Your Ultimate Guide to Minnesota Payroll

Running payroll in Minnesota requires employers to manage several key obligations, including unemployment insurance contributions, personal income tax withholding, and mandatory workers’ compensation coverage.

With progressive tax rates and no exemptions for workers’ comp, businesses must stay compliant to avoid penalties and protect their employees.

This guide walks through the essential payroll requirements for Minnesota employers, highlighting rates, filing processes, and how Deel can help simplify compliance and administration.

Paying unemployment insurance

In addition to federal taxes, employers in Minnesota are responsible for paying Unemployment Insurance (UI) on behalf of their employees.

UI is a national program administered by the US Department of Labor, providing temporary payments to individuals who are unemployed through no fault of their own. To conveniently manage your Minnesota unemployment insurance, you can use the state's online portal.

The UI rates for 2025 range from 0.4% to 8.9% based on a taxable wage base of $43,000. New employers get assigned a rate based on their industry average.

For detailed information on paying unemployment insurance and meeting your obligations, refer to the Minnesota Department of Employment and Economic Development's resources for employers.

See also: State-by-State Guide to Payroll Taxes in the US

Withholding personal income tax (PIT) from your Minnesota employee

When hiring in Minnesota, you will also have to withhold Personal Income Tax (PIT) from your Minnesota employee's salary.

Here are the tax rates you pay for each employee’s income band and filing status in 2025:

After deducting PIT (also known as individual income tax or state income tax), you are required to pay the withheld amount to the state. To facilitate this process, Minnesota provides an online portal for employers to file and pay the withheld amount.

For comprehensive guidance on paying the withholding amount, consult the Minnesota Department of Revenue's resources on withholding tax.

Learn more about income tax rates across the US.

Paying your Minnesota workers’ compensation

Apart from PIT, employers who hire in Minnesota must also provide Workers' Compensation (WC) coverage for their employees. There are no exceptions unlike in some other states.

Whether you have one or hundreds of employees in this state, workers' compensation insurance is crucial, as it offers protection to employees in the event of job-related injuries or illnesses.

To find a qualified commercial carrier that meets the state's requirements, refer to the information provided by the Minnesota Department of Labor and Industry.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Minnesota payroll taxes, payroll compliance, and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel Payroll - US and PEO.

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.