How to Hire Employees in Minnesota: The Complete Compliance Sequence
Step-by-step Minnesota hiring guide for small businesses: state tax and UI registration, I-9, W-4MN, new hire reporting, workers’ comp, and onboarding.
The first time I helped a founder hire in Minnesota, we did everything in the wrong order. We wrote the offer letter first, agreed on a start date, and only then discovered that the state wants two separate registrations, a written wage notice signed before the first shift, and a workers' compensation policy that has to be bound before anyone touches a keyboard. The start date slipped by nine days.
That is the real risk in Minnesota. The rules are not obscure, but they arrive in a specific sequence, and half of them come due before your new hire has done a single hour of work.
Miss the sequence and you are not paying a small late fee. You are explaining to the Department of Labor and Industry why someone worked uninsured, at up to $1,000 per employee per week under Minn. Stