Easily manage employment in Minnesota

Payroll management in Minnesota

Minnesota has a diverse economy supported by industries such as healthcare, manufacturing, agriculture, and technology. With state-specific payroll regulations, including a higher minimum wage and mandatory paid sick leave, employers in Minnesota must ensure compliance with both state and federal payroll laws. Understanding these regulations is crucial for smooth payroll operations and compliance.

Payroll breakdown in Minnesota

Employers in Minnesota must adhere to both federal and state payroll regulations regarding wages, taxes, and benefits. Below is an overview of key payroll components:

Minimum wage and overtime

• Minimum wage: Minnesota’s minimum wage is $10.85 per hour for large employers (gross annual revenue of $500,000 or more) and $8.85 per hour for small employers.
• Overtime rules:
• Minnesota follows federal overtime laws, requiring employers to pay 1.5 times an employee’s regular rate for hours worked beyond 40 hours in a workweek.
• Some exemptions apply based on job classification and industry.

State income tax

• Minnesota has a progressive state income tax system with rates ranging from 5.35% to 9.85% depending on income levels.
• Employers must withhold state income tax and remit it to the Minnesota Department of Revenue.

Unemployment insurance (UI) tax

• Employers must contribute to Minnesota’s Unemployment Insurance (UI) program, managed by the Minnesota Unemployment Insurance Program.
• The wage base for UI tax in Minnesota is $40,000.
• UI tax rates vary based on an employer’s experience rating and range from 0.1% to 8.9%.

Workers’ compensation

• Minnesota law requires most employers to carry workers’ compensation insurance to cover medical expenses and lost wages for employees injured on the job.

Payroll tax filing and payment deadlines

• Employers must register for a Minnesota Withholding Tax Account Number with the Minnesota Department of Revenue.
• State withholding tax returns must be filed monthly, quarterly, or annually, depending on employer classification.
• UI tax reports must be submitted quarterly to the Minnesota Unemployment Insurance Program.
• Payroll tax payments can be made electronically through the Minnesota e-Services portal.

Quick facts: Important considerations for employers

• State minimum wage compliance: Minnesota’s minimum wage is higher than the federal rate, and employers must comply with state laws.
• Final paycheck rules:
• If an employee is terminated, employers must provide the final paycheck immediately upon discharge.
• If an employee resigns, the final paycheck must be provided by the next scheduled payday.
• New hire reporting: Employers must report new hires to the Minnesota New Hire Reporting Center within 20 days.
• Paid sick leave: Minnesota requires employers with 21 or more employees to provide paid sick leave at a rate of one hour per 30 hours worked, up to 48 hours per year.
• Payroll recordkeeping: Employers must maintain payroll records for at least three years to comply with state and federal laws.
• Right-to-work state: Minnesota is not a right-to-work state, meaning employees may be required to join a union if applicable.

Run payroll in Minnesota with Remote

Managing payroll in Minnesota requires careful attention to state-specific regulations, including minimum wage compliance, UI tax requirements, and workers’ compensation laws. Employers must stay informed about tax rates, wage laws, and reporting deadlines to ensure smooth payroll processing and avoid penalties.

To see just how easy global payroll can be, book a demo with Remote today.