How to Hire Employees in Michigan: The Complete First-Hire Sequence

The first Michigan employer I walked through a first hire had the fun part handled. Offer accepted, start date agreed, a payroll app connected to the business bank account. What he did not have was a state withholding account, a workers compensation policy, or any idea that the written sick time policy he had never heard of was due on the employee's first day, not at the end of the first month.

Michigan is a middle-of-the-pack state for hiring paperwork, which is exactly what makes it dangerous. It is not California, so founders assume there is nothing unusual to learn. Then they discover a flat state income tax with its own W-4, twenty-four cities that levy their own income tax, a sick time law that reaches an employer with a single employee, and a workers compensation coverage test written in hours per week and weeks per year rather than a simple headcount.

I built FirstHR because none of this should require a compliance consultant. The sequence below is the order the work actually happens: what you do before the offer, what you do on the first day, what you owe inside three business days, and what you owe inside twenty. Everything here was checked against the state agency that owns the rule.

Michigan Hiring at a Glance: Every Deadline in One Place

Every obligation below is enforceable by a named agency, and most of them land before or during the employee's first week. The two hard clocks are the third business day for Form I-9 and the twentieth day for the new hire report. Everything else is anchored to the first wage payment or the first day of work.

The rest of this guide walks each step in the order you will actually do it, with the Michigan agency that owns the rule and the specific form number you will be asked for.

Step 1: Get a Federal Employer Identification Number

Nothing else in this sequence works without an EIN. It is the number the IRS uses to identify your business, and every Michigan registration form, unemployment filing, and new hire report asks for it. Apply online with the IRS and the number is issued at the end of the session.

If you formed an LLC or corporation and already have an EIN, you do not need another one. If you have been operating as a sole proprietor using your Social Security number, you need an EIN now. You cannot report payroll taxes on a personal Social Security number, and Michigan Treasury will not open a withholding account without a federal number to attach it to.

The one thing worth doing carefully: match the legal business name on the EIN application to the name on your Michigan filings exactly. Mismatched names between the IRS record and the state record are the most common reason a first-time registration sits in review instead of activating.

Step 2: Register the Business With the State of Michigan

Michigan uses a single combined registration, Form 518, that opens two separate accounts at two separate agencies. The Department of Treasury takes the state income tax withholding registration. The Unemployment Insurance Agency, which sits inside the Department of Labor and Economic Opportunity, takes the unemployment registration through the UIA Schedule A liability questionnaire attached to the same form.

File it electronically through Michigan Treasury Online. Electronic registration authenticates within minutes; the paper route runs four to six weeks, which is long enough to make your first payroll late. There is no separate application to fill out for state unemployment tax, because Schedule A is the application.

Your unemployment tax rate is set by statute for the first two years of liability. Non-construction employers pay 2.7%. Construction employers instead pay the average rate for the construction industry. After the initial period the rate is experience-rated and moves with your claims history. Full employer guidance is published by the Michigan Unemployment Insurance Agency.

The taxable wage base is the other number to know. For the 2026 calendar year it sits at $9,000 for qualifying employers, reduced from $9,500, with the higher base applying to employers that are delinquent. The reduction is triggered when the UIA trust fund balance stays above $2.5 billion, so it is not permanent and it is worth re-checking each January.

Step 3: Verify Work Authorization With Form I-9

Every employer in the United States completes Form I-9 for every new hire, and the deadline is the tightest one in this whole sequence. Section 1 is completed by the employee on or before the first day of work. Section 2 is completed by you, after examining the employee's original documents in person, by the end of the third business day after the start date. The DHS alternative procedure that allows remote document examination is open only to employers enrolled in E-Verify and in good standing with the program, which most Michigan small businesses are not.

You do not get to tell the employee which documents to bring. The employee chooses from the Lists of Acceptable Documents, and asking for a specific document is itself a violation. You record what you were shown and you sign the attestation.

Storage and Retention

Keep I-9 forms in their own file, physical or digital, separate from the personnel file. The reason is procedural rather than philosophical: I-9s are subject to government inspection, and co-storing them hands an inspector every other confidential document about that employee. Retain each form for three years from the date of hire or one year after the employment ends, whichever is later. If you want the document rules in more depth, start with what counts as I-9 documentation.

E-Verify in Michigan

Michigan has no statewide E-Verify mandate for ordinary private employers. The requirement reaches state transportation department contractors, federal contractors carrying the qualifying contract clause, and vendors under county-level policies in Macomb, Ingham, and Oakland counties. Voluntary enrollment is allowed, but it adds obligations rather than replacing the I-9.

