5 Payroll Compliance Must-Dos for Michigan Employers in 2025
As a Michigan employer, staying ahead of payroll compliance is crucial in 2025. Recent legislative changes have introduced new requirements that could impact your business operations. Here are five essential actions to ensure compliance:
1. Adjust to the New Minimum Wage Rates
Effective February 21, 2025, Michigan’s minimum wage increased to $12.48 per hour. For tipped employees, the minimum cash wage is now $4.74 per hour, with plans to reach 50% of the standard minimum wage by 2031.
Action: Review and update your payroll systems to reflect these changes and ensure all employees are compensated according to the new wage standards.
2. Implement the Earned Sick Time Act (ESTA)
Starting February 21, 2025, the ESTA mandates that:
- Employees accrue 1 hour of paid sick time for every 30 hours worked.
- Employers with 10 or more employees must provide up to 72 hours of paid sick leave annually.
- Employers with fewer than 10 employees must offer 40 hours of paid and 32 hours of unpaid sick leave annually.
Action: Update your leave policies, employee handbooks, and payroll systems to comply with ESTA requirements.
3. Ensure Accurate Tax Withholding
Michigan requires employers to:
- Use the MI-W4 form for state income tax withholding; federal W-4 forms are not acceptable substitutes.
- Withhold 4.25% for Michigan income tax on bonuses and other supplemental wages.
Action: Verify that all employees have completed the MI-W4 form and adjust your payroll processes to ensure correct tax withholding.
4. Maintain Comprehensive Payroll Records
Under ESTA, employers are required to:
- Keep records of hours worked, sick time accrued, and sick time used for at least three years.
- Provide employees with quarterly notices detailing their sick leave balances.
Action: Implement or update your record-keeping systems to track and report this information accurately.
5. Display Updated Labor Law Posters
Michigan law mandates that employers post updated notices regarding minimum wage and sick leave policies in a visible location accessible to all employees.
Action: Ensure that the latest labor law posters are displayed prominently in your workplace.
Need Assistance?
Navigating these changes can be complex, but you don’t have to do it alone. At Integrated Payroll, we specialize in helping Michigan businesses stay compliant and efficient.