2025 Year-End Compliance Update for Minnesota Employers

As we close out 2025, Minnesota employers are navigating one of the most significant workforce compliance shifts in recent years.

With the new Minnesota Paid Leave Program (MPL) moving from planning to implementation, updates to city and statewide ESST requirements, minimum wage adjustments, plus important federal changes affecting payroll, deductions, and contractor rules, this December marks a crucial moment for business owners to ensure their HR, payroll, and communication practices are aligned for 2026.

This update provides a clear, forward-looking overview of what Minnesota employers should already have completed, what needs immediate attention, and what to prepare for in early 2026.

Minnesota Paid Leave (MPL)

Employers should already have registered for a Minnesota Paid Leave employer account, reviewed premium deductions with payroll, distributed employee notices, posted the Paid Leave poster, and set up the Paid Leave Administrator account. If not, contact us or refer to the Minnesota Paid Leave state website for guidance on catching up.

Starting January 1, 2026

In addition to providing employee notices, employers should also ensure that the MN Paid Leave poster is displayed in a visible location at the workplace. This helps employees easily access important program information.

Premium Collection via Payroll Begins

The state of Minnesota mailed premium confirmation letters to employers and their payroll providers on December 5, 2025, which should be used to configure and test payroll for Minnesota Paid Leave premiums ahead of the first 2026 payroll.
Total 2026 premium: 0.88% of taxable wages (family leave 0.27%, medical leave 0.61%) for large employers, and 0.66% of taxable wages for small employers.
- Large employers: split 50/50 by default between employer and employee; although employers may cover more if they choose.
- Small employers (≤30 employees, average wages under 150% of statewide average): employees contribute up to 0.44%, although employers may cover more.
Wages up to the Social Security’s Old-Age, Survivors, and Disability Insurance limit (OASDI) are subject to the MN Paid Leave premium. For 2026, this limit will be $184,500 per employee.

New Employee Onboarding

Include Paid Leave notice in new hire paperwork. Apply the same process for transfers or employees who become newly eligible.

Quarterly Premium Payments

First state plan payment is due April 30, 2026, for Q1 (January–March). Private plan payments follow the carrier’s schedule.

Other Minnesota Compliance Developments

Minnesota Earned Sick & Safe Time (ESST) Year-End Audit

Employers Should Ensure:

Employees carry over required hours, if applicable.
PTO policies align with the new statewide ESST standards
Hours have been tracked accurately under the 48-hour minimum accrual requirement
Policies account for broad usage, including safety leave, and are coordinated with Minnesota Paid Leave where applicable.

Updates Effective 2026

Minneapolis ordinance changes require updated accruals and tracking.
Employers may reduce documentation requirement for absences from 3 days to 2 days.
Ensure PTO, ESST, and Paid Leave tracking systems are fully aligned.

Minnesota’s New Minimum Wage Rate Effective January 1, 2026

The updated wage order will be published in late December, with increases effective January 1.
Minnesota’s inflation-linked adjustment is expected to affect both large and small employer rates; cities like Minneapolis and St. Paul may have additional adjustments.
Employers should update payroll systems accordingly.

Secure Choice Retirement Program

Minnesota employers with five or more employees in business at least two years must offer a retirement plan or facilitate employee participation in the state’s Secure Choice payroll-deducted IRA.
The Secure Choice pilot begins January 1, 2026, with phased enrollment starting April 1 based on business size; small businesses with 5–9 employees have until January 1, 2028, to enroll or apply for an exemption if they offer a qualified retirement plan.
Employers should ensure payroll is set up to automatically deduct contributions and that employees have received required enrollment notices.

Rest & Meal Breaks

Non-exempt employees must get a paid 15-minute rest break every four hours and a 30-minute meal break if working six or more consecutive hours.
Employers who don’t provide breaks may owe pay for missed time and penalties.
Update handbooks, train managers, audit schedules, and document any voluntarily waived breaks.

Wage Reporting

Employers should already be submitting Minnesota Paid Leave wage reports through the appropriate UI or Paid Leave accounts. Employers who have not yet done so may face penalties. For guidance on catching up, contact us or visit the state website.

Federal Updates Impacting MN Employers Right Now

New Federal Deductions for Overtime and Tips (Tax Year 2025)

Employers should note:

No new payroll reporting is required in 2025 W 2s
Payroll teams should prepare for possible new reporting fields in 2026, which may affect payroll system updates

DEI & Affirmative Action (Federal Contractors)

New guidance updates affirmative action and DEI requirements. Minnesota businesses operating with federal contracts should review policies, hiring programs, and training for compliance.

Home Care Worker Classification (FLSA)

The Department of Labor temporarily broadened exemptions for companionship services and live-in domestic workers. Minnesota home-health employers should monitor these changes for 2026 payroll and compliance planning.

Secure 2.0 (Federal Retirement Updates)

Employers should prepare for the following upcoming changes

Automatic enrollment for new employees in retirement plans with higher contribution limits.
Catch-up contribution enhancements for employees aged 50 and older, and new rules for those 60–63 starting in 2025–2026.
Required payroll systems updates to handle automatic escalations and contribution reporting.
Minnesota employers offering private retirement plans or facilitating Secure Choice participation should coordinate payroll and HR systems to comply with these federal updates.

December / Early January Employer Checklist

By Early December (Should Already Be Done)

✔ Registered for Minnesota Paid Leave employer account (MPL) with the state.
✔ Reviewed 2026 Paid Leave premium deductions with payroll to ensure accuracy.
✔ Distributed the official Minnesota Paid Leave employee notice to all employees and retained proof of distribution.
✔ Confirmed PTO / ESST alignment for year-end, including accruals and carryover.
✔ Checked for minimum wage updates in your city (Minneapolis / St. Paul) and update payroll as needed.

December Must-Dos

☐ Finalize Paid Leave premium setup in your payroll software to ensure correct deductions starting January 1.
☐ Update employee handbooks for 2026 (Paid Leave, ESST, PTO).
☐ Train managers on leaves of absence, Paid Leave rights, and anti-retaliation/job protection/notification policies.
☐ Review employee classification and overtime policies.
☐ Plan internal communications regarding January 1 Paid Leave deductions.

Early January 2026

☐ Begin Paid Leave premium collection.
☐ Audit the first payroll run of 2026 for Paid Leave accuracy.
☐ Submit Q1 2026 wage report to the state by April 30, 2026.
☐ Verify that Paid Leave, ESST, and PTO tracking systems are fully aligned.

Closing Thoughts for Employers

Between the rollout of Minnesota’s Paid Leave Program, ESST alignment, minimum wage changes, and shifting federal guidance, business owners are facing a complicated compliance landscape heading into 2026.

Mistakes in payroll setup, employee communication, or wage reporting can become costly very quickly, especially as Minnesota increases enforcement and employee awareness.

Lakeside HR Group is here to support employers through this transition, including:

Paid Leave compliance setup
Employee handbook updates
Payroll and wage reporting readiness
Manager training
Federal contractor compliance
ESST/PTO policy alignment

If your organization needs guidance navigating these changes, contact our team to ensure a smooth and compliant start to 2026.

About Lakeside HR Group

We are a premier Recruiting and HR Consulting 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.

CONTACT US