As we’ve entered 2025, several amendments to current employment laws—along with a few new regulations —are shaping the workplace landscape in Minnesota. Staying informed and compliant is essential for employers to avoid potential risks.
The updates below highlight important changes that may impact your business. Lakeside HR Group is here to help you navigate these changes with confidence—reach out to our HR Consulting team to ensure your compliance and keep your workplace running smoothly.
Minnesota Paid Family and Medical Leave (PFML)
Minnesota will be the 13th state to enact a paid family and medical leave law. As of this quarterly update, PFML is still on track for January 1st, 2026. Updates to PFML introduce new benefits and employer obligations. To stay compliant, ensure you review your policies to align with contribution requirements and leave entitlements.
Employers will continue using their unemployment website accounts for quarterly wage reporting. A new employer portal will also be available to track employees’ paid leave status.
Employees must work at least 90 days before qualifying for PFML benefits. Before applying with the state, they must first notify their employer, a step that will be enforced through the state’s application process. Employers considering private PFML plans must receive state approval, with further guidance expected in the Spring of 2025.
The PFML tax rate has increased from 0.7% to 0.88%, with a cap remaining at 1.2%. Employers with 30 or fewer employees may qualify for a reduced rate of 0.75%. The first quarterly premium payments are due April 30, 2026, and benefits will become available starting January 1, 2026. Employers must still pay at least 50% of the tax rate on behalf of their employees.
Minnesota Earned Sick and Safe Time (ESST) Amendments
Minnesota’s Earned Sick and Safe Time (ESST) rules were expanded to include additional requirements on employers leveraging Paid Time Off (PTO) policies to satisfy ESST obligations. Employers must ensure compliance with these changes as any PTO accrued beyond the annual 48-hour ESST threshold is now subject to ESST regulations.
To align with these updates, employers must limit notice requirements on their PTO plan to a maximum of seven days, eliminate any policies requiring employees to find their own replacements before taking leave, and ensure PTO balances are reported electronically or via paystub. Non-compliance can lead to significant penalties, including liquidated damages for withholding ESST or failing to meet reporting requirements.
ESST eligibility has broadened to cover preventive care, domestic violence or stalking situations, school closures, childcare issues, funeral arrangements, financial and legal matters, and memorial attendance. Employees may also designate one individual annually as a family member under this policy.
Employers should also note changes to ESST increments and pay adjustments. Leave cannot be taken in increments smaller than 15 minutes or be required in blocks longer than four hours. Employers must pay employees using ESST at their regular base rate. For hourly workers, this is the same rate they earn per hour. If an employee has multiple hourly rates, they should be paid the rate they would have earned for the work scheduled during the leave period.
The MN Department of Labor & Industry has been granted new rule-making authority, with additional guidance expected in the coming months. To avoid compliance risks, employers should review and update their PTO policies now to reflect these changes.
Pay Transparency: The Minnesota Pay Equity and Transparency Law
The Minnesota Pay Equity and Transparency Law went into effect on January 1st, 2025. It is designed to promote fair pay practices and reduce wage disparities across the workforce.
Employers with 30 or more employees in the state will be required to take the following actions to ensure compliance and enhance transparency regarding pay structures.
One significant change is that all MN employers are no longer allowed to ask about an applicant’s salary history during the hiring process, which aims to prevent the perpetuation of wage inequality. Additionally, employers meeting the headcount requirement are required to disclose pay ranges in job postings and for internal job moves, ensuring that employees and candidates have a clear understanding of compensation from the start. This includes staffing and recruitment partnerships posting on behalf of employers that meet the headcount requirement.
The law also mandates that employers provide equal pay for comparable work, regardless of protected characteristics such as gender or race, which is a critical step in closing systemic pay gaps. Larger employers will need to conduct regular pay equity audits to ensure their practices align with the law and address any potential disparities.
Finally, employees will be protected when discussing their wages or reporting pay discrimination, helping foster a more open and transparent workplace culture.
With these new requirements, employers in Minnesota will need to prepare now by reviewing compensation structures, hiring practices, and internal policies to ensure full compliance in 2025.
Minnesota 2025 Minimum Wage Increases
It’s important for business owners to stay informed about minimum wage increases in Minnesota to ensure compliance and avoid potential penalties. Here’s a breakdown of what’s changed in 2025 and how it impacts your payroll.
