Michigan Minimum Wage and Tip-Credit Rules: Key Takeaways
- Michigan's minimum wage increased to $12.48 on February 21, 2025, with scheduled hikes to $15 by 2027 and annual CPI adjustments starting 2028.
- Tip credit percentage will gradually rise from 38% in 2025 to a cap of 50% by 2031, setting the tipped minimum wage at $7.50.
- Employers must ensure tipped workers' combined wages and tips meet the standard minimum wage and keep accurate wage and tip records.
Michigan's updated minimum wage and tip-credit rules significantly affect hospitality workers and employers.
This article outlines key changes and compliance responsibilities as of 2025.
Employers navigating these changes may find valuable insights in our restaurant staff hiring resource to optimize recruitment strategies.
1. Overview of Michigan Minimum Wage Increases
The minimum wage in Michigan saw a major rise starting February 21, 2025, climbing to $12.48 per hour.
Further increases are set through 2027, culminating in a $15 hourly wage on January 1, 2027. After that, wages will adjust annually.
Annual adjustments are based on the Consumer Price Index (CPI) for the Midwest, ensuring wages keep pace with inflation.
Employers looking to stay compliant can benefit by understanding hiring costs for restaurants and hospitality to plan budgets effectively.
2. Understanding Tip Credit Rules in Michigan
Michigan maintains a tip credit system permitting employers to pay tipped employees less than the full minimum wage.
The tip credit represents a percentage of the standard minimum wage that employers can credit against wages if employees receive tips.
As of February 21, 2025, the tip credit is 38%, resulting in a tipped minimum wage of $4.74 per hour.
This percentage will increase yearly by 2% until it caps at 50% on January 1, 2031.
When the tip credit reaches 50%, the tipped minimum wage will be $7.50 per hour.
For employers needing guidance on managing tipped employees, the how to post jobs for tipped employees offers practical advice.
How Tip Credit Works for Employees and Employers
Employers pay a base tipped minimum wage lower than the full minimum wage but must ensure that the total earnings with tips meet or exceed the full minimum wage.
If an employee's tips plus base wage fall below the regular minimum wage, employers are legally obligated to pay the shortfall.
3. Employer Responsibilities Under Michigan Tip Credit Laws
Employers have specific obligations to maintain compliance with tip credit and wage laws.
- Tip Credit Compliance: They must verify that employees' total compensation (wage plus tips) reaches the standard minimum wage.
- Tip Pooling Rules: While tip pooling is allowed, it must be voluntary and exclude management and supervisory staff.
- Record-Keeping: Accurate tracking of employee wages and tips is mandatory to demonstrate legal compliance.
Consult our restaurant owner responsibilities guide to ensure you meet all legal and operational standards.
Voluntary Tip Pooling and Management Exclusion
Employees cannot be forced to participate in tip pooling arrangements, promoting fairness in tip distribution.
Additionally, managers and supervisors are prohibited from sharing in tipped employees' tips to prevent conflicts of interest.
For best practices on fair tipping practices and tip pooling, see our can restaurant owners take tips advice.
4. Paid Sick Leave Updates Impacting Hospitality Workers
Effective February 21, 2025, Michigan also expanded paid sick leave benefits.
Employees accumulate one hour of paid sick leave per 30 hours worked, capped annually at 72 hours for employers with 10+ employees.
Smaller employers with fewer than 10 employees must provide a minimum of 40 hours of paid sick leave annually.
This time off can be used for personal or family health matters, with employers only able to request a doctor's note after three consecutive days of absence.
5. Implications for Hospitality Workers in Michigan
Hospitality workers should be aware that their minimum hourly wage and tipped wage are increasing over several years.
These changes mean better income stability and protections for tipped employees who historically relied heavily on variable tips.
Understanding employer responsibilities helps workers ensure they receive lawful pay and benefits.
To better understand salary trends and career paths for tipped roles, explore our detailed bartender salary information as an example of tipped hospitality roles.
6. Advice for Employers and Employees in Michigan Hospitality
Employers should review their wage policies immediately to align with the new minimum wage and tip credit schedules.
They must establish clear, documented tip pooling policies and track all payments carefully.
Employees should monitor pay stubs to verify correct wage payments, including tip credit computations.
They should also understand their rights regarding paid sick leave accrual and usage.
Employers aiming to enhance team management may want to consult our how to hire a restaurant manager spotlight for leadership hiring tips.
7. Useful Government Resources on Michigan Wages and Tips
- Visit the Michigan Department of Labor and Economic Opportunity for updates and official guidance.
- The U.S. Department of Labor – Fair Labor Standards Act (FLSA) site provides federal wage and hour information.
- Check Michigan's Wage and Hour Division for state-specific wage laws and tip-credit rules.
Michigan Minimum Wage and Tip-Credit Rules: Conclusion
The enhancements to Michigan's minimum wage and tip-credit rules represent a positive step toward fair compensation for hospitality workers.
Employers must stay informed and compliant with the evolving wage thresholds, tip credit percentages, and paid sick leave policies to avoid violations.
By understanding these changes, hospitality employees are better equipped to ensure they receive proper wages and benefits under Michigan law.
For further insights on retaining staff amid wage changes, see the strategies to reduce restaurant employee turnover.
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