Colorado Payroll Compliance Guide 2026: FAMLI, Taxes & Labor Laws

Colorado has built one of the more layered employer payroll systems in the western US. You have a flat income tax, SUI on a $23,800 wage base, a paid family leave program (FAMLI) that launched in 2023, mandatory paid sick leave under HFWA, a minimum wage well above the federal floor, and a final paycheck rule with a peculiar "demand" trigger. Each piece requires its own setup and ongoing compliance.

New employers in Colorado especially need to take time before the first payroll to register with the right agencies, configure FAMLI withholding, and make sure sick leave accrual is tracking correctly. Skipping any of these creates retroactive liability.

Colorado Payroll at a Glance

FAMLI: Colorado Paid Family & Medical Leave

Colorado's FAMLI program provides paid family and medical leave benefits to employees and is funded by a shared contribution between employers and employees. It launched for benefit payments in January 2024 (contributions began January 2023).

FAMLI Contribution Rates

The total FAMLI contribution rate is 0.9% of wages, applied to wages up to the Social Security wage base ($176,100 in 2026).

• Employers with 10 or more employees: 0.45% employer + 0.45% employee = 0.9% total
• Employers with fewer than 10 employees: 0% employer + 0.45% employee = 0.45% total (only the employee share applies; no employer obligation)

The employee share is withheld from each paycheck. For employers with 10+ workers, you also owe your 0.45% on top of that. FAMLI contributions are remitted quarterly to the Colorado FAMLI Division.

Maximum Annual FAMLI Cost

What FAMLI Provides

Eligible employees can take up to 12 weeks of paid leave per year for qualifying reasons: their own serious health condition, caring for a family member with a serious health condition, bonding with a new child, military family leave, or safe leave (domestic violence, sexual assault). Benefits replace 90% of wages for lower-earning employees and 50% for higher earners, up to a maximum weekly benefit.

FAMLI Withholding Setup

To withhold and remit FAMLI, register with the Colorado FAMLI Division at famli.colorado.gov. You'll withhold the employee share from each paycheck and — if you have 10+ employees — add your employer share. Remit quarterly along with a wage report.

State Income Tax: Flat 4.4%

Colorado has a flat 4.4% state income tax rate on all taxable income. Employees complete Form DR 0004 (Colorado Employee Withholding Certificate) to declare their withholding allowances. If an employee doesn't submit a DR 0004, withhold as if they claimed zero allowances.

Colorado income tax withholding is remitted to the Colorado Department of Revenue through Revenue Online (revenue.colorado.gov). Filing frequency depends on the amount withheld — quarterly for small employers, monthly for mid-size, weekly for high-volume. Year-end reconciliation is due January 31.

State Unemployment Insurance (SUI)

Colorado SUI is administered by the Colorado Department of Labor and Employment (CDLE). The $23,800 wage base is more than three times the federal FUTA base of $7,000, making Colorado SUI a meaningful cost for employers.

SUI Rates for 2026

• Experienced employer range: 0.75% to 10.39%
• Taxable wage base: $23,800 per employee per year
• New employer rates: Assigned by CDLE at the time of registration; vary by industry
• Maximum annual cost per employee (at 10.39%): $2,472.82

Colorado SUI returns are filed quarterly through the CDLE MyUI Employer portal. Deadlines align with the standard quarterly schedule: April 30, July 31, October 31, January 31.

Minimum Wage

Colorado's minimum wage is $14.81 per hour statewide in 2026, adjusted annually for CPI. But Colorado has two tiers:

• Metro/urban counties: $14.81/hr (covers Denver, Boulder, Jefferson, Arapahoe, Adams, Douglas, Broomfield, and similar metro areas)
• Non-metro/rural counties: $12.32/hr (applies to counties not designated as metropolitan statistical areas)

Verify your county's classification each year. The Colorado Department of Labor publishes the updated rates and county list after each CPI adjustment. A tipped employee minimum wage applies as well: employers can credit up to $3.02/hr in tips, reducing the minimum cash wage to $11.79/hr (metro) or $9.30/hr (rural) as long as total compensation reaches the applicable minimum.

