Final PFML Mandate Exacerbates Biggest Small Business Challenges

May 18, 2023 Last Edit: June 5, 2025

Final PFML Mandate Exacerbates Biggest Small Business Challenges

St. Paul (May 18, 2023) The National Federation of Independent Business in Minnesota, or NFIB, is expressing its disappointment with the House File 2 conference committee agreement, which imposes a government-run Paid Family and Medical Leave (PFML) program on small business owners and their employees. The Minnesota Senate is debating the bill today, its last stop before heading to Governor Walz’s desk. The final version of the PFML Mandate comes with a $1.5 billion per year payroll tax hike on small business owners, workers, and others and up to five months of paid leave per employee every year. The bill got worse for small business owners in conference committee, with the Minnesota Department of Employment and Economic Development gaining the ability to unilaterally increase the payroll tax in the first year of the program. The tax can increase every year, up to a maximum of 1.2% of FICA employee wages per year. “When politicians micromanage small businesses, it means fewer jobs, lower pay, and less opportunity,” said John Reynolds, NFIB State Director in Minnesota. “The costs of this mandate – higher payroll taxes and bigger workforce struggles – will escalate rapidly. Small businesses are still squeezed from inflation, supply challenges, and a chronic workforce shortage that is not going away.” Only four other states – Colorado, Delaware, Maryland, and Oregon – require the employer to share the cost of both the medical and family payroll tax. Compared to these states, the Minnesota mandate will have the longest leave length and most expensive wage replacement. Despite having less generous programs, each of the four states has a first year payroll tax rate above the 0.7% rate proposed in House File 2 “This proposal fundamentally misunderstands the needs and challenges of small business owners,” added Reynolds. “Basic math shows the PFML mandate is financially unsustainable at the proposed benefit levels.” Small business owners routinely report that labor quality and labor availability are among their biggest challenges. According to NFIB’s most recent monthly Jobs Report, 43% of owners reported job openings they couldn’t fill and 90% reported few or no qualified applicants for open positions. NFIB and its 10,000 members around the state, have been very vocal about how this legislation would impact their ability to operate and hire employees. You can hear their voices and find out more here.

Topics:

Taxes

State:

Minnesota

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