Processing payroll in Oregon is more complex than in some states because some municipalities levy local taxes, adding a layer of complexity to your work. Oregon also has state-specific forms, so you need to pay close attention to new hires and make sure you’re giving them both the federal and state forms.
However, you don’t have to try to remember it all. The best way to avoid costly fines is to use an all-in-one payroll service, like Gusto. With it, you can onboard new employees, provide them the right forms, pay via direct deposit from their first paycheck, and file payroll taxes, all while ensuring you run payroll accurately every time. Sign up today for a 30-day free trial.
Step-by-Step Guide to Running Payroll in Oregon
Running payroll in Oregon requires your full attention to make sure you don’t miss any steps. Making even innocent mistakes could cause costly government fines. Here are your basic steps for running payroll in Oregon.
Step 1: Set up your business as an employer. If your company doesn’t already have one, you need to get a Federal Employer Identification Number (FEIN). This is a simple process that can be completed online via Electronic Federal Tax Payment System (EFTPS). Your FEIN is required to pay federal taxes.
Step 2: Register with Oregon. If your business is new, you need to register with the Oregon Secretary of State’s Oregon Business Registry. Some cities and counties also require that you register with them directly. You can search your business location to see if your company is subject to local registration. Any company that pays employees in Oregon must register with the Oregon Department of Revenue. Oregon provides a startup toolkit with information and links to help you move through the steps.
Step 3: Create your payroll process. An established business may have a payroll process you inherit. If it does, or if your company is brand-new, you may want to make some adjustments to the process to help you streamline your steps. Overall, you can opt to do payroll yourself manually (not recommended), set up an Excel payroll template, or sign up for a payroll service to help you handle your payroll.
Step 4: Have employees fill out relevant forms. During onboarding of new hires, you must collect certain federal and state forms from your employees. Every employee must complete I-9 verification no later than their first day on the job. New employees must also have a completed W-4 on file. The state also requires employees to complete Oregon Form OR-W-4.
Step 5: Review and approve timesheets. Your payroll processing will begin several days before your payroll is due when you collect and review time sheets for your employees. Starting a few days early gives you the opportunity to spot and address any issues with employees’ time. Whether you use paper time sheets or time and attendance software, review time sheets for accuracy.
If your company uses paper time sheets, have your employees sign them before they give them to you. That is verification that they agree to be paid based on the hours listed and you do not have to try to chase them down later. The benefit of using an electronic system is that there’s a built-in function to have your employees digitally sign their time sheets.
Step 6: Calculate employee gross pay and taxes. This is where things really get complicated if you’re using pen and paper or spreadsheets to run payroll. A payroll software would help standardize this process and make sure you don’t miss any steps or make any inaccurate calculations. You can also follow our guide on how to calculate payroll.
Oregon has one of the highest income taxes in the country, plus some localities also levy taxes. Oregon’s tax is progressive, so the higher an employee’s salary, the higher the tax burden. Making these calculations by hand will be complex and may lead to costly mistakes. Payroll software can eliminate these mistakes.
Taxable income for single or married filing separately
Taxable income for married filing jointly
Taxable income for head of household
$125,001 and up
$250,001 and up
$250,001 and up
Step 7: Pay employee wages, benefits, and taxes. The vast majority of companies and employees use direct deposit, but cash (not the best way) and paper check are also options. Make sure that you are paying your employees at least the Oregon minimum wage, which increases every year July 1 and varies based on where employees work (more detail on minimum wage further down). You can pay your federal and Oregon state taxes online. If you use a benefits provider, it should work with you to make deductions simple, automatic, and electronic.
Step 8: Save your payroll records. As with any business record, you want to make sure you have a copy for at least several years. Oregon law requires companies to keep time sheets or time records for at least two years and all other payroll records for at least three years. These records may be kept electronically, so using a payroll software will save you file cabinet space.
Step 9: File payroll taxes with the federal and state government. All Oregon state taxes need to be paid to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the Oregon Department of Revenue website. To pay federal taxes, you can make those payments online using the EFTPS, on one of the following two schedules:
- Monthly: When the IRS assigns you a monthly schedule, you need to deposit employment taxes on payments made during a calendar month by the 15th of the following month
- Semi-weekly: When the IRS assigns you a semi-weekly schedule, you must deposit employment taxes for payments made Wednesday, Thursday, and Friday by the following Wednesday, and for payments made Saturday, Sunday, Monday, and Tuesday, by the next Friday
Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule you are on, you only report taxes quarterly on Form 941 or annually on Form 944.
Step 10: Complete year-end payroll reports. Every year, you will need to complete payroll reports, including all W-2 forms and 1099 forms. These forms need to be in the hands of employees and contractors no later than Jan. 31 of the following year.
Learn more about doing payroll yourself in our guide on how to do payroll. It has a free checklist you can download to make sure you don’t miss any steps.
Oregon Payroll Laws, Taxes, and Regulations
Oregon mirrors federal regulations. To make sure that your company adheres to all laws and regulations, it’s a good idea to speak with an employment law expert in your area. To ensure you maintain compliance with payroll regulations, review the ins and outs of doing payroll in Oregon below.
