Like many other states in the U.S., Michigan has established its own minimum wage laws that dictate the lowest hourly rate employers can offer their employees. These regulations have been designed to ensure that workers receive fair pay for their efforts, helping them achieve a decent standard of living. But what is the minimum wage in Michigan and how has it changed recently?
In today’s comprehensive guide for employers, we will cover everything you need to know about the Michigan minimum wage to help you understand your responsibilities and the rights of your employees. We will also share some tips and best practices to help you comply with your obligations and foster a positive workplace environment.
- The U.S. Minimum Wage Framework
- History of the Minimum Wage in Michigan
- What Is the Current Minimum Wage in Michigan?
- Exemptions & Special Cases
- Additional Michigan State Wage Laws
- Best Practices to Ensure Wage Law Compliance
- How Factorial Can Help You Comply with Michigan Wage Laws
- Centralize your payroll management processes and get ahead 🚀
The U.S. Minimum Wage Framework
The United States operates a tiered minimum wage system, with varying rates set at the federal, state and municipal levels. This creates a complex system for determining the minimum wage for workers across the United States.
- Federal Minimum Wage. The federal minimum wage, established by the Fair Labor Standards Act, serves as the baseline wage for non-exempt employees nationwide. The current federal minimum wage stands at $7.25 per hour.
- State Minimum Wage. Some states have established their own minimum wage laws. These state minimum wages are often higher than the federal rate, aiming to align with the cost of living and labor market conditions within their respective jurisdictions.
- Municipal Minimum Wage. A growing number of cities and counties have also implemented their own minimum wage limits, often higher than both state and federal minimum wage rates. These municipal-level minimum wages reflect the unique economic circumstances of specific localities.
History of the Minimum in Wage Michigan
There are currently 34 states, territories and districts that have minimum wages above the federal standard of $7.25 per hour. Five states have not adopted a state minimum wage (Alabama, Louisiana, Mississippi, South Carolina and Tennessee), and Georgia and Wyoming have a minimum wage below $7.25 per hour. (although the federal minimum wage of $7.25 per hour still applies).
So, what about Michigan?
The state of Michigan has its own minimum wage, although increases have been relatively small and gradual.
Here’s a brief history of the minimum wage in Michigan.
- 1971. The first minimum wage in Michigan is set at $1.60, in line with the federal minimum wage.
- 1961. Employment is covered by amendments to the FLSA and the minimum wage in Michigan is raised to the federal rate ($1.80).
- 1981. Stays in line with the federal rate until 1981, when the state raises it to $2.50 (40 cents higher than federal).
- 1995 – 1997. Between 1995 and 1997, the federal minimum wage increases from $4.25 per hour to $5.15 per hour. Michigan continues to align with these changes.
- 1998. Another raise brings the minimum wage in Michigan to $5.15 per hour, matching the federal rate.
- 2006. Michigan passed Public Act 81, which raises the minimum wage from $5.15 to $6.95 per hour. This law also sets a schedule for future increases, reaching $7.40 per hour by 2008.
- 2014. Public Act 138 sets a new schedule for increases starting from $8.15, with further increases planned for subsequent years.
- 2023. The minimum wage in Michigan is raised to $10.10 per hour.
- 2024. The minimum wage in Michigan is raised to $10.33 per hour, with future increases scheduled annually until 2027.
What Is the Current Minimum Wage in Michigan?
The current minimum wage for the entire state of Michigan is $10.33 per hour. This is higher than the federal minimum wage, which remains at $7.25 per hour (and it’s not set to increase any time soon). This minimum wage rate is enforced by the Michigan Department of Labor and Economic Opportunity (LEO).
The minimum wage in Michigan applies to all businesses with two or more employees, although there are some exceptions (as we will see in more detail below). Not only, that, but the minimum wage in Michigan is scheduled to increase to $11.50 per hour by 2027. This incremental approach aims to provide a balanced path for both employers and employees, ensuring fair compensation while allowing businesses time to adapt to the new wage standards.
Moreover, unlike other states, the minimum wage in Michigan isn’t always adjusted annually. Specifically, according to the State’s minimum wage laws, increases are only made in years where the unemployment rate is above 8.5%. As a result, there have been no updates to the minimum wage in Michigan during periods of high unemployment, such as in 2021, when the scheduled increase was delayed due to economic conditions related to the COVID-19 pandemic.
