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In 2023, Minnesota enacted legislation creating a statewide Paid Family and Medical Leave program (the “Program”), which is set to take effect on January 1, 2026. The law established a publicly administered insurance program that is funded through employer and employee payroll contributions. This change aligns Minnesota with a growing number of states implementing similar programs at the state level. 

Overview of the Program

Under the Program, eligible employees may take:

• up to 12 weeks of paid medical leave for their own serious health condition;
• up to 12 weeks of paid family leave for family care, such as bonding with a new child, caring for a family member with a serious health condition, certain military exigencies, and safety leave for issues related to domestic violence; and
• a maximum of 20 weeks of combined leave per benefit year.

Employers and employees will share the cost of the Program in the form of premiums on employee wages. Employers must cover a minimum of 50% of the premium and may deduct the remainder of the premium from employee pay. The Program also provides businesses with existing paid leave benefits the opportunity to apply for approval to use a private plan in lieu of the state program, provided the private benefits are equivalent or better.

Key Steps for Employers Before January 1, 2026

As the January 1, 2026, effective date approaches, employers should begin taking steps to prepare for the Program. 

1. Decide State or Equivalent Private Plan – Recommended by November 15, 2025
   Employers should decide whether they prefer to participate in the state plan or whether they would rather fulfill their obligations with an equivalent private plan that matches or exceeds state program coverage and does not cost employees more than they would be required to contribute under the state plan. The latter requires (i) annual renewal, (ii) a $500 annual fee based on headcount, (iii) and a surety bond or insurance carrier policy. If an employer submits their request after November 15, 2025, the earliest the equivalent plan can start is April 1, 2026. 
2. Determine Premium Allocations
   Employers should also decide what portion of the premium rate is going to be paid by the employer and what portion will be deducted from the employee’s pay. For 2026, the premium rate is 0.88% of an employee’s taxable wages.[1] The rate is set annually, cannot exceed 1.2% of an employee’s taxable wages, and is not adjusted for individual employers based on their employees’ utilization of the Program. For 2026, employers are responsible for at least 0.44% (i.e., 50% of the premium), and employees will pay anywhere between 0.00 and 0.44% of the premium, so long as the deduction does not reduce an employee’s pay below minimum wage.
3. Notify Employees – Required by December 1, 2025
   Employers must display Paid Leave workplace posters in English and any other language spoken by five or more employees or independent contractors. Additionally, employers must provide individual notice of the paid leave program to employees[2] in their primary language — including the employer-determined premium allocations. This notice can be delivered through a physical read-and-sign copy or virtually via a payroll system. Employers must obtain signed written or electronic acknowledgment of receipt from employees.
4. Prepare for Quarterly Wage Reporting
   Finally, employers must be prepared to submit wage reports on a quarterly basis. In most cases, employers will not need to take any additional steps to meet this requirement because the state will use the existing Unemployment Insurance (UI) system to collect wage detail reports for Paid Leave. If all employees are covered by UI, the employer’s current UI account will automatically be converted to a joint UI and Paid Leave account, and their quarterly wage detail reports (which they are already submitting) will now serve both UI and Paid Leave.

Next Steps for Employers

By the year-end of 2025, Minnesota employers should work with counsel to determine plan participation, premium allocation, and compliance with Paid Leave program requirements to ensure compliance by January 1, 2026.

[1] Small employers (employer with 30 or fewer employees) have a smaller premium rate of 0.66%. 

[2] New employees hired after December 1, 2025 must receive the individual notice within 30 days of hire.