With few exceptions, most employers in the US must pay Federal Insurance Contributions Act (FICA) taxes. The current FICA tax rate for Social Security is 6.2% and 1.45% for Medicare. Beyond federal taxes, Oregon levies state taxes on businesses and employees. Some localities also levy taxes.
Employer Unemployment Taxes
All businesses in Oregon must pay State Unemployment Tax Act (SUTA) taxes. The current wage base is $43,800, and rates range from 1.2% to 5.4%. New employers have a standard rate of 2.6%. Businesses that pay SUTA in full and timely can claim a tax credit of up to 5.4% on your Federal Unemployment Tax Act (FUTA) taxes.
To learn more about FUTA requirements, check out our guide on FUTA and Form 940.
Oregon businesses with one or more employees must carry workers’ compensation insurance. Workers’ comp premiums will vary depending on the industry in which your company operates. Exceptions to this requirement include:
- Sole proprietors
- Casual labor (less than $500 in monthly payroll)
- Domestic workers
- Workers who live out of state
Oregon employees who work out-of-state may get a tax credit for taxes paid outside of Oregon. If an employee lives in Oregon but works in another state, they can receive a tax credit in Oregon for the taxes paid on their income in another state, only if the other state does not provide a credit of its own.
For employees who live in Multnomah County or reside elsewhere and work in the county, they are subject to a 1.5% tax if they earn over $125,000 as an individual or $200,000 as a couple. On Jan. 1, 2026, this rate will increase to 2.3% on employees earning over $250,000 as an individual or $400,000 as a couple. This tax funds preschool services in Multnomah County.
Oregon also levies a transit tax statewide. The tax is 0.001% or $1 for every $1,000 in wages and applies to both Oregon residents and nonresidents who work in the state.
There is another Oregon tax that helps fund TriMet, the public transit system in the Portland area. The tax rate is currently 0.7837% of wages paid by an employer for work performed within the TriMet boundary. You can check TriMet’s interactive map to see if your business is within the boundary.
Oregon Minimum Wage
Oregon’s minimum wage is complicated. Not only does the minimum wage go up each year July 1 based on the Consumer Price Index inflation rate, but different areas of the state have different minimum wage rates.
Minimum Wage Rate
Minimum Wage Zone
$12.00 per hour
Non-Urban: Baker, Coos, Crook, Curry, Douglas, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Morrow, Sherman, Union, Wallowa, and Wheeler Counties
$12.75 per hour
Standard: Benton, Clatsop, Columbia, Deschutes, Hood River, Jackson, Josephine, Lane, Lincoln, Linn, Marion, Polk, Tillamook, Wasco, Yamhill, and parts of Clackamas, Multnomah, and Washington outside the urban growth boundary
$14.00 per hour
Portland Metro: Within the urban growth boundary, including parts of Clackamas, Multnomah, and Washington Counties
To make matters more confusing, if an employee works across multiple minimum wage zones, the employer must pay the minimum wage rate where the employee conducts the majority of their work.
An important note for tipped employees: Oregon law does not allow for tip credits, so employers of tipped workers cannot count the employee’s tips against the minimum wage. You can find more information on Oregon’s minimum wage website.
Unlike some other states, Oregon overtime is fairly straightforward. If you have employees who are eligible for overtime pay, you must calculate their overtime as 1.5 times their regular rate. An employee is eligible for overtime if they have worked over 40 hours in a workweek.
To help ensure your overtime calculations are accurate, use our overtime calculator to verify.
Oregon law is less strict than most other states when it comes to pay frequency. It requires that employers pay employees at least once every 35 days on a regular basis. Oregon also provides several options for paying your employees: cash, paper check, and direct deposit.
Pay Stub Laws
Oregon law mandates that you provide employees an itemized pay stub detailing the wages paid, deductions, and purpose of deductions. The pay stub can be a part of the paycheck or a separate document, delivered, by hand on paper, email, or through payroll software.
Oregon Paycheck Deductions
Besides deductions listed above, Oregon law requires that employees consent in writing to any additional deductions. Employers can only withhold additional amounts for:
- Collective bargaining agreements
- Repayment of a loan to the employee
- Any other deduction authorized by the employee so long as the company is not the recipient
Terminated Employee’s Final Paychecks
Oregon provides different rules for paying final pay to an employee based on the type of departure from your company and the notice given.
How Employment Ended
Date of Final Pay
Termination and layoff
First business day after employee’s last working day
Employee resignation with at least two business days’ notice
Employee’s last day
Employee resignation without notice
Five business days or next scheduled payday, whichever is first
Employee resignation without submitting final time sheet
Estimate wages and pay within five days after employee quits and pay any wages owed within five days after employee submits final time sheet
If you need to pay an employee right away and aren’t currently using a service, use one of our recommended ways to print a free payroll check.
Oregon HR Laws That Affect Payroll
Many of Oregon’s HR laws go beyond federal minimum guidelines, so pay close attention to the distinctions to keep your business out of hot water.
