What Are Michigan's Minimum Wage Laws?

Michigan's minimum wage isn't just a number—it defines the baseline for fair pay across the state. For employers, it dictates payroll decisions. For employees, it impacts take-home pay. Knowing the exact rates and rules is non-negotiable if you want to stay compliant and avoid penalties.

The law behind Michigan's minimum wage sets clear expectations for businesses with two or more employees. It also outlines specific exemptions for certain workers. These details matter whether you're managing payroll or working hourly shifts.

Here's a breakdown of Michigan's minimum wage for 2025, including the applicable laws, current rates, and situations where exemptions apply.

Current Minimum Wage in Michigan

The Improved Workforce Opportunity Wage Act (IWOWA) governs Michigan’s minimum wage requirements.
Effective January 1, 2025, most employees must receive a minimum of $10.56 per hour.
Employers with two or more employees are obligated to meet this rate unless exemptions for specific job categories apply.
State or federal laws exempt certain groups, such as tipped workers or minors with restricted hours, from the standard rate.

Key Changes for Michigan's Minimum Wage in 2025

Michigan's minimum wage will increase twice in early 2025, requiring employers to adjust payroll systems and budgets quickly to stay compliant. Both adjustments reflect legal mandates and court rulings, leaving little room for flexibility in implementation.

January 1, 2025: The hourly minimum wage rises from $10.33 in 2024 to $10.56. This adjustment accounts for inflation and is applied statewide to all non-exempt workers covered under the IWOWA. Employers must update payroll systems immediately to meet the new rate for the first pay period of the year.
February 21, 2025: A second increase follows, raising the hourly rate to $12.48. This change stems from the Michigan Supreme Court’s reinstatement of original wage requirements outlined in the IWOWA. The ruling overrode previous legislative amendments, making the February adjustment non-negotiable for all qualifying employers.

Payroll budgets must accommodate both changes without delay. The dual increases within a short period mean payroll administrators should review systems now to avoid any errors. For businesses relying on hourly workforces, the February increase may significantly raise labor costs, requiring a reassessment of workforce planning and financial forecasts.

Accurate implementation of both rate increases is non-negotiable to avoid penalties or potential wage disputes. Each adjustment applies immediately on the effective dates, leaving no grace period between announcements and enforcement.

Tipped Employees in Michigan

Tipped employees in Michigan earn a minimum wage tied directly to the full minimum wage. Instead of receiving the standard rate, tipped workers are paid a percentage of the hourly minimum wage set by the IWOWA. Employers must carefully calculate wages to ensure compliance with state laws.

Starting February 21, 2025, the tipped minimum wage will increase to $5.99 per hour. This amount is exactly 48% of the new standard minimum wage of $12.48 per hour. Employers are required to implement this change immediately on the effective date. Payroll systems must accurately reflect the updated tipped rate to avoid errors or legal violations.

Employers must also ensure that tipped employees' total earnings meet or exceed the full minimum wage. This calculation includes the hourly tipped wage and all tips earned during a shift. If an employee's combined earnings fall short of $12.48 per hour, the employer must pay the difference. This rule applies to every shift worked, requiring close tracking of tips and wages.

Michigan plans to phase out the tip credit system over time, which will steadily increase the tipped minimum wage until it equals the standard minimum wage. Employers should anticipate future adjustments to tipped pay rates and develop processes to manage the changes effectively. Accurate recordkeeping and proactive payroll planning will be necessary to comply with the law as the tip credit decreases.

Training Wage and Youth Wage in Michigan

Training Wage

Michigan allows a training wage of $4.25 per hour for employees under 20 years old during their first 90 consecutive calendar days of employment. Employers can use this reduced rate to onboard and train young workers who are stepping into the workforce for the first time.

The training wage is strictly limited to the first 90 days of employment. After the 90-day period, employers must pay at least the standard minimum wage or any other applicable wage rate, such as the youth wage or tipped wage. Employers must document the employee's start date and track the transition to a higher wage accurately. Payroll systems should reflect the exact date when the higher rate is applied to avoid compliance issues.

85% Youth Wage

Employers in Michigan can pay workers under 18 years old a youth wage equal to 85% of the regular state minimum wage. This reduced hourly rate is designed specifically for part-time or entry-level positions held by minors. The youth wage adjusts automatically whenever the standard minimum wage increases.

Two updates will change the youth wage in 2025:

January 1, 2025: The youth wage increases to $8.98 per hour. Employers must calculate this as 85% of the $10.56 hourly minimum wage effective on the same date. Payroll adjustments should be completed before the first payroll of the year.
February 21, 2025: A second increase raises the youth wage to $10.61 per hour. This adjustment reflects 85% of the updated $12.48 standard minimum wage. Payroll systems must apply the new rate immediately to avoid underpayment.

Employers hiring minors must also comply with federal and state labor laws regulating work hours, roles, and conditions for employees under 18. Accurate records of hours worked and wages paid are required to ensure compliance with both wage laws and labor restrictions.

