Article
9 min read
A Guide to PEO in Michigan
PEO
Author
Deel Team
Published
September 11, 2024
Last Update
September 11, 2024
Table of Contents
The benefits of partnering with a PEO in Michigan
Payroll, employment, and labor laws in Michigan
Payroll and benefits
Choosing the right PEO for your organization
Manage your Michigan, US, and global workers with Deel
Key takeaways
- Michigan employers must adhere to both federal and state-specific employment regulations, including those related to payroll, benefits, and labor laws.
- By outsourcing HR tasks to a PEO, Michigan employers gain access to localized expertise in navigating the state's complex labor laws.
- Deel offers PEO services across the US, providing businesses with payroll, HR, and benefits administration, as well as compliance support.
For Michigan-based businesses, navigating the state’s unique labor and employment regulations can be a significant challenge. Professional employer organizations (PEOs) offer a strategic solution by streamlining HR and payroll processes, enabling businesses to focus on core competencies and drive growth.
Read on to learn more about the process and benefits of using a PEO in Michigan.
Deel PEO
The benefits of partnering with a PEO in Michigan
Michigan businesses of all sizes can benefit from partnering with a PEO. PEOs can help manage employment compliance, provide attractive employee benefits, and support business growth.
Cost-savings and efficiency gains in HR
Outsourcing HR tasks to a PEO can significantly streamline your organization's operations. PEOs leverage advanced HR technology to automate and simplify payroll processing, providing real-time analytics and reducing the need for costly labor hours.
Businesses and startups can benefit from PEOs by gaining access to expert support in areas such as:
- Compliance with state and federal laws and regulations
- Payroll and tax withholding and filing
- Benefits administration
- Reporting
- Recruitment and hiring
- Onboarding employees
- Worker classification
- Unemployment claims
- Workplace policies
- Data privacy
Collaborating with a PEO empowers HR teams, CFOs, and Finance departments to make compliant and strategic decisions based on localized expert insights.
Affordable employee benefits plans
Because PEOs co-employ a large number of employees, they're able to offer client companies competitive rates on benefits, such as health insurance, life and disability insurance, and retirement plans. These attractive employee benefits packages and perks allow Michigan companies of all sizes to compete with larger corporations.
PEO services also allow you to continue working with your existing benefit providers while offloading many compliance and administrative tasks.
Stronger compliance and protection from legal liabilities
When you partner with a PEO, you enter into a co-employment relationship. A PEO assumes responsibility for ensuring compliance with federal requirements and state-specific legislation. You offload legal liabilities and compliance risk to the PEO for payroll, employment tax, labor laws, and more.
This protects your organization from the potential financial, reputational, and legal repercussions of non-compliance with payroll, employment, and labor laws in Michigan. Meanwhile, you keep control of the day-to-day management of your workforce.
Payroll, employment, and labor laws in Michigan
Employers in Michigan must comply with the federal employment regulations and contributions stipulated in the Fair Labor Standards Act (FLSA). They include federal unemployment tax, unemployment insurance, social security taxes, Medicare taxes, and more.
Additionally, Michigan has specific regulations about leave and paid time off, union rights, and other labor laws. For example, Michigan state law requires a client company and its PEO to hold separate workers' compensation insurance policies.
A PEO can streamline your organization’s compliance with the following legislation, and more:
Payroll and benefits
Income tax
Michigan has a flat individual income tax rate of 4.25% as of the most recent legislation. Michigan residents may also face local income taxes if they live or work in certain cities that impose them, such as Detroit.
Paydays and pay periods
If an employer has established a regular weekly or biweekly payday, they must pay employees by the regularly scheduled payday, which must occur no later than 14 days after the end of the work period in which the wages were earned. For employers who have a monthly pay schedule, they must pay all wages earned within 15 days after the end of the monthly pay period.
Final paychecks
Upon termination, an employer in Michigan must provide the final paycheck by the next scheduled payday.
Pay transparency laws
Michigan has two pending pay transparency-related bills: Senate Bill 142 of 2023 and House Bill 4406 of 2023. Currently, pay stubs must include itemized deductions to ensure transparency between employers and employees.
Minimum wage
In Michigan, employers with at least two employees must pay at least a minimum hourly wage of $10.33 in 2024. The minimum wage for 2025 has not yet been determined but is set to increase with adjustments for inflation.
A lower minimum hourly cash wage applies to tipped employees. In 2024, Michigan state requires employers to pay their tipped employees a minimum hourly cash wage of $3.93, equivalent to 38% of the state minimum wage.
If the cash wage and tips equate to less than $10.33 per hour, the employer should apply a supplementary tip credit of up to $6.40 per hour. This is subject to change as the state has introduced legislation to phase out tip credits between 2025 and 2029.
Overtime
Overtime compensation for non-exempt employees is mandatory after 40 hours of work per week, paid at a premium rate of 1.5 times the employee's regular rate.
Vacation time
Employers in Michigan aren’t required to offer any paid or unpaid vacation time for their employees. However, many of the state’s employers choose to provide it as part of their fringe benefits package.
