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 Michigan's sick time law runs on its own clock for a business making its first hire.

This guide walks you through a first hire in Michigan, from your federal employer identification number (EIN) to the 90-day review, with the forms, agencies, and deadlines along the way. 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.

The surprises are 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 that counts hours per week and weeks per year as well as headcount.

I built FirstHR because none of this should require a compliance consultant. The timeline below puts each item in the order it falls due: 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 agency that owns the rule.

Michigan Hiring at a Glance: Every Deadline in One Place

Almost every item 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 agency labels in the table are short forms: UIA is the Unemployment Insurance Agency, LEO is the Department of Labor and Economic Opportunity, WDCA is the Workers Disability Compensation Agency, MIOSHA is the Michigan Occupational Safety and Health Administration, USCIS is U.S. Citizenship and Immigration Services, and ICE is U.S. Immigration and Customs Enforcement.

Each step below names the agency that owns the rule and, where one exists, the form 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. Treasury's registration instructions warn that incomplete or inaccurate information delays processing, and a name that does not match the IRS record is exactly that kind of error.

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. Treasury describes its online e-Registration as much faster than registering by mail, which matters when the account numbers have to exist before your first payroll. 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. The rate rules, including the construction exception, are published by the Michigan Unemployment Insurance Agency.

The taxable wage base, the slice of each employee's yearly pay that unemployment tax applies to, 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 lower base 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.

What worked for me

I now treat state registration as part of writing the offer letter, not part of running payroll. The moment a candidate says yes, Form 518 goes in. It costs fifteen minutes and it removes the single most common first-hire failure I see in Michigan: an account number that has not arrived by the time the first paycheck is due.

Nick Anisimov, FirstHR founder

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 Department of Homeland Security (DHS) alternative procedure that allows remote document examination is open only to employers enrolled in E-Verify (the federal online work-authorization check) and in good standing with the program. A business outside E-Verify examines the documents in person.

You do not get to tell the employee which documents to bring. The employee chooses from the Lists of Acceptable Documents, and USCIS is explicit that you cannot specify which documentation an employee presents. 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 practical: 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.

E-Verify in Michigan

Michigan has no statewide E-Verify mandate for ordinary private employers. The requirement reaches federal contractors whose contracts carry the Federal Acquisition Regulation (FAR) E-Verify clause, which makes enrollment a condition of the contract. Voluntary enrollment is allowed, but it adds obligations rather than replacing the I-9.

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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 for these forms, 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 works online through the state new hire portal, or by mail or fax. Employers who report electronically may send two transmissions a month, spaced no less than 12 and no more than 16 days apart, in place of the per-hire deadline.

Step 6: Put Workers Disability Compensation Coverage in Place

Michigan requires workers compensation coverage once you meet either half of a two-part test: one half counts hours and weeks, the other counts people.

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 meets the hours-and-weeks half on their own once 13 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. 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.

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 set of state and federal notices where employees can see them.

Each new hire must also get written notice of their rights under the Earned Sick Time Act, and the natural place for it is a written copy of your earned sick time policy, handed over at hire.

The written policy is the one small employers miss. Under the Earned Sick Time Act, your own call-in procedure for unforeseeable sick time binds an employee only if you gave them a written copy of the policy that sets it out. Without one, you cannot deny unforeseeable leave over missed notice. For foreseeable leave you may require up to 7 days of advance notice.

State posters are free from the Wage and Hour Division, 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 where a small employer has the most control 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. Form I-9, W-4, and MI-W4 go on the new hire's first-day list as tasks, and completed forms are kept in their employee file; the forms themselves are completed outside the platform.

The twenty-day report shows up as a task rather than as something 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 is $15.00 per hour effective Jan. 1, 2027 ($13.73 until then), with $12.75 for 16 and 17 year olds and a tipped cash wage of $6.30 from the same date ($11.67 and $5.49 until then).

From 2028 the rate is adjusted for inflation every year, so the increases are automatic from then on. The full 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.

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Earned Sick Time

The Earned Sick Time Act took effect Feb. 21, 2025 (Oct. 1, 2025 for small businesses) 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, where hours are earned as they are worked, 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, which you grant up front instead of accruing, are available immediately.

A brand-new small business gets more time to comply. According to the LEO Wage and Hour Division, a small business that did not employ anyone on or before Feb. 21, 2022 is not required to comply with the act until three years after the date it first employs an employee. The headcount behind small business status counts full-time, part-time, and temporary staff.

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.

If you hire anyone under 18, the Youth Employment Standards Act requires a work permit before work begins. Since October 2026, every Michigan youth work permit comes exclusively through the Youth Employment Permit Portal, the centralized state system overseen by the LEO Wage and Hour Division.

In the portal you register as the employer, the minor completes their part online, and the state approves and issues the permit. You keep the permit on file.

What worked for me

The Michigan detail I underestimated was final pay. Coming from states with an immediate-payment rule, I assumed a termination meant a same-day off-cycle run. In Michigan the final check is due on the regular payday for the pay period in which employment ended, whether the person quit or was let go. Knowing that changed how I schedule terminations: there is no emergency payroll, but there is a wage statement requirement that still has to be met.

Nick Anisimov, FirstHR founder

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. Grand Rapids works this way, with the City of Grand Rapids administering its own tax.

Detroit is handled differently: the Michigan Department of Treasury runs Detroit city withholding, so Detroit returns are filed through the state system rather than with the city directly, and no separate city registration is needed.

Flint moves to the Detroit model on Jan. 1, 2027. From that date Flint income taxes, employer withholding included, are filed and paid with the Department of Treasury, and Flint withholding returns switch from quarterly to monthly. The city handles them until then, according to Michigan Treasury.

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, allow extra time 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.

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.

When the state finds misclassification, the employer owes the unemployment taxes that should have been paid on those wages, and the agency charges penalties on quarterly reports and payments that were not submitted on time.

The 5 Mistakes That Cost Michigan Small Businesses the Most

These are the failures I see repeatedly, and most of them are timing problems rather than knowledge problems. 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.

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, and why the fix for most of this list is a reminder rather than a lawyer.

So keep one record per hire, with a date and a name against every line. Fill it in as you go rather than reconstructing it later, because the value of the record is that it tells you on day four that something is missing, not that it tells an auditor two years on that something was.

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