Michigan Minimum Wage and Earned Sick Time Act: What New Employers Owe in 2026
Michigan Minimum Wage and Earned Sick Time Act: What New Employers Owe in 2026
If you are about to hire your first employee in Michigan, two state laws set the floor for what you pay and how much paid time off you must allow. The Michigan minimum wage rises in 2026 and again in 2027. The Earned Sick Time Act, which took effect February 21, 2025, requires most employers to let workers accrue paid sick time. Both laws were amended in early 2025, so older articles, payroll templates and job board postings may show outdated rules.
This guide covers the wage schedule, the sick time rules, and the points you still need to confirm with the state before your first payroll run.
Michigan minimum wage schedule for 2026 and 2027
The Michigan minimum wage is set by the Improved Workforce Opportunity Wage Act, as amended on February 21, 2025. The schedule has two fixed steps and then inflation adjustments:
| Effective date | Minimum wage per hour |
|---|---|
| January 1, 2026 | $13.73 |
| January 1, 2027 | $15.00 |
| 2028 and later | Adjusted each January 1 for inflation (Midwest CPI-U, calculated by the state treasurer; skipped if the state unemployment rate for the prior year is 8.5% or higher) |
If you are hiring now at the 2026 rate, $13.73 is the number to start with. If your first pay period falls in 2027, the rate is $15.00. Budget for the step-up at the time you make the offer, not after the notice arrives. A full-time employee working 2,080 hours in a year earns $28,558.40 at $13.73 an hour and $31,200.00 at $15.00 an hour, before payroll taxes and deductions.
Tipped employees
The tipped minimum wage is not a flat dollar figure. It is a percentage of the regular minimum wage, set by MCL 408.934d: 38 percent from February 21, 2025, 40 percent from January 1, 2026, 42 percent in 2027, 44 percent in 2028, 46 percent in 2029, 48 percent in 2030 and 50 percent from January 1, 2031. The tipped rate applies only if the employee's tips equal or exceed the difference between the tipped rate and the regular minimum wage, the tips are reported for federal payroll tax purposes, the employee keeps the tips (voluntary sharing with others in the chain of service is allowed), and you told the employee about the rule in writing at or before hire and got written consent. Keep records that show compliance for at least 3 years after the employee's last pay period.
Tipped staff are also covered by the Earned Sick Time Act on the same terms as other employees. A restaurant that pays a tipped share of the wage still owes sick time accrual.
Local wage floors
State law sets the floor, and local governments cannot raise it. Under the Local Government Labor Regulatory Limitation Act, a city, village, township or county may not adopt, enforce or administer an ordinance, local policy or resolution requiring an employer to pay a wage higher than the state minimum hourly wage (MCL 123.1385). Federal minimum wage rules can still apply to employers covered by them.
Keep local wage questions separate from local tax questions. Only 24 Michigan cities levy a city income tax, and that tax has nothing to do with the minimum wage or sick time. A city tax notice does not tell you what to pay your staff.
Earned Sick Time Act: what it requires
The Earned Sick Time Act took effect February 21, 2025. Michigan paid sick leave under the act works like this:
- Employees accrue 1 hour of paid sick time for every 30 hours worked.
- Employers may cap how much accrued sick time an employee uses at 72 hours a year.
- Small businesses, meaning employers for which 10 or fewer individuals work for compensation in a given week, may cap paid sick time use at 40 hours a year.
- A new hire can be made to wait up to 120 days before using accrued time.
The accrual rule is simple arithmetic. A full-time employee working 2,080 hours in a year accrues about 69 hours of sick time (2,080 divided by 30, rounded down). That is just under the 72 hour use cap. A part-time employee working 1,000 hours accrues about 33 hours. Track hours worked for every employee from the first day, because the accrual is tied to hours, not to a fixed annual grant.
| Rule | Standard employer | Employer with 10 or fewer employees |
|---|---|---|
| Accrual | 1 hour per 30 hours worked | 1 hour per 30 hours worked |
| Annual use cap | Up to 72 hours | Up to 40 hours |
| Compliance deadline | In effect since February 21, 2025 | October 1, 2025 (passed) |
The small employer cap and the October 1, 2025 deadline
Small employers, meaning those with 10 or fewer employees, can cap paid sick time use at 40 hours. Those employers had until October 1, 2025 to bring their policies into compliance. That date has passed. A business that is only now hiring should set its policy to the law in force today and should not assume an old deadline gives it extra time. The count includes full-time, part-time and temporary workers, including people supplied by a staffing agency, and an employer that had more than 10 employees on its payroll in 20 or more workweeks of the current or previous calendar year is not a small business (MCL 408.962(l)).
