| EFFECTIVE DATE | MICHIGAN MINIMUM WAGE |
| January 1, 2023 | $10.10 |
| January 1, 2024 | $10.33 |
| January 1, 2025 | $10.56 |
| February 21, 2025 | $12.48 |
| January 1, 2026 | $13.73 |
| January 1, 2027 | $15.00 |
Looking for minimum wage rates by state? Click here to view the minimum wage chart by state.
According to FLSA regulations, “Tipped employees” are classified as workers regularly making over $30 a month in tips.
While tipped employees have the right to make the state's minimum wage, employers only have to pay employees $4.74 per hour as long as the employee makes a minimum of $7.74 per hour in tips, adding up to Michigan's minimum wage of $12.48 per hour. This is known as a tip credit for the amount earned in tips.
To make up the difference in pay, if an employee makes less than $7.74 per hour in tips in a given work week, the employer must make the employee’s earnings equal to $12.48 per hour for the work week.
The next increase to the state tipped minimum wage will be effective as of January 1st, 2026.
The tipped hourly rate is 38% of the state's minimum wage rate, effective February 21st, 2025. With the minimum wage increase scheduled according to the IWOWA, the tipped employees will receive wages based on these rates:
Under the IWOWA, all employees, including tipped employees, working over 40 hours per week or 12 hours per day / shift must be paid one-half times their regular rate of pay in overtime.
Signed by President Trump on July 4, 2025, the One Big Beautiful Bill Act allows applicable employees, including those self-employed, to claim a tax reduction on qualified tips received from his or her occupation. The tip tax deduction is effective from January 1, 2025 through December 31, 2028.
The occupation must be listed by the IRS as “customarily and regularly” receiving tips and must be reported on a Form W-2 or other applicable statements that report qualified tips (ex: Form 4137 for tips not reported to the employer).
An employee can deduct an annual maximum amount of $25,000. For self-employed individuals, the deduction amount cannot exceed his or her net income from the trade or business where the tips were earned. If an employee’s modified adjusted gross income (MAGI) exceeds $150,000, or $300,000 for employees filing taxes jointly, the amount allowed to be deducted will be reduced by $100 for each $1,000 earned above the MAGI.
To be eligible for the tip tax deduction, employees must include a Social Security number on the tax return for the given tax year. If married, the employee must also file jointly to remain eligible. Even if individuals opt for a standard deduction (vs. itemized deductions) on a tax return, the individual is still eligible for the annual maximum deduction for overtime.
Note that self-employed individuals categorized in a Specific Trade or Business (SSTB) under section 199A are NOT eligible.
All employers must file information returns to the IRS or Social Security Administration (SSA), as well as deliver the applicable forms, including a W-2, to employees that show the cash tips received and the occupation of the tip recipient.
As outlined in the IWOWA and further detailed in Michigan's Youth Employment Standards Act (YESA), minor employees above 16 years of age in Michigan can be paid a subminimum wage of $10.61 per hour. This amount is 85% of Michigan's current minimum wage rate.
Based on the scheduled increase for Michigan's minimum wage, the youth minimum wage is as follows:
Minor employees under 16 years of age are NOT covered by the IWOWA subminimum wage and are instead entitled to the federal minimum wage of $7.25 per hour or, during his or her first 90 days, $4.25 per hour.
For minor employees, the overtime requirements stated by the IWOWA only apply to workers aged 16 years or older and are required to receive one-half times the regular rate of overtime pay after 40 hours per week or 12 hours per day / shift.
Because the IWOWA does not cover minor employees under 16 years of age, the FLSA states that they are prohibited from working past 18 hours a week when school is in session and 40 hours a week when school is not in session. Since employees under 16 years of age cannot exceed these limits, he or she cannot be eligible for overtime pay.
Newly hired employees can be paid a minimum wage rate of $4.25 per hour for his or her first 90 calendar days of employment. This provision only applies to employees under 20 years of age.
Outside of special minimum wage exceptions, workers exempt from the state's minimum wage include any employee exempt under FLSA classification.
Generally, these exemptions include:
Michigan does not require employers to give specific meal or rest breaks to employees 18 years of age or older. However, employers that offer employees breaks must adhere to the specific guidelines set forth by the FLSA regarding meal and rest breaks.
Businesses must post a summary of the Michigan Improved Workforce Opportunity Wage Act (IWOWA) in an easily accessible and visible place. This can easily be managed through an all-in-one Michigan Labor Law Poster to cover all the required state and federal labor law postings.
Note that each time the minimum wage is updated, the labor law poster must be replaced in the workplace. A labor law poster subscription service will automatically provide updated mandatory notices that need to be posted for employees as additional changes take place with state or local laws.
In accordance with the Payment of Wages and Fringe Benefits Act, employers violating Michigan wage and hour laws can be subject to the following penalties required by the Department of Labor & Economic Opportunity (LEO):
Businesses struggling to maintain minimum wage compliance or manage payroll may want to consider outsourcing payroll to a Michigan Payroll Provider. Areas for additional knowledge and learning include the basics of payroll and what to know about modern payroll software.
To learn more about how Employer Pass is helping countless businesses maintain minimum wage compliance, contact us today or use the find a provider tool.