Virginia State Capitol in Richmond by Ron Cogswell is licensed under CC.

Virginia Democrats are advancing two massive workplace mandates in 2026: a statewide paid family and medical leave (PFML) program (SB 2 and HB 1207) and a statewide paid sick leave mandate (SB 199 and HB 5). Supporters describe these bills as “benefits,” but the reality is simpler: they are new costs, new bureaucracy, and new legal exposure for Virginia employers, costs that will ultimately show up as lower wages, fewer hours, slower hiring, and even higher prices. 

SB2 / HB1207: A State-Run Paid Leave Program Funded by a New Payroll Tax 

SB 2 and HB 1207 would create a government-run PFML program administered by the Virginia Employment Commission. 

Under the legislation, beginning in 2028, employers must provide contributions to a newly created fund designated for the program. The contribution is set as a percentage of employee wages and applies across all employees. Employers with more than 10 employees are required to pay the full contribution to the state and may withhold up to 50 percent of that amount directly from workers’ paychecks. Smaller employers must still withhold and provide the employee portion. 

Supporters will avoid calling it a tax, but that’s exactly what it is: a mandatory payroll tax imposed by the state and collected from wages to finance a government program. 

It functions like a payroll tax in every meaningful way: 

  • It is calculated as a percentage of wages. 
  • It is automatically deducted from employee compensation. 
  • It is remitted to a state trust fund. 
  • It funds a state-administered entitlement program. 
  • It is mandatory. 

Whether proponents try to label the tax a “contribution,” “premium,” or “assessment,” it’s still simply a tax that will reduce take-home pay and increase the cost of employment. 

And importantly, payroll taxes are among the most economically harmful forms of taxation because they directly raise the cost of hiring and maintaining employees. When the cost of employing a worker rises, employers respond in predictable ways: slower hiring, fewer hours, slower wage growth, or higher prices passed on to consumers. Workers will ultimately bear much of the burden through lower wage growth. There is no free benefit; the cost is simply embedded into the employees’ wages. 

Creation of the program will also require a large administrative state to implement it. This means regulations, certifications, claims processing, and enforcement. Virginia shouldn’t be building a new entitlement-style system that will require permanent administrative growth layered on top of the new payroll tax itself. 

Virginia would be creating not just a benefit program, but a new tax-and-bureaucracy structure that will inevitably expand over time. Once a payroll-funded entitlement is in place, history shows contribution rates rarely stay flat. 

SB 199 / HB 5: A Statewide Paid Sick Leave Mandate for All Employees 

SB 199 and HB 5 would expand Virginia’s current paid sick leave requirements into a broad mandate covering nearly all employees. 

What sounds like a well-intentioned policy is really just an across-the-board cost increase, which will be especially painful for small local employers. Mandated leave is not “free.” It is a form of compensation. For many small businesses, especially those operating on thin margins, this is a forced benefit expansion that will squeeze payroll budgets and reduce flexibility. 

Beyond the financial impact, the bills create new compliance obligations and litigation risk. These proposals do not simply require employers to allow time off; they layer in enforcement mechanisms, recordkeeping requirements, and penalties. The more government micromanages workplace policies, the more routine scheduling questions and human resources decisions risk becoming legal disputes. What should be handled internally between employer and employee instead becomes subject to regulatory oversight and potential enforcement action, leading to even higher costs for businesses. 

This mandate also discourages the flexible benefit structures many employers already provide to their employees. Businesses often design leave policies that reflect the needs of their particular workforce. Instead of giving employers the freedom to design benefits that work best for their employees, the state would be substituting a one-size-fits-all rule that prioritizes bureaucratic uniformity over workplace flexibility. 

The Bottom Line 

Virginia does not exist in a vacuum. Employers considering where to expand or hire new workers compare labor costs, regulatory burdens, and long-term tax stability. At a time when other states are cutting taxes and lowering economic barriers to growth, Virginia Democrats are moving in the opposite direction, increasing the cost of employment, expanding government control over businesses, and advancing billions of dollars in additional tax increases across a range of other proposals this session. Taken together, the message to job creators is clear: Virginia is becoming more expensive and less business-friendly. 

Virginia lawmakers should be focused on making the Commonwealth more affordable and more competitive, not layering on new payroll taxes, new mandates, and new compliance burdens that will ultimately be paid by workers in the form of lower wage growth and by consumers in the form of higher prices. 

Good intentions do not eliminate economic consequences. When government mandates benefits through taxes or regulation, someone pays – and it is often the very workers the policy claims to help.