Oregon New Hire Reporting
Your business will need to complete an Oregon New Hire Reporting Form for each new employee. This is used to enforce child support orders and must include the employee’s name, address, and Social Security number.
Companies must provide employees with at least one 30-minute unpaid and uninterrupted meal break when the employee’s scheduled shift is more than eight hours. If an employee is required to work during their meal break, the entire break must be paid, even if the employee only worked a portion of the break.
Oregon also mandates when the employee should take a meal break:
- If an employee works seven hours or less, their meal break must start no earlier than their second hour of work and end no later than the end of their fifth hour of work
- If an employee works over seven hours, the meal break must start no earlier than the end of their third hour of work and end no later than the end of their sixth hour of work
Tipped employees can waive their meal break if the following conditions exist:
- The employee is paid to serve food and drink, receives tips, and reports tips to their employer
- The employee is at least 18-years-old
- The employee has worked for the employer for at least seven days
- The employee has signed a waiver form
- The employer retains the waiver form for at least six months after the employee no longer works for the employer
- The employer provides a reasonable opportunity for the employee to eat at any time during their shift
- The employer pays the employee for any meal breaks
- The employer does not coerce the employee to waive their right to a meal break
Numbers of Meal Breaks
Up to 2h
2h 1m to 5h 59m
6h 1m to 10h
10h 1m to 13h 59m
14h 1m to 18h
18h 1m to 21h 59m
22h 1m to 24
Oregon mandates employers provide employees with two paid 10-minute breaks for every eight hours of work. If an employee is under the age of 18, the breaks must be 15 minutes for every four hours worked.
Numbers of Rest Breaks
Up to 2h
2h 1m to 5h 59m
6h 1m to 10h
10h 1m to 13h 59m
14h 1m to 18h
18h 1m to 21h 59m
22h 1m to 24
Employers should provide nursing mothers reasonable breaks as needed to express milk. They are also required to provide a space that isn’t a bathroom. These breaks are unpaid, but an exception is if a nonexempt employee takes their lactation break during a paid rest period.
Oregon Child Labor Laws
Oregon generally follows the Fair Labor Standards Act (FLSA) child labor laws. Under the FLSA, there are restrictions for workers under the age of 18.
Oregon allows for people as young as 14 to work up to eight hours per day and 40 hours per week. Stricter limitations exist around school days, where children 14 and 15 can work only from 7 a.m. to 7 p.m. and cannot work more than three hours per day and 18 hours per week. Children 16 and 17 can work up to 44 hours per week, regardless of whether school is in session.
Time Off and Leave Requirements
Oregon follows the Family and Medical Leave Act (FMLA). The Oregon Family Leave Act (OFLA) protects workers who need to take leave for a covered reason. The leave under the OFLA does not have to be paid, though it can be. Paid family leave is scheduled to be provided in Oregon in January 2023, though that date may get pushed to later in the year.
To be eligible for OFLA, an employee must have worked an average of 25 hours per week for 180 days prior to the leave and your company must employ at least 25 workers. Under OFLA, employees can take protected leave for the following reasons:
- Parental leave
- Serious health condition of the employee or family member
- Pregnancy leave
- Sick child leave
- Military family leave
- Bereavement leave
Oregon does not require employers to provide employees with paid vacation leave. Employers may create a policy if they wish.
The state does, however, require that employers with 10 or more employees, or six or more in Portland, provide paid sick leave. Employers with fewer than 10 employees must provide sick leave but it can be unpaid. There is no minimum amount of sick leave required.
If you need help to calculate your PTO accrual, use our free PTO calculator.
Oregan has no requirement for employee voting leave.
Oregon requires any employer with 25 or more employees to give paid bereavement leave, per the OFLA. Employers with fewer than 25 employees are not required to provide any bereavement leave, paid or unpaid.
Oregon Payroll Forms
Payroll forms can vary from state to state, and some have their own W-4, like Oregon. Fortunately, that’s the only one:
- OR-W-4: Employee withholding form
Federal Payroll Forms
Here is a complete list and location of all the federal payroll forms you should need.
- W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state income taxes
- W-2 Form: Used to report total annual wages for each employee
- W-3 Form: Used to report total annual wages for all employees
- Form 940: To calculate and report unemployment taxes due to the IRS
- Form 941: Used to file quarterly income tax
- Form 944: Used to file annual income tax
- 1099 Forms: Provides information for non-employee contract work
For a more detailed discussion of federal forms, check out our guide on federal payroll forms you may need.
Oregon Payroll Tax Resources
- Oregon Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information.
- Tax withholdings often trip up employees processing payroll; reviewing Oregon’s comprehensive information may help you.
- For extensive information on how to get workers’ compensation coverage, Oregon’s Department of Labor offers guidance.
Oregon payroll is more complex than most states but still simpler than others, like California. There is only one state-specific form, but there are multiple taxes you need to pay attention to.
One way to ensure you don’t make any mistakes or miss any steps is to use a payroll software. Gusto helps you pay accurately and on time, pays employees with direct deposit for free, and offers health insurance benefits. Sign up for its 30-day free trial.