flexible services tailored to your business size and industry. Maryland’s regulations can vary by sector, so a PEO with industry-specific knowledge is valuable.
  3. Track Record and Compliance History. Research the PEO’s compliance history to ensure they have a proven track record of helping businesses avoid penalties and stay compliant with Maryland’s complex employment laws.
  4. Consider Employee Benefits. A PEO can offer access to more affordable and comprehensive employee benefits, which are crucial for attracting and retaining top talent in Maryland’s competitive job market.
  5. Assess Customer Service. Responsive customer service, dedicated human support teams (not AI), and robust HR technology are key factors in ensuring a smooth partnership with the PEO. It’s important to find a partner who supports your people, when they need it most.
By following these steps, you can select a PEO that aligns with your business goals and ensures compliance with Maryland’s complex labor regulations. For more detailed insights, check out Playroll’s Guide to Employment in Maryland.

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FAQS

FAQs About PEO Services in Maryland

How does a PEO help with Maryland labor law compliance?

A PEO ensures compliance with Maryland’s wage and hour laws, tax requirements, and employee classification rules, reducing legal risks for businesses.

Are PEOs regulated in Maryland?

Yes, PEOs operating in Maryland must comply with state regulations and are often certified to provide services within the state’s legal framework.

Can a PEO help small businesses in Maryland?

Absolutely. PEOs are especially beneficial for small and mid-sized businesses in Maryland, as they provide access to competitive benefits and ensure compliance with complex labor laws. Also, partnering with a PEO allows small businesses to offer their employees access to big-company benefits plans they’d likely otherwise struggle to afford.

Can a PEO help with compliance in Maryland?

Yes, a PEO can help with compliance in Maryland. One key area where a PEO provides support is with minimum wage laws, which vary significantly by state, and sometimes even by county or city. For example, as of 2024, 30 states and Washington, DC, have minimum wages above the federal rate, ranging from $8.75 to $17.00 per hour. PEOs stay updated on these changes and ensure your business remains compliant, especially if you have a distributed workforce.

Here are other ways PEOs assist with compliance in Maryland:

- Payroll regulations: A PEO helps with proper worker classification, filing tax forms, managing payroll taxes, and adhering to wage and hour laws, such as overtime regulations.

- Benefits laws: PEOs ensure compliance with state-specific and federal benefits regulations, including laws related to COBRA, FSAs, HSAs, and other benefit programs.

- Labor laws: A PEO can manage workers’ compensation, ensure compliance with Equal Employment Opportunity (EEO) laws, display required labor posters, and support OSHA inspections.

By partnering with a PEO, you reduce the risk of costly fines and penalties related to non-compliance, as they handle complex regulations for you.

What happens if I want to terminate my relationship with a PEO in Maryland?

With Playroll PEO, you can switch on and off the PEO any time you want, moving seamlessly onto our workforce management platform. All your data and integrations stay intact in your account.

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