Minnesota employers are preparing for the implementation of a new Paid Family and Medical Leave (PFML) mandate, which is set to take effect on January 1, 2026. The legislation, passed by the Minnesota Legislature in 2023, establishes a government-run program that will require small business owners and their employees to comply with new rules regarding paid leave.
Under the PFML program, employees will be eligible for up to 12 weeks of family or bonding leave and up to 12 weeks of medical leave within a benefit year. However, the total combined leave cannot exceed 20 weeks per year.
The funding for this program comes from a payroll tax imposed on employers. Beginning January 1, 2026, employers must submit this tax to the state’s PFML program. The Department of Employment and Economic Development (DEED) has set the initial payroll tax rate at 0.88% for calendar year 2026. Employers are permitted to deduct up to half of this amount from employee paychecks, provided that such deductions do not reduce an employee’s earnings below minimum wage requirements.
This payroll tax rate will be reviewed annually through an actuarial study to ensure the program remains solvent. Recent changes in legislation have reduced the maximum allowable payroll tax cap from 1.2% to 1.1%, so any increase beyond that threshold would require legislative approval. The first payments under this tax are due by April 30, 2026.
Employers with fewer than 30 employees may qualify for a reduced payroll tax rate if their average employee wage is less than one and a half times the statewide average weekly wage. This reduced rate equals half of what standard employers pay.
The PFML mandate covers almost all employees working in Minnesota, with only limited exemptions for certain seasonal hospitality workers as defined by state law.
Employees can take caregiving leave under this program to care for a wide range of family members—spouses, domestic partners, children (including those who are adopted or fostered), parents or guardians, siblings, grandchildren, grandparents, in-laws, and others with close caregiving relationships as specified by statute.
Upon returning from leave, employees are entitled to reinstatement in a “virtually identical” position regarding pay and benefits after being employed for at least ninety days.
Employers must also meet notice requirements: they need to display information about PFML benefits prominently at their workplaces by December 1, 2025. Notices must be available in English and any other language spoken as a primary language by five or more workers at each location; DEED provides downloadable posters online (https://mn.gov/deed/programs-services/paid-leave/employers/posting-notices.jsp). Individual written notifications about PFML availability must also be given directly to employees by December 1 or within thirty days of hiring; acknowledgment from employees is required.
There is an option for businesses to substitute private plans that provide equal or better coverage compared to the state plan. These can be offered through approved insurance carriers or self-insured arrangements. Employers interested in this alternative can learn more and submit requests through Minnesota’s Paid Leave website (https://mn.gov/deed/programs-services/paid-leave/employers/equivalent-plans.jsp).
Small business owners seeking additional details or resources may visit DEED’s Minnesota Paid Leave webpage dedicated to employer questions about the upcoming changes.