Sick leave
The reinstatement of the Earned Sick Time Act means employers in Michigan will be required to provide earned sick time to their eligible employees (exceptions apply) from February 21, 2025. The minimum statutory requirements are:
For businesses with fewer than 10 employees:
- Employees accrue one hour of sick time for every 30 hours worked, up to a maximum of 40 hours of paid sick time
- If the employee has accrued over 40 hours of sick time, an additional 32 hours of unpaid sick time may be taken
For businesses with 10 or more employees:
- Employees can accrue up to 72 hours of paid sick time annually
Paid sick time must be compensated at the employee's normal hourly wage or the minimum wage, whichever is higher. Employees are entitled to carry over unused sick time to the next year, as long as their use doesn’t exceed the required annual maximum allowances stated above.
Eligible existing employees will accrue earned sick time from February 21, 2025. Eligible new hires after this date will accrue earned sick time from the start of their employment, but may need to wait 90 days to use it. Employers mustn't expect an employee to arrange coverage for their role as a condition for using their earned sick time.
Michigan’s Paid Medical Leave Act allows eligible employees to accrue paid sick leave for medical reasons, including caring for family members
Labor laws
Worker safety regulations
Michigan follows both federal and state regulations, primarily through the Michigan Occupational Safety and Health Administration (MIOSHA), ensuring safe working environments.
Right to work
Michigan is a right-to-work state, meaning employees cannot be required to join or pay dues to a union as a condition of employment.
Meal breaks and rest periods
Michigan doesn't require employers to provide paid or unpaid meal or rest breaks for adult employees. Minors must have a 30-minute break for shifts over five hours.
Employment laws
At-will employment
Michigan is an at-will employment state, meaning both employers and employees can terminate employment at any time, barring illegal reasons like discrimination.
Worker classification
Employers in Michigan must ensure proper classification of workers to avoid misclassification penalties, as per IRS guidelines.
Discrimination
Michigan prohibits workplace discrimination based on race, color, national origin, age, sex, disability, religion, height, weight, marital status, and genetic information.
Non-compete agreements
Michigan law allows employers to establish non-compete agreements with employees to protect their legitimate business interests. These agreements must be reasonable in terms of their duration, geographic scope, and the type of employment or business activities they restrict.
Equal pay
Michigan’s Equal Pay Directive ensures equal pay protections for employees, preventing wage discrimination based on gender or other protected categories.
Choosing the right PEO for your organization
The following steps will help you select the PEO which best aligns with your business needs and goals.
1. Define your business needs
Begin by conducting a thorough analysis of your current and projected HR-related expenditures, identifying areas where a PEO could offer savings or efficiencies. This includes understanding your needs for payroll management, benefits administration, HR compliance, and risk management, as well as considering how these services can scale with your company’s growth.
2. Research PEOs with Michigan expertise
Focus your search on PEOs that have a strong presence and a proven track record in Michigan. Look for case studies, client testimonials, and examples of their success in navigating the state’s complex labor laws and business environment.
3. Evaluate the range of services and quality of benefits
Examine the PEO’s offerings to ensure they meet your company’s specific needs. Assess the quality and cost-effectiveness of the benefits packages provided and whether the PEO offers customizable solutions that can adapt to your company’s changing requirements.
4. Assess compliance and risk management capabilities
Understand the PEO’s approach to managing continuous compliance with Michigan’s labor laws and their capacity to mitigate risks related to employment practices and workplace safety. This step is crucial for reducing potential liabilities and ensuring regulatory compliance.
5. Check customer service and support
Evaluate the PEO’s reputation for customer service and support. Consider their responsiveness, the availability of dedicated support teams, and the quality of HR technology platforms they use for managing employee services. High-quality, responsive customer service is essential for a smooth partnership.
6. Review and negotiate the contract
Carefully review the PEO contract to understand all terms, conditions, fees, and exit clauses, with the help of legal advisors if necessary. Compare its pricing structure with other PEOs, whether you pay a fixed monthly fee per employee or a percentage of the overall payroll. Negotiate terms that serve your company’s interests, ensuring flexibility, transparency, and a clear understanding of responsibilities.
7. Plan for implementation and transition
Prepare for the transition to the PEO by communicating changes to your employees, integrating systems, and setting up processes for ongoing collaboration with the PEO. Effective planning and communication are vital to minimize disruption and ensure a successful partnership.
Manage your Michigan, US, and global workers with Deel
Deel makes payroll and HR management easy, whether you’re hiring in one state, across the country, or around the world. As your PEO*, Deel takes care of payroll, HR, and benefits administration while ensuring state tax compliance and handling sensitive issues. We provide:
- Expert payroll administration
- Access to benefit plans from leading carriers and benefits administration
- Robust HRIS with free IT, Finance, and PTO management
- State-specific trainings, HR policies, and on-demand HR support
- Advanced tax and benefits compliance
- And more
Book a demo to learn more about using Deel’s PEO in Michigan.
*Provided by Deel PEO US, LLC, Deel Employment Services, LLC, or through Deel's partnership with licensed providers where required.
Disclaimer: This article is intended for informational purposes and shouldn't be considered legal advice. Consult a qualified licensed attorney for help on legal issues. Content is accurate at the time of publishing.