Key Updates Employers Must Know in 2025–2026
Staying compliant with Michigan labor laws is becoming more complex as new legislation reshapes hiring practices, payroll requirements, and HR policies. For employers and HR teams, understanding these changes is not optional—it’s essential to avoid penalties and maintain a compliant workforce.
This guide breaks down the most important employment compliance updates in Michigan and what they mean for your business.
Major Michigan Employment Law Changes in 2025
1. Minimum Wage Increases
Michigan has implemented significant wage increases beginning in 2025, with additional increases scheduled in the coming years.
- $12.48/hour effective February 21, 2025 (vorys.com)
- $13.73/hour effective January 1, 2026 (vorys.com)
- $15.00/hour effective January 1, 2027 (vorys.com)
These increases stem from updated wage legislation and court rulings that reinstated stronger worker protections (Miller Johnson).
As a result, employers must prepare for ongoing payroll adjustments.
What this means for employers
- Payroll budgets must be adjusted annually
- Compensation structures may need restructuring
- Wage compression issues (entry-level vs. experienced staff) may arise
2. Expanded Paid Sick Leave (Earned Sick Time Act)
The Earned Sick Time Act (ESTA) took effect on February 21, 2025, significantly expanding employee benefits (Michigan).
Specifically, the law introduces new requirements that affect nearly all employers.
Key requirements
- Employees earn 1 hour of paid sick leave for every 30 hours worked (MI Chamber)
- Applies to full-time, part-time, and seasonal workers (MI Chamber)
- Large employers must allow up to 72 hours annually
- Small businesses (≤10 employees) must provide at least 40 hours (dickinson-wright.com)
Important timeline
- Large employers: compliance required starting Feb 21, 2025
- Small businesses: compliance required by Oct 1, 2025 (honigman.com)
Additional compliance rules
- Employers may impose a 120-day waiting period before usage (Jackson Lewis)
- Carryover may be capped (72 hours large / 40 small employers) (Jackson Lewis)
Therefore, HR teams must ensure systems are updated to track leave accurately.
What this means for HR teams
- Update employee handbooks and leave policies
- Track accrual accurately
- Ensure proper employee notifications
3. Tipped Wage and Credit Adjustments
Michigan has also updated its tipped wage structure.
In particular, employers must ensure that tipped workers still meet full minimum wage requirements when tips are included.
- Tipped workers must still reach full minimum wage when tips are included
- Tip credit percentage will gradually decrease through 2031 (vorys.com)
Because of this, payroll tracking becomes more complex.
Employer impact
- Increased payroll tracking complexity
- Greater compliance risk if tip reporting is inaccurate
4. Employer Coverage Expanded
Previously exempt employers are now included under new regulations.
As a result, nearly all Michigan employers must comply with updated wage and sick leave laws (sbam.org).
- Small businesses are no longer broadly exempt
What this means
- Even small teams must implement formal HR systems
- Informal or manual compliance processes are no longer sufficient
Key Compliance Areas Employers Should Review
To stay aligned with current workplace regulations, businesses should conduct a structured review of their internal processes.
Payroll and Compensation
Employers must ensure wage increases are applied correctly. Additionally, overtime calculations should align with Michigan law, and tipped wage compliance must be verified.
HR Policies and Documentation
Policies must reflect current legal requirements. In addition, employers should update employee handbooks and ensure onboarding documents align with ESTA.
Time Tracking and Recordkeeping
Accurate tracking systems are essential. For example, employers must monitor sick leave accrual and maintain audit-ready records at all times.
Risks of Non-Compliance
Failing to comply with updated Michigan employment laws can lead to serious consequences.
- Financial penalties and back pay liabilities
- Employee lawsuits or labor complaints
- Increased scrutiny from regulatory agencies
In many cases, these risks arise from outdated or poorly managed systems.
How Employers Can Stay Ahead
The pace of HR updates in Michigan requires a proactive approach.
To stay compliant, employers should:
- Conduct regular compliance audits
- Partner with HR or staffing experts
- Automate payroll and leave tracking systems
- Stay updated with state labor announcements
Need Help Navigating Michigan Employment Laws?
At Career Connections Staffing Services, we help businesses stay compliant while building strong, reliable teams. Whether you need support with hiring, HR processes, or workforce management, our experts are here to help you navigate today’s changing regulatory environment.