Minnesota Payroll Compliance Guide 2026: Complete Employer Reference

Minnesota Payroll Overview

Minnesota is consistently among the most active states for payroll legislation. In the last two years alone, the state has added statewide paid sick leave (January 2024), launched a paid family and medical leave program (January 2026), and maintained a high-income top rate of 9.85% that makes withholding calculations on larger paychecks consequential. The $43,000 SUI wage base—tied with Montana—means your SUI liability accumulates over more of each employee’s annual wages than in most other states.

Minneapolis and Saint Paul operate under their own local minimum wage ordinances that exceed the state rate. If your employees work in either city, verify the current local rates, which are higher than the $10.85 large-employer state rate. Both cities index their minimums to local inflation measures and adjust periodically.

The Minnesota Department of Revenue handles income tax withholding. The Department of Employment and Economic Development (DEED) administers SUI. The new PFML program falls under the Department of Labor and Industry (DLI). You interact with three separate state agencies just for payroll tax obligations.

Minnesota Payroll Taxes: 2026 Rates and Wage Bases

Minnesota Income Tax Withholding: Four Brackets to 9.85%

Minnesota taxes wages using four brackets. The top rate of 9.85% applies to the highest income range and puts Minnesota among the top five states for individual income tax rates nationally. Most employees fall in the 6.8% or 7.85% brackets, but executives and high-earning professionals in the Twin Cities commonly reach the 9.85% tier.

Note: Minnesota adjusts bracket thresholds annually for inflation. Confirm current thresholds at revenue.state.mn.us before the start of each calendar year.

Minnesota W-4MN Form

Minnesota employees complete a W-4MN withholding form in addition to the federal W-4. The W-4MN captures Minnesota-specific filing status and additional withholding elections. Without a W-4MN, use the federal W-4 filing status for Minnesota withholding. Employees who want to opt out of using their federal allowances for state purposes must complete a separate Minnesota W-4MN.

All withholding returns and deposits go through the Minnesota Department of Revenue’s e-Services portal at myminnesotaid.dor.state.mn.us. Annual W-2 reconciliation on Form MW508 is due February 28.

Minnesota PFML: January 2026 Launch

Minnesota’s Paid Family and Medical Leave program launched January 1, 2026. The Minnesota Department of Labor and Industry administers the program. All Minnesota employers must register and begin contributions.

Contribution Rate and Wage Base

The combined contribution rate is 0.7% of wages, split equally—0.35% employer, 0.35% employee. The contribution applies to wages up to the Social Security wage base: $176,100 per employee per year. At the combined 0.7% rate on the full $176,100 base, the maximum combined contribution per employee is $1,232.70 per year ($616.35 employer + $616.35 employee).

Benefit Coverage

Minnesota PFML provides qualifying employees:

• Up to 12 weeks of family leave—bonding with a new child, caring for a seriously ill family member, qualifying military exigency
• Up to 12 weeks of medical leave—the employee’s own serious health condition

Benefits are calculated as a percentage of the employee’s average weekly wage, up to a weekly cap. The Minnesota DLI publishes the current benefit cap. Benefits are funded through the contributions collected by employers.

Employer Registration and Filing

All Minnesota employers must register with the PFML program through the Minnesota DLI’s paid leave portal. Contributions are reported and remitted quarterly. If you have not yet registered, do so immediately—contributions were due beginning January 1, 2026, and retroactive liability accumulates.

Minnesota SUI: High Wage Base, Wide Band

Minnesota SUI is administered by DEED. The $43,000 taxable wage base is the highest in this guide and one of the highest in the country. New employers pay 1.0%—a low rate—but on a $43,000 base, that caps new-employer SUI at $430 per employee per year. That’s higher in absolute dollars than most states with higher percentage rates but lower wage bases.

The experienced-employer range is 0.2% to 9.1%. At the maximum 9.1% rate on the $43,000 wage base, SUI tops out at $3,913 per employee per year. That’s a significant cost for high-turnover industries like hospitality or staffing.

