DEED confirms 0.88% payroll tax to support paid leave, a 25% bump from original proposal

A 0.88% payroll tax will go into effect in 2026 to support Minnesota’s paid family and medical leave program, the Minnesota Department of Employment and Economic Development (DEED) confirmed on Friday.

The premium is a 25.7% increase from the 0.7% payroll tax included in the original law passed in 2023.

An actuarial firm released an independent report within months of the law’s passage, recommending a rate of at least 0.78%. During the 2024 legislative session, a DFL trifecta amended the law, with a fiscal note attached to the bill assuming a new rate of 0.88%, split between employers and employees.

The DEED commissioner is charged with adjusting the rate each year, with a cap of 1.2%.

Republicans on Friday criticized the premium rate, saying it will impose an undue burden on workers and business owners.

“These are real dollars coming out of Minnesotans’ paychecks and cutting into the razor-thin margins of family-owned businesses struggling to stay afloat,” said Rep. Dave Baker, R-Willmar, who chairs the House Workforce, Labor and Economic Development Committee. “It’s time to take a step back, delay PFML implementation, and find a practical solution that supports both employees and job creators.”

When the program goes into effect, it will allow Minnesotans to take up to 12 weeks of paid leave each year to care for family members or their own medical needs. If someone qualifies for both types of leave, they can take a combined total of 20 weeks.

In addition to locking in the premium rate for 2026, DEED announced a tool for employers and workers to calculate their contributions to the program.