New business grace period
The law gives some new small businesses extra time. Under MCL 408.972(3), a small business that did not employ an employee on or before February 21, 2022 is not required to comply with the act until 3 years after the date it first employs an employee. That applies only to small businesses (10 or fewer individuals working for compensation in a week), and it delays compliance rather than exempting you. Check with LEO Wage and Hour how the date applies to your first hire before you rely on it.
Enforcement
LEO enforces the Earned Sick Time Act. An employee who believes the act was violated can file a claim with LEO within 3 years of the violation, and LEO investigates and can bring a civil action on the employee's behalf (MCL 408.967). Failing to provide earned sick time can bring a civil fine of up to 8 times the employee's normal hourly wage, and retaliation can bring a fine of up to $1,000 per violation. Follow the rules whether or not an employee ever complains.
What new employers should do before the first paycheck
- Set the wage at or above $13.73 an hour for 2026, and budget for $15.00 starting January 1, 2027.
- If you plan to pay tipped staff, the 2026 tipped rate is 40 percent of the regular minimum wage, and it applies only if the conditions in MCL 408.934d are met, including written notice and consent.
- Start an accrual record for every employee on day one: 1 hour of sick time for every 30 hours worked.
- Choose your annual use cap: 72 hours for most employers, or 40 hours if you qualify as a small employer.
- Decide whether a waiting period applies to new hires, up to 120 days, and write the rule into your written policy.
- Ask LEO Wage and Hour whether the new small business delay applies to you.
- Keep payroll records that show hours worked, sick time accrued, and sick time used.
Setting up the business before you hire
Wage and sick time rules apply once you have employees, so they belong in your formation plan. Michigan has no general statewide business license. The Corporations Division of the Michigan Department of Licensing and Regulatory Affairs (LARA) receives and files the documents that form and maintain an entity. Registering an LLC or corporation through the MiBusiness Registry is a filing, not a license.
The filing fees that apply to a new entity are:
- LLC: Articles of Organization (Form CSCL/CD-700), $50 filing fee. The Annual Statement (Form CSCL/CD-2700) costs $25 and is due February 15 each year. An LLC formed after September 30 does not owe a statement on the February 15 immediately following its formation.
- Corporation: Articles of Incorporation for Profit Corporation (Form CSCL/CD-500), $60 minimum filing fee (more if you authorize more than 60,000 shares). The Annual Report (Form CSCL/CD-2500) costs $25 and is due May 15 each year, beginning the year after incorporation.
Licensing is handled by trade or activity, through agencies such as LARA's Bureau of Professional Licensing or the Michigan Liquor Control Commission, and by local zoning, occupancy and health approvals. If you sell taxable goods at retail, register with the Michigan Department of Treasury for a sales tax license. That registration is free. Michigan's sales tax rate is 6%. Confirm with the relevant agency whether your specific trade needs a license before you open.
Where to confirm the numbers
Use the official pages for current figures, and treat any secondary summary, including this guide, as a starting point. The key sources are:
- Michigan Department of Labor and Economic Opportunity, Wage and Hour (LEO): https://www.michigan.gov/leo
- LARA Corporations Division: https://www.michigan.gov/lara/bureau-list/cscl/corps
- MiBusiness Registry business search: https://mibusinessregistry.lara.state.mi.us/search/business
- Michigan Department of Treasury: https://www.michigan.gov/taxes
For free help with planning, the Michigan Small Business Development Center offers advising at https://michigansbdc.org/.
When to talk to a professional
A single hourly employee in one city is a manageable setup. Get professional help sooner if you plan to pay tips, operate in several cities or townships, use independent contractors alongside employees, or want to claim a grace period for a new business. An employment attorney can review your written sick time policy, and a CPA can review your payroll setup and how the minimum wage increase affects your budget.
This guide is informational content only. It is not legal, tax, payroll or employment advice, and it does not create an attorney-client relationship. Wage rates, sick time rules and deadlines can change, and the items marked for confirmation above must be verified with the named agency before you rely on them. Consult a qualified attorney or CPA for your specific situation.