Minnesota Launches Paid Family and Medical Leave Program

Starting in 2026, Minnesota will become one of the latest states to offer a state-funded paid family and medical leave program. While this provides significant worker benefits, it also introduces new payroll tax obligations that employers and employees must prepare for.

What Happened

• Beginning January 1, 2026, Minnesota workers will be eligible for up to 20 weeks of paid leave annually for family or medical reasons.

• Eligible workers may receive up to $1,423 per week during leave.

• The program will be financed by a new 0.88% payroll tax, split evenly between employers and employees (0.44% each).

• Both public and private sector employers are covered, though small businesses may qualify for limited exemptions.

  
  

Why It Matters

1. For Employees: Paid leave provides income security during family or medical absences, reducing reliance on unpaid leave or outside savings.

2. For Employers: Labor costs will rise as businesses begin contributing payroll taxes. Compliance requires updated payroll systems and HR policies.

3. For Advisors: CPAs, HR consultants, and financial planners will need to guide both businesses and workers on budgeting for the new tax and integrating the benefit into overall compensation strategies.

   
   

Implications for CPAs and Business Owners

• Payroll Adjustments: Employers must update payroll systems to calculate and remit the 0.44% contribution beginning in 2026.

• Cash Flow Planning: Businesses should budget for increased labor costs, especially in industries with slim margins.

• Employee Communication: Clear explanations to employees about the shared tax and benefits are essential for avoiding confusion or pushback.

• Multi-State Employers: For companies operating in multiple states, HR teams must track varying state-level leave and payroll tax programs.

Looking Ahead

Minnesota joins a growing list of states that are reshaping the social safety net through payroll-funded leave programs. More states may follow, especially as federal policy remains uncertain. For employers, the next 12–18 months should be spent preparing payroll systems, HR practices, and budgets for this new compliance requirement.

Stay Ahead of State Payroll Tax Changes

Payroll-funded leave programs represent a new era of state-mandated benefits.

👉 Try Bizora today to track payroll tax developments and prepare your business for evolving compliance requirements.