Step 4: Collect the W-4, the MI-W4, and Any City Certificate

Michigan has three possible layers of income tax withholding and each one has its own form. The federal Form W-4 handles federal withholding. Michigan Form MI-W4, the employee withholding exemption certificate, handles state withholding. If the job sits in a taxing city, a city withholding certificate handles the local layer.

The state rule that trips people up: the federal W-4 cannot be substituted for the MI-W4. They are separate documents with separate exemption rules, and an employee may not claim more exemptions on the MI-W4 than can be claimed on their Michigan return. Michigan withholds at a flat 4.25% for the 2026 tax year with a personal exemption amount of $5,900, per the Department of Treasury withholding guide.

If a new hire does not return a completed MI-W4 before the first paycheck, you withhold on zero exemptions. That is a legal outcome, not a friendly one, so treat the form as part of the pre-start packet rather than something to chase down in week two. The difference between payroll tax and income tax matters here, because the employer-side taxes run on your registrations while the employee-side withholding runs on these certificates.

Step 5: File the New Hire Report Within 20 Days

Michigan gives you 20 days from the date of hire to report a new employee to the Michigan New Hires Operation Center, which runs the reporting program for the state child support program. The date of hire is the first day the employee performs services for wages. It is not the offer date and it is not the day the paperwork was signed.

The report carries seven data elements: your business name, address, and federal employer identification number, plus the employee name, address, Social Security number, and start date. Filing is done online through the state new hire portal, and employers who report electronically may substitute two monthly transmissions spaced no less than 12 and no more than 16 days apart for the per-hire deadline.

Step 6: Put Workers Disability Compensation Coverage in Place

Michigan requires workers compensation coverage once you cross a two-part test, and the test is written in hours and weeks rather than a simple headcount. Under the Workers Disability Compensation Act, a private employer must carry coverage if it regularly employs one or more people for 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks, or if it regularly employs 3 or more people at one time, part-time staff included.

Read that carefully, because a single full-time first hire crosses the first prong on their own once thirteen weeks have passed. The Workers Disability Compensation Agency publishes the full requirement, including the separate rules for agricultural employers and household employers.

Buy the policy from a licensed carrier, or qualify as a self-insured employer through the agency. Your carrier files proof of coverage with the state. The timing rule is simple: the coverage decision belongs before the start date, because the test looks backward across 52 weeks and you do not get to fix it retroactively after an injury. Requirements vary widely by state, so if you also employ people elsewhere, check the state-by-state coverage rules.

Step 7: Post the Required Notices and Hand Over the Sick Time Policy

Two obligations land on the first day and only one of them is a poster. Michigan requires you to display a specific set of state and federal notices where employees can see them, and separately requires you to give each new hire a written copy of your earned sick time policy on the date of hire.

The written policy is the one small employers miss. Under the Earned Sick Time Act, if you require notice from employees for foreseeable sick time, you have to provide the written policy that explains how, and you have to provide it on the hire date. Handing it over late does not just create exposure; it undercuts your ability to enforce your own notice rules against that employee.

State posters are free from the Wage and Hour Division at michigan.gov/wagehour, in English, Spanish, and Arabic, and free from MIOSHA for the safety notices. Federal posters are free from the Department of Labor. There is no reason to pay a vendor for an all-in-one poster board you can assemble yourself in an afternoon.

Step 8: Onboard From Day 1 Through Day 90

Compliance gets the employee legally onto your payroll; onboarding decides whether the hire was worth making. First-year turnover is the failure mode, and the earliest weeks are the window where a small employer has the most control over it and usually applies the least structure.

The practical goal is to move every form off the first day. If the offer packet, I-9 Section 1, W-4, MI-W4, direct deposit authorization, sick time policy, and handbook acknowledgment are all signed before the start date, the first day can be about the work and the people.

This is the part of the sequence FirstHR was built for. The offer packet goes out with e-signature, the forms come back before Day 1, the three-day I-9 and twenty-day report show up as tasks rather than as things you were supposed to remember, and the AI onboarding wizard turns the job description into a 30-60-90 day plan. Flat, predictable pricing, no per-employee fee. FirstHR is an onboarding and HR platform, not a payroll provider, so the withholding and unemployment filings still run through your payroll system.

Michigan-Specific Employment Rules Worth Knowing Before You Hire

Michigan employment law differs from the national baseline in a handful of ways that change what goes into your offer letter, your handbook, and your pay calendar. None of them are exotic, but each one has caught a first-time employer.