Finally, Michigan currently uses only a statewide minimum wage law rather than allowing cities or counties to set alternative higher rates. This means that there are no municipal minimum wage rates in the Great Lakes State.
Exemptions & Special Cases
While the minimum wage in Michigan applies to most adult workers over the age of 18 who are employed by a business with two or more employees, there are certain exemptions that you need to be aware of.
Here’s an overview of these exemptions:
- Young workers. You can pay employees aged 16 and 17 paid 85% of the standard minimum wage ($8.78 per hour as of 2024).
- Tipped Employees. The current minimum wage in Michigan for tipped employees (employees who regularly receive gratuities, like bar staff, servers, and hairdressers) increased to $3.93 per hour this year, with an average hourly tipped wage of $6.40 to make up the difference. Tipped employees can expect another increase in their wages in 2025, where they’ll be paid $4.01 per hour (with an hourly tipped wage of $6.55).
- Training wage. Employers can pay employees aged 16 to 19 a training wage of $4.25 per hour for the first 90 days of employment.
- Employees with disabilities. You can pay a lower wage to employees with disabilities if they are covered by the Fair Labor Standards Act (FLSA).
Additional Michigan State Wage Laws
In addition to the Michigan minimum wage, the “Great Lakes” state has several supplementary wage laws that employers need to understand and apply.
Let’s explore these additional Michigan wage laws in a bit more detail so you can make sure your employee handbook meets all requirements.
Sick Leave
In 2019, Michigan introduced the Paid Medical Leave Act (PMLA), giving certain employees in the State the legal right to paid sick leave. This was a significant step forward in labor rights and worker protections.
Specifically, Michigan employers with 50 or more employees must now provide one hour of paid sick leave for every 35 hours an employee works up. Employees can accumulate up to 40 hours of leave per year.
Employees can take sick leave for a variety of reasons, including:
- A worker’s physical or mental illness or that of a family member.
- During a public health emergency.
- Addressing domestic violence and assault.
Unions
According to Michigan’s Public Employment Relations Act (PERA), public employees have the right to form, join or assist labor organizations and to negotiate collectively through representatives of their own choosing. However, Michigan no longer mandates union membership after the Right to Work laws were amended in 2023.
Pay Discrimination
Michigan has progressive pay discrimination laws aimed at ensuring fair pay and preventing wage discrimination based on gender, race, and other protected characteristics.
Specifically, according to the Elliott-Larsen Civil Rights Act, employers cannot offer discriminatory pay on the basis of an employee’s religion, race, color, national origin, age, sex, height, weight, familial status, or marital status. This is in addition to the protections offered by Title VII of the Civil Rights Act of 1964.
Pay Transparency
While not a standalone law, Michigan’s employment laws include provisions that protect employees from retaliation if they discuss or disclose their wages. This is intended to promote pay transparency and pay parity and help identify and address wage discrimination
Overtime
Michigan adheres to the federal overtime regulations set by the Fair Labor Standards Act (FLSA). Specifically, Michigan overtime law requires that non-exempt employees receive overtime pay equal to 1.5 x their regular hourly pay for any hours worked over 40 in a week (overtime). These hours must be tracked and recorded and stored for a period of at least three years.
Michigan does not have additional state-specific overtime laws beyond those stipulated by the FLSA.
Payment of Wages and Fringe Benefits Act
According to the Payment of Wages and Fringe Benefits Act, employers must pay employees at least twice a month. This can be biweekly, provided the payment frequency does not exceed 16 days between pay periods. Employers must ensure that employees are paid all wages earned during the pay period within this timeframe.
In addition, employers must maintain records for at least three years that indicate the employee’s name, address, birthdate, classification, rate of pay, total hours worked in each pay period, total wages paid and an itemization of fringe benefits. If an employee believes that their employer has violated this act, they can file a complaint with the Wage and Hour Division.
Equal Pay
Finally, the Michigan Equal Pay Law prohibits private employers from discriminating in pay based on an individual’s membership in a protected class. This aligns with the Federal Equal Pay Act which also aims to ensure that all employees receive equal pay for equal work (also known as pay parity).
Specifically, according to the these laws, all employees have a right to pay equity and protection against sex-based compensation discrimination. This means that if multiple individuals are performing substantially equal jobs that require similar levels of skill, effort, and responsibility, and under similar working conditions, then you must pay them the same wage or salary, regardless of gender.
