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A compromise in Lansing scales back minimum wage for tipped workers and required sick leave benefits.
Michigan’s long and bumpy path to increasing the minimum wage and providing earned sick time for employees took another turn recently. A voter initiative passed in 2018 that was legally challenged and upheld by the Michigan Supreme Court preceded a bipartisan compromise on House Bill 4002 that passed in February. Here’s an overview of the new minimum wage and sick leave requirements.
Minimum wage for tipped employees
Legislators set the tipped minimum wage at $4.74/hour and the change went into effect February 21, 2025. This is $1.75/hour less than the $6.49/hour called for in the 2018 Wage Act.
The tipped wage is scheduled to increase over the next two years as follows:
- Effective January 1, 2026: $5.49/hour
- Effective January 1, 2027: $6.30/hour
Minimum wage for non-tipped employees
The changes to the minimum wage for non-tipped employees went into effect as stated in the Wage Act. Here’s the rate for the rest of 2025 and the following two years:
- Effective February 21, 2025: $12.48/hour
- Effective January 1, 2026: $13.73/ hour
- Effective January 1, 2027: $15.00/ hour
Minimum wage for minors
The minimum rate for workers aged 16 and 17, calculated at 85% of the minimum wage, is now $10.61/hour.
What happened with sick leave requirements?
The amendments to the Earned Sick Time Act (ESTA) are numerous and include specifications on small business size and when they need to comply with the law.
At businesses with more than ten employees, earned sick time (EST) is accrued at a rate of one hour for every 30 hours worked. Employees may accrue more than 72 hours of EST each year, but employers may cap usage at 72 hours in a given year. Carryover time is capped at 72 hours. Businesses with ten or fewer employees only have to provide up to 40 hours of EST.
Also, businesses with fewer than 10 employees have until October 1, 2025, to comply with the EST requirements. New businesses have a three-year grace period after forming to comply.
What to do now
Michigan businesses need to do at least two things in response to HB 4002. First, ensure that wages and sick time benefits comply with the law. Second, budget for the scheduled increases in the minimum wage for both tipped and non-tipped workers.
Consumers business loans
Do you have business banking questions? Contact our knowledgeable commercial loan officers.