Overtime and Special Exemptions in Michigan

Overtime Requirements

Michigan employers must follow federal overtime laws for non-exempt employees. Any hours worked beyond 40 in a single workweek require overtime pay at 1.5 times the employee's regular hourly rate. This rule applies to hourly workers, salaried employees who don't meet exemption criteria, and those paid on commission.

Accurate time tracking is the foundation for complying with overtime laws. Employers should use reliable systems to record all hours worked, including time spent on tasks outside regular schedules. Overlooking even a few minutes of extra work can lead to disputes or penalties. Adjust payroll calculations promptly for any overtime hours flagged during reviews.

Exempt Employees

Certain employees are exempt from receiving overtime pay under the FLSA. The exemption depends on two primary factors: job duties and salary basis. Executive, administrative, and professional employees often fall under this category, but only if they meet specific criteria.

To qualify as exempt, employees must perform tasks outlined in the FLSA exemption definitions. For example, an executive exemption requires managing at least two employees and having input on hiring or firing decisions. An administrative exemption applies to roles involving independent decision-making on significant matters.

Additionally, exempt employees must receive a fixed salary meeting or exceeding the minimum threshold set by federal or state law. Hourly pay structures disqualify employees from exemption status, regardless of job responsibilities. Misclassifying employees as exempt without meeting these requirements can result in back pay liabilities and penalties. Regularly auditing employee classifications ensures compliance and reduces risk.

Other Special Cases

Some small businesses and specific industries qualify for partial exemptions from Michigan wage laws. Businesses with limited annual revenue or a small workforce may be excluded from certain state requirements. However, federal wage standards still apply to most businesses, particularly those engaged in interstate commerce.

Interstate commerce includes shipping products across state lines, processing payments through out-of-state institutions, or engaging in online sales that reach customers outside Michigan. Employers involved in any of these activities must comply with federal wage and hour laws, including overtime pay requirements.

To determine exemption eligibility, review both state and federal guidelines carefully. Documenting exemption decisions with detailed records ensures compliance and provides support during audits or legal reviews. Businesses should revisit exemption qualifications periodically to account for changes in revenue, workforce size, or operations.

Compliance for Employers

Employers in Michigan must take deliberate steps to comply with minimum wage laws and avoid penalties or disputes. Staying organized and proactive ensures payroll accuracy and alignment with state requirements.

Keep precise payroll and time records: Record every hour worked, wage paid, and any adjustments made for tipped employees, minors, or training wages. Documentation should be clear and detailed, with no gaps in time tracking or pay history. Retain all records securely for the duration required by law, and ensure they are easily accessible during audits or reviews.
Plan for payroll updates in January and February 2025: Adjust payroll systems immediately to reflect the $10.56 hourly rate effective January 1. Prepare for the second increase to $12.48 on February 21 by scheduling system updates in advance. Double-check wage calculations for all employees, ensuring tipped and youth wages also align with the updated rates. For manual payroll processes, review each calculation thoroughly to prevent underpayment.
Regularly check updates from the Michigan Department of Labor and Economic Opportunity: Wage rates may change annually, often tied to inflation adjustments. Employers should monitor official announcements to stay informed about rate changes, deadlines, and compliance guidelines. Subscribing to state bulletins or alerts can ensure timely awareness of updates affecting payroll.
Automate payroll adjustments for accuracy: A payroll system with automation capabilities can simplify compliance with minimum wage increases. Automation ensures accurate pay rates for hourly employees, calculates tipped wage compliance, and accounts for overtime adjustments. By reducing manual intervention, payroll administrators can minimize errors and ensure timely implementation of mandated wage changes.

Review payroll practices regularly to confirm compliance with Michigan wage laws. Verify employee classifications, hourly rates, and overtime calculations to ensure accuracy and legal alignment.

Common Questions About Michigan's Minimum Wage

Is it illegal to pay below the minimum wage in Michigan?

Yes, paying employees less than the legal minimum wage in Michigan violates state law unless a specific exemption applies. For instance:

Training Wage: Employers can pay $4.25 per hour to workers under 20 during their first 90 days of employment.
Youth Wage: Minors under 18 may earn a rate equal to 85% of the standard minimum wage.

Any other circumstance requires payment of at least the current minimum wage. Employers who underpay workers may face financial penalties, back pay obligations, or legal action.

Is Michigan's minimum wage going up in 2025?

Yes, the minimum wage in Michigan will increase twice in 2025. The first adjustment on January 1 raises the hourly rate to $10.56. A second adjustment on February 21 increases the rate again to $12.48. Both changes are required under state law and align with recent court rulings.

Employers must update payroll systems to reflect these changes on the exact dates to avoid non-compliance. Preparing for both increases ahead of time can help ensure accurate payments.

Final Thoughts About Michigan's Minimum Wage

Navigating the complexities of Michigan's minimum wage laws can be challenging, but staying informed and proactive is essential for maintaining compliance and avoiding penalties. We understand the importance of accurate payroll management and are here to support you every step of the way. If you're looking for a comprehensive solution to streamline your HR processes and ensure compliance with Michigan's wage requirements, book a demo with us today.