Minimum Wage and the Indexing Schedule

The Michigan rate moved to $13.73 per hour on Jan. 1 of the 2026 calendar year, with $11.67 for 16 and 17 year olds and a tipped cash wage of $5.49. It is scheduled to reach $15.00 per hour a year later. Beginning in October 2027 the state treasurer calculates the adjusted rate using the 12-month percentage increase in the Midwest region CPI-U published by the Bureau of Labor Statistics, which makes the increases automatic from then on. The current schedule is published by the LEO Wage and Hour Division.

The Improved Workforce Opportunity Wage Act, the statute behind those rates, applies to employers with 2 or more employees aged 16 and older. Overtime is the standard time and a half after 40 hours in a 7-day workweek, with the usual exemptions tracking the federal ones.

Earned Sick Time

The Earned Sick Time Act took effect Feb. 21, 2025 and reaches employers with a single employee. Accrual is 1 hour for every 30 hours worked. Use may be capped at 72 hours in the 12-month period, or 40 hours for a small business, which the act defines as an employer with 10 or fewer employees. Under the accrual method you may impose a waiting period of up to 120 days before a new hire uses accrued time, and accrual continues throughout that period. Frontloaded hours are available immediately.

Two more items belong in the handbook. Michigan is an at-will employment state, but the Whistleblowers Protection Act and public policy exceptions are real limits, so an at-will clause is a starting point rather than a shield. And if you hire anyone under 18, the Youth Employment Standards Act requires a work permit before work begins: form CA-6 for a minor under 16, form CA-7 for a 16 or 17 year old, both issued by the minor's school. That route changes on Oct. 1, 2026, when permits move from schools to a centralized state system run by the LEO Wage and Hour Division, so confirm the current process before a minor's start date. You keep the permit on file either way.

City Requirements: Detroit, Grand Rapids, and the Other Taxing Cities

In Michigan, city-level obligations are almost entirely tax obligations rather than labor obligations. The Local Government Labor Regulatory Limitation Act, Public Act 105 of 2015, bars local governments from setting their own minimum wage, leave, or scheduling requirements, so a city cannot hand you a separate employment mandate the way Chicago or Seattle can.

What cities can do is levy an income tax, and 24 of them do. If your business has a location in a taxing city, or your employee performs work there, you register with that city and withhold city tax on top of state tax. Detroit is the exception in administration: the Michigan Department of Treasury runs Detroit city withholding, so Detroit returns are filed through the state system rather than with the city directly.

The rule to internalize: city withholding follows both where the work happens and where the employee lives. An employer located in a taxing city withholds for employees working there, and also withholds for resident employees regardless of where they work. For a remote or hybrid Michigan hire, confirm the work location and the home address before the first payroll, not after.

Check the current rate with the city before you set up withholding, because city rates are set locally and change on local schedules. If a hire is your first employee in a given city, budget an extra week for the city registration to activate.

Employee or Independent Contractor: the Michigan Test

Misclassifying an employee as a contractor is the most expensive shortcut available to a Michigan small business, and it is usually taken for the wrong reason: to avoid the registration work in Step 2. Michigan unemployment law adopted the IRS 20-factor test for services performed on and after Jan. 1, 2013. Services performed before that date are analyzed under the older economic reality test, which matters only if you are cleaning up historical records.

The 20 factors group into three categories: behavioral control, financial control, and the nature of the relationship. No single factor decides the question. The agency guidance is explicit that you look at the entire relationship, weigh the degree of the right to direct and control, and document each factor you relied on.

The consequence of getting it wrong is not abstract. When the state finds misclassification, the employer owes the unemployment taxes that should have been paid. If the misclassification continues after that finding, it becomes an intentional violation and penalties can quadruple the taxes owed on the misclassified wages. If you genuinely need project help rather than a hire, the rules for engaging a contractor properly are worth reading before you draft the agreement.

The 5 Mistakes That Cost Michigan Small Businesses the Most

These are the failures I see repeatedly, and every one of them is a timing problem rather than a knowledge problem. The founder knows the I-9 exists. The I-9 just did not get finished by the third business day, because the third business day was a Thursday and something broke.

The pattern is worth stating plainly. Compliance at small companies fails when the owner gets busy, not when the owner is ignorant. That is why a dated task with an owner beats a well-written policy document every single time, and why the fix for most of this list is a reminder rather than a lawyer.

Frequently Asked Questions