HFWA: Colorado Paid Sick Leave

Colorado's Healthy Families and Workplaces Act (HFWA) requires all employers — regardless of size — to provide paid sick leave to employees working in Colorado.

Accrual and Usage

• Accrual rate: 1 hour of paid sick leave for every 30 hours worked
• Annual cap: 48 hours per year
• Carryover: Accrued leave carries over year to year, but employers may cap usage at 48 hours per year
• Use start: Employees can use accrued leave as it accrues (no waiting period after the initial accrual)

Front-loading 48 hours at the start of the year is an acceptable alternative to tracking accrual. Front-loading simplifies administration but requires you to advance the leave before it's technically "earned."

Permitted Uses

HFWA leave covers the employee's own illness, care for a family member, public health emergencies, and needs related to domestic violence or sexual assault. The list of qualifying family members is broad and includes parents, children, siblings, grandparents, and any person the employee considers a family member.

Final Paycheck Rules

Colorado requires final wages to be paid on the next regular payday. But there's an important additional rule: if the employee makes a written demand for payment and the employer has the ability to pay, the employer must provide the final paycheck within 6 hours of the start of the next business day following the demand.

In practice, most Colorado employers pay final wages on the next regular payday without incident. The 6-hour rule only kicks in when the employee makes a formal demand. Document any such demand in writing and track the 6-hour clock from when your next business day begins.

Vacation Payout

Colorado law treats earned vacation pay as wages. If an employee has accrued unused vacation at termination, you must pay it out — regardless of any policy to the contrary. A "use it or lose it" policy that forfeits vacation at termination violates Colorado law. You can cap accrual going forward, but you cannot take away earned leave already accrued.

Federal Payroll Taxes

Colorado employers owe federal payroll taxes on top of state obligations:

• Social Security: 6.2% employer + 6.2% employee on wages up to $176,100
• Medicare: 1.45% employer + 1.45% employee on all wages; 0.9% Additional Medicare Tax on employee wages over $200,000
• FUTA: 6.0% on first $7,000 per employee, effective 0.6% with state UI credit
• Federal income tax withholding: Per each employee's W-4

Note that FAMLI contributions apply to wages up to $176,100 — the same cap as Social Security. This makes administration cleaner: the same wage base ceiling applies to both Social Security and FAMLI.

Registering as a New Employer in Colorado

Three registrations are required before running Colorado payroll:

• CDLE registration: Register with the Colorado Department of Labor and Employment for SUI at myui.coworkforce.com. You'll receive your UI employer account number.
• CDOR registration: Register with the Colorado Department of Revenue for income tax withholding at revenue.colorado.gov (Revenue Online). You'll get your withholding account number.
• FAMLI registration: Register with the Colorado FAMLI Division at famli.colorado.gov for paid family leave contributions. Required for all employers with at least one employee in Colorado.

Frequently Asked Questions

What is Colorado FAMLI and who pays it?

FAMLI is Colorado's paid family and medical leave program at 0.9% of wages up to $176,100. Employers with 10+ employees split it 50/50 (0.45% each). Employers with fewer than 10 employees owe no employer share — only the 0.45% employee contribution is withheld.

What is Colorado's state income tax rate for 2026?

Colorado's flat 4.4% state income tax rate applies to all taxable income. Withhold using Form DR 0004 and remit through Revenue Online.

What is Colorado's minimum wage in 2026?

$14.81/hr in metro/urban counties and $12.32/hr in rural (non-metro) counties. Both rates adjust annually for CPI.

Does Colorado require paid sick leave?

Yes. Under HFWA, all employees accrue 1 hour of paid sick leave per 30 hours worked, up to 48 hours per year. All employers must comply, regardless of size.

When is a final paycheck due in Colorado?

The next regular payday, or within 6 hours of the next business day if the employee makes a written demand for earlier payment. Earned vacation is treated as wages and must be paid at termination.

What is Colorado's SUI wage base for 2026?

Colorado's SUI taxable wage base is $23,800 per employee per year. SUI rates run 0.75%–10.39%, administered by CDLE.