Minnesota uses a reserve account method. Your account balance (cumulative SUI taxes paid minus benefits charged) divided by average annual payroll determines your rate band. DEED sends rate notices each year. Contesting unemployment claims you believe are improperly charged pays off when your wage base is this high.

Quarterly SUI Filing

File quarterly SUI returns through DEED’s Unemployment Insurance (UI) employer portal at uimn.org/employers. Report total wages, taxable wages, and per-employee wage detail. Quarterly deadlines: April 30, July 31, October 31, January 31.

Minnesota Earned Sick and Safe Time

Minnesota’s Earned Sick and Safe Time (ESST) law took effect January 1, 2024. It applies to all employers with one or more employees. Accrual rate: 1 hour per 30 hours worked, up to 48 hours per year. Unlike most states with sick leave laws, Minnesota’s 48-hour cap is slightly higher than the common 40-hour standard.

ESST covers use for the employee’s own illness, care of a family member, closure related to a public health emergency, and matters related to domestic abuse, sexual assault, or stalking. Unused ESST carries over year to year, up to the 48-hour annual cap on use. Employers may front-load the full 48 hours at the start of the year instead of tracking per-hour accrual.

Wage Payment Laws: The 24-Hour Demand Rule

Minnesota wage payment law appears in Minnesota Statutes §181.13–181.14. The Department of Labor and Industry, Wage and Hour Division enforces it.

Pay Frequency

Minnesota employers must pay wages at least once every 31 days for salaried employees and at least semi-monthly for hourly employees. In practice, most employers pay bi-weekly or semi-monthly for all employees.

Final Paycheck Deadline and the 24-Hour Demand Rule

Minnesota’s final pay rules have an important demand-triggered component:

If a terminated employee submits a written demand for their final wages, you have 24 hours to pay. This applies regardless of where your next regular payday falls. Make sure your HR and payroll teams understand this rule and have a process to issue off-cycle final checks within 24 hours when a demand is received. The demand does not need to be formal—an email or text message requesting payment can constitute a demand.

Penalty for Late Final Payment

If an employer fails to pay final wages within the required time frame, the employee may recover the unpaid wages plus a penalty equal to an additional day’s wages for every day the payment is late, up to 15 days of additional pay. That penalty accrues quickly on higher-wage employees.

Overtime and FLSA

Minnesota has its own overtime law that mirrors FLSA for most purposes: 1.5× the regular rate for hours over 48 in a workweek—not 40. Minnesota’s state overtime threshold of 48 hours per week is higher than the federal FLSA’s 40-hour threshold. However, federal FLSA’s 40-hour rule also applies to Minnesota employers covered by FLSA. Since FLSA coverage is broad, most employers must use the lower 40-hour threshold.

If your business falls below FLSA coverage (very small employers not engaged in interstate commerce), Minnesota state law would govern at the 48-hour threshold. For most employers, use 40 hours to be safe and compliant with both laws simultaneously.

Minnesota Minimum Wage 2026: Tiered by Employer Size

Minnesota uses a two-tier minimum wage based on employer gross revenues:

Minnesota adjusts the minimum wage annually based on an inflation index. The rates above reflect the 2026 figures; verify updated rates at dli.mn.gov/minwage at the start of each year.

Minneapolis and Saint Paul Local Minimums

Both Minneapolis and Saint Paul have enacted their own minimum wage ordinances that exceed the state rates. Minneapolis and Saint Paul both phase their rates toward $15+/hr over time, with rates varying by employer size within those cities as well. If any of your employees work within the city limits of Minneapolis or Saint Paul, apply the applicable city rate rather than the state rate. Verify current city rates at the Minneapolis CPED and Saint Paul Department of Human Rights websites.