Best Practices to Ensure Wage Law Compliance
And that’s pretty much everything you need to know about the minimum wage in Michigan and the state’s additional wage laws! All that remains is to ensure that your business meets the legal requirements of these laws.
So, how can you make sure you don’t inadvertently side-step the law in Michigan?
Simple. Just implement the following essential tips and best practices to protect your business from potential non-compliance fines and penalties. Plus, ensuring compliance in this way also helps you foster a positive and compliant work environment for your employees, so you can attract and retain top talent, boost employee morale, and enhance overall productivity and workplace harmony!
Stay Informed and Up to Date
Firstly, keep up to date with federal and state minimum wage laws, as these can change. The Michigan Department of Labor and Economic Opportunity (LEO) and the U.S. Department of Labor websites are good resources for this.
Maintain Accurate Records and Conduct Regular Audits
Secondly, it’s important to maintain accurate and up-to-date records of all employee work hours and wages. Keeping precise records helps ensure employees are paid correctly and on time. Regular audits, both internal and external, can spot and fix mistakes, making sure everything is legal and helping you avoid hefty fines.
Using employee record management software can make this easier. These systems automate time tracking, payroll processing and compliance checks, which cuts down on errors and saves time. By using this technology, you can maintain accurate and reliable records and focus on other important parts of your business while staying compliant with the law.
Classify Employees Correctly
Thirdly, make sure you properly classify your employees as either exempt or non-exempt under the minimum wage regulations. This classification determines whether an employer must offer overtime pay. Carefully review the duties and responsibilities of each employee to determine their exempt or non-exempt status.
Implement Accurate Payroll Practices
It’s important to maintain accurate and up-to-date payroll records that include employee names, hours worked, wages paid and any deductions that you have made. Michigan law requires you to keep these records for at least three years.
You should also regularly review your payroll records to identify any inconsistencies or errors. And don’t forget to create a payroll checklist to make sure that you complete all necessary steps during each payroll cycle, including verifying employee hours, ensuring correct pay rates and calculating payroll tax deductions accurately.
Track Overtime Hours
In addition, make sure you accurately track overtime hours worked by non-exempt employees. Implement a system for employees to report overtime hours, such as using timesheets or electronic timekeeping systems. Ensure that overtime pay is calculated and paid correctly at the appropriate rate (time and a half).
Use the Right Payroll Software
Finally, choosing the right payroll software is essential. In fact, you could even argue that it is the most important tool for managing employee wages and compliance. The right software helps you stay compliant by automatically adjusting for changes in minimum wage rates and managing tax withholdings. It also helps you track employee work hours, calculate overtime and holiday pay, and produce accurate pay stubs at the end of each pay period. This reduces the risk of errors, streamlines administrative tasks, and ensures that employees are paid correctly and on time, helping your business comply with all Michigan wage laws and time-tracking legal requirements.
How Factorial Can Help You Comply with Michigan Wage Laws
Factorial can help you navigate the complexities of Michigan’s wage laws and streamline your payroll processes to maintain compliance.
- Automated payroll calculations. Firstly, Factorial’s automated payroll system eliminates manual calculations, reducing the risk of errors and ensuring accurate compensation for all employees. It automatically factors in minimum wage Michigan rates and requirements, overtime pay, holiday pay and other relevant regulations to ensure compliance with Michigan wage laws.
- Real-time overtime tracking. Secondly, Factorial’s time tracking feature and electronic time clock enable real-time monitoring of overtime hours. This allows you to maintain and generate accurate records and reports to identify and address any overtime issues promptly, ensuring compliance with Michigan’s overtime pay regulations.
- On-demand pay. Factorial’s on-demand pay feature allows employees to access their earned wages between pay periods, providing financial flexibility and enhancing employee satisfaction.
- Secure payroll processing. Factorial employs robust payroll security measures to safeguard sensitive employee data.
- Comprehensive payroll reporting. Finally, Factorial generates detailed payroll reports, providing valuable insights into employee compensation, overtime trends and overall payroll expenses.
By leveraging Factorial’s comprehensive payroll solution, you can effectively manage each stage of your payroll process, ensuring accuracy and compliance with all Michigan wage laws (including the minimum wage in Michigan). That way, you can foster a positive and compliant work environment and enhance overall efficiency and transparency in your payroll operations.
