In 2023, the Minnesota Legislature passed legislation that imposed a government-run Paid Family and Medical Leave (PFML) mandate on small business owners and their employees. Despite ongoing efforts to make common sense modifications to the PFML mandate, the program is currently scheduled to go into effect on January 1, 2026.

Small businesses will have several new responsibilities under this mandate. Here are some of the key aspects of the mandate that small businesses should be aware of. Small business owners can also visit the Department of Employment and Economic Development’s (DEED) Minnesota Paid Leave for Employers webpage for a FAQ and additional resources.

Leave Weeks per Employee per Year – The PFML program will provide employees with up to 12 weeks of family/bonding leave and up to 12 weeks of medical leave in a benefit year. However, the total weeks of combined leave in a benefit year cannot exceed 20 weeks of leave.

Payroll Tax – The PFML program is funded by a payroll tax that is levied on employers. Starting on January 1, 2026, employers must submit this payroll tax to the state PFML program. DEED has set the initial payroll tax for Calendar Year 2026 at 0.88%. Employers may estimate their PFML payroll tax liability by using Minnesota Paid Leave’s Premium Calculator.

Employers may deduct up to 50% of the payroll tax liability from their employees’ pay (e.g., 0.44% paid by employer; 0.44% paid by employee). However, deductions from employee pay cannot cause an employee to earn less than the applicable minimum wage.

The PFML payroll tax will be adjusted each year and will be based on an actuarial study to determine the amount need to keep the program solvent. Recent legislation reduced the payroll tax cap from 1.2% to 1.1%, meaning that the payroll tax cannot exceed 1.1% without legislative approval. The first premiums are due on April 30, 2026. Employers can begin to deduct the payroll tax from employee paychecks starting January 1, 2026.

Waiting Period – There is no employee waiting period for the use of PFML. Payments will be made to employees for each week they are on leave following approval of their leave application.

Small Employer Treatment – Employers with less than 30 employees may qualify for a reduced payroll tax rate if their average employee wage is less than 150% of the statewide average weekly wage. The small employer reduced tax rate is equivalent to half of the standard employer contribution. Minnesota Paid Leave’s Premium Calculator will factor in the small employer reduced tax rate if applicable.

Covered Employment – The PFML mandate covers virtually all employees who are employed in the state of Minnesota. There is a narrow exemption for seasonal hospitality employees who work <150 days if off-season revenue is no more than 1/3 of in-season revenue (Minn. Stat. 157.15, Subd. 4-9, 11-14).

Family Member (Caregiving Leave) – Under the PFML program, employees are entitled to take caregiving leave to care for family members. The term “family member” is broadly defined to include an employee’s spouse, domestic partner, spouse’s parent, child (including biological, adopted, foster, step, in loco parentis), parent or legal guardian of the applicant, sibling, grandchild, grandparent, spouse’s grandparent, son-in-law, daughter-in-law, and an “individual who has a relationship with applicant that creates an expectation and reliance for care.”

Post-Leave Reinstatement – Employees have the right to return to a “virtually identical” position in terms of pay, benefits, and conditions, including OT and shift. However, employees must wait 90 calendar days from the date or hire before they are entitled to reinstatement.

Notice & Posting Requirements – Employers are required to post a notice of benefits available under the PFML mandate by December 1, 2025. This notice must be posted by the employer in a “conspicuous place on each of its premises.” These notices must be provided in English and in any language that is the primary language of five or more employees or independent contractors of that workplace. DEED is required to provide copies of the workplace poster, which is available for download in English here: Required workplace poster / Minnesota Paid Leave.

Employers are also required to provide their employees with individual notice regarding the availability of PFML benefits by December 1^st, 2025 (or 30 days from the start of employment). Employees must acknowledge that they have received the information. DEED will have model notifications available for employers soon.

Private Plan Option – Minnesota law allows employers to meet the requirements of the Minnesota PFML mandate by substituting an equivalent plan that provides their employees with coverage that meets or exceeds the coverage offered by the State. Employers who are interested in substituting an equivalent plan may elect to do so with either (1) an approved insurance carrier plan or (2) a self-insured plan. Information on both options, as well as additional details, can be found here: Equivalent Plans for Paid Leave / Minnesota Paid Leave.

Employers who are interested in substituting an equivalent plan can now visit the Paid Leave website to set up a Paid Leave Administrator Account and submit an Equivalent Plan Substitution Request.