Payroll Done Right

Minnesota Payroll Requirements: What Employers Need to Know in 2026

Minnesota payroll in 2026 carries a full set of employer obligations: a four-bracket graduated income tax, a new Paid Family and Medical Leave (PFML) program that launched January 1, 2026, State Unemployment Insurance, mandatory paid sick leave under the Earned Sick and Safe Time (ESST) law, and one of the strictest final paycheck rules in the country. Employers must be prepared to manage all of these programs simultaneously. The state income tax brackets range from 5.35% at the lower end to 9.85% on income above $171,220 for married filers — one of the highest top rates among all states. Withholding is based on tables issued by the Minnesota Department of Revenue, and employers file the quarterly MWH withholding return.

The Minnesota PFML program began January 1, 2026, with a total contribution rate of 0.7% of covered wages up to the Social Security taxable wage base ($176,100 in 2026). The split is 0.35% employer and 0.35% employee. Employers with fewer than 30 employees are exempt from the employer portion but must still withhold and remit the employee share. PFML contributions are reported to the Minnesota Department of Employment and Economic Development (DEED) quarterly, alongside SUI contributions. New employers pay SUI at 1.0% on a $43,000 wage base, for a maximum first-year SUI obligation of $430 per worker. See how Minnesota SUI experience rates and PFML contributions are filed together through the DEED employer portal.

Minnesota's minimum wage is $10.85 per hour statewide for large employers (annual gross revenue of $500,000 or more) and $8.85 per hour for small employers (under $500,000). Minneapolis has a significantly higher local minimum of $17.00 per hour, and employers with workers in Minneapolis must pay the Minneapolis rate. Minnesota does not allow a tip credit — tipped employees are entitled to the full applicable minimum wage in direct cash wages regardless of tips received. This applies across all covered industries including food service and hospitality.

Minnesota's Earned Sick and Safe Time (ESST) law requires all employers to provide paid sick leave accruing at one hour for every 30 hours worked, up to 48 hours per year. ESST applies to all employers regardless of size and covers part-time and temporary workers. Employees may use ESST for their own illness, a family member's illness, or absences related to domestic abuse or sexual violence. Unused ESST hours carry over from year to year, though employers may cap usage at 80 hours per year. Read the full Minnesota payroll compliance guide for ESST recordkeeping requirements, PFML benefit structure, and MWH filing instructions.

Minnesota's final paycheck rule is among the strictest in the nation for discharged employees. When an employer terminates a worker, the final paycheck is due within 24 hours of the employee making a written demand for wages. For employees who resign voluntarily, the final check is due on the next regular payday. The 24-hour demand rule means that a same-day or next-morning payment process must be in place for any workforce reduction, layoff, or individual termination.

New hire reporting in Minnesota must be submitted within 20 days of hire to the Minnesota Department of Human Services New Hire Reporting Center. For employers new to Minnesota payroll, the combination of the new PFML program, the no-tip-credit rule, and the 24-hour final pay rule makes a thorough compliance review essential before running the first payroll. Walk through the Minnesota new employer registration process for withholding, SUI, and PFML accounts — all three are required before employees are paid.