Minnesota Has No Tip Credit

Minnesota does not allow a tip credit. Tipped employees must receive the full minimum wage ($10.85 or $8.85 depending on employer size) in direct wages from the employer, regardless of tips received. Employers cannot count tips toward the minimum wage obligation. This is a major distinction from federal law and most other states.

New Employer Registration

Minnesota new employers register with three state agencies: the Department of Revenue for income tax withholding, DEED for SUI, and the Department of Labor and Industry for PFML.

Federal EIN

Apply at irs.gov/ein first. Free and immediate online.

Minnesota Withholding Registration (DOR)

• Where: Minnesota Department of Revenue e-Services at www.revenue.state.mn.us
• What you get: Minnesota Tax ID Number, withholding account, assigned filing frequency
• When: Before your first Minnesota payroll

Minnesota SUI Registration (DEED)

• Where: DEED UI employer portal at uimn.org/employers
• Trigger: $1,500 in wages in any quarter, or one or more employees for 20 days in a year
• What you get: Minnesota UI Account Number, new-employer SUI rate of 1.0%

Minnesota PFML Registration (DLI)

• Where: Minnesota DLI paid leave portal
• Required for: All employers with Minnesota employees effective January 1, 2026

New-Hire Reporting

Report new hires and rehires within 20 days to the Minnesota New Hire Reporting Center at newhire.mn.gov. Report employee name, address, SSN, start date, and employer FEIN.

Minnesota Payroll Compliance Calendar 2026

Frequently Asked Questions

What is Minnesota’s top income tax rate for 2026?

Minnesota’s top income tax rate is 9.85%, applying to single filers earning above approximately $193,240 and joint filers above $321,450. The state uses four brackets starting at 5.35%. Most middle-income employees fall in the 6.8% or 7.85% brackets. Employers calculate withholding using the Minnesota DOR’s tables and each employee’s W-4MN.

When does Minnesota’s paid family and medical leave program start?

Minnesota PFML launched January 1, 2026. Both contributions and benefits are active. The combined rate is 0.7% of wages up to $176,100, split evenly (0.35% employer, 0.35% employee). Benefits include up to 12 weeks of family leave and 12 weeks of medical leave. Employers must be registered and contributing now.

What is the Minnesota SUI rate for new employers in 2026?

New employers pay 1.0% on the first $43,000 per employee per year, capping at $430 per employee. Experienced employers range from 0.2% to 9.1%. The $43,000 wage base is one of the highest in the nation—at the 9.1% maximum rate, SUI tops out at $3,913 per employee annually.

What is the minimum wage in Minnesota for 2026?

Minnesota minimum wage is tiered: $10.85/hr for large employers (annual gross revenues over $500,000) and $8.85/hr for small employers ($500,000 or less in revenues). Minneapolis and Saint Paul have higher local minimums. Minnesota has no tip credit—tipped employees must receive the full minimum in direct wages regardless of tips.

When must Minnesota employers pay a terminated employee their final paycheck?

Minnesota requires final wages by the next regular payday. If the employee makes a written demand for payment, the employer has 24 hours to pay. The 24-hour clock starts from the time of the demand, not from the next payday. Failure to pay within 24 hours of a demand triggers a penalty of one day’s wages for each day late, up to 15 days.

How does Minnesota’s tiered minimum wage work?

Employer size is measured by annual gross revenues, not employee headcount. If your business had more than $500,000 in gross revenues in the prior calendar year, you pay the large-employer rate of $10.85. At or below $500,000, you pay the small-employer rate of $8.85. New businesses typically qualify as small employers in their first year. Minneapolis and Saint Paul impose higher city-level minimums that supersede the state rates for work performed within those cities.

Does Minnesota require employers to provide paid sick and safe leave?

Yes. Minnesota’s Earned Sick and Safe Time (ESST) law, effective January 1, 2024, requires all employers with one or more employees to provide paid sick and safe leave at 1 hour per 30 hours worked, up to 48 hours per year. It covers all employees including part-time and temporary workers. Unused time carries over year to year up to the usage cap.