Statewide Minimum Wage Increase
Effective January 1, 2025, Minnesota’s minimum wage will increase to $11.13 per hour for all employees, regardless of employer size. However, the state still allows a 90-day training wage of $9.08 per hour for employees under 20 years old.
Minneapolis Minimum Wage Requirements
Businesses operating in Minneapolis must pay employees at least $15.97 per hour (up from $15.57 in 2024) if they work at least two hours per week within the city limits. This applies to all employers, regardless of size.
St. Paul Minimum Wage Updates
St. Paul is implementing two minimum wage increases in 2025:
- The first took effect on January 1, 2025
- The second takes effect on July 1, 2025
The required wage depends on employer size, but any worker performing at least two hours of work per week in St. Paul must be paid the new rate.
National 2025 New Pay Transparency Laws
Since January 1, 2025, several other states have implemented new pay transparency laws to promote fair compensation.
- Illinois now requires employers with 15 or more employees to include salary ranges and benefits in job postings.
- Massachusetts has introduced the Pay Transparency Act, requiring employers with over 100 employees to submit annual wage reports and, starting July 31, 2025, employers with 25 or more employees must disclose pay ranges in job postings.
- New Jersey will enforce employers with 10 or more employees to include benefits description and salary ranges in job postings beginning June 1, 2025.
- Vermont will require employers with five or more employees to include good faith wage ranges in job listings starting July 1, 2025.
These changes reflect a growing nationwide movement toward greater pay transparency and equitable compensation practices. Employers should ensure wage adjustments are reflected in payroll processing, plan for the increased labor costs, keep accurate records and follow all wage regulations to avoid penalties.
Independent Contractor Classification
Worker classification laws are shifting again, and if your business uses independent contractors, it’s time for a review. Misclassifying workers can lead to hefty fines, legal trouble, and major headaches, so let’s break down what’s changing and what you need to do.
As of March 1, 2025, construction companies now must follow a new 14-factor test to determine if a worker is truly a 1099 independent contractor. To qualify, a worker must meet all 14 criteria—no exceptions. If an employer misclassifies someone, they could face penalties of up to $10,000 per misclassified worker, plus additional compensatory damages.
For all other industries, the 5-factor test is still in place, but given the direction things are headed, now is the time to double-check your worker classifications.
Misclassifying workers isn’t just a legal risk—it can impact payroll, benefits, and even company culture. Here’s how HR can stay ahead:
- Review how workers are classified using both federal and state guidelines.
- Regularly update contracts and agreements to align with current laws.
- Keep solid documentation that supports the 1099 classification.
Minnesota’s Secure Choice Retirement Program
There’s a new retirement savings requirement on the horizon. The Minnesota Secure Choice Retirement Program is designed to help more workers save for the future—but recent updates have shifted its timeline. Here’s what you should know.
Under this program, employers with five or more employees must automatically enroll their workers in a state-managed retirement plan if they don’t already offer one. Once enrolled, payroll deductions will begin to fund employees’ retirement savings.
When Does It Start?
Originally set to roll out on January 1, 2025, the program’s launch has been pushed back. Now, employers won’t need to start enrollment until January 1, 2026 or later according to the Minnesota Secure Choice Retirement Program FAQ page.
Employers Should:
- Keep an eye on official announcements regarding exact deadlines.
- If you already offer a retirement plan, you may not need to participate.
- If you don’t have a retirement plan in place, start considering how this change will affect your payroll and operations.
Although the timeline has been extended, it’s a good idea to get familiar with the program now. By planning ahead, businesses can ensure compliance and provide employees with a valuable retirement savings option.
Lakeside HR Group is your trusted partner for all compliance needs. Whether you need support with policy creation, implementation, or understanding how new regulations impact your business, our expert HR consultants are here to guide you every step of the way. Let us help you navigate these changes with confidence.
About Lakeside HR Group
We are a premier HR Consulting and Recruiting firm connecting people and businesses through personalized, full-service solutions. As a boutique firm of seasoned HR professionals, we specialize in providing customized HR services for small to midsize businesses. With expertise across diverse industries, positions, and states throughout the U.S., we partner with our clients to discover top talent and deliver the support needed to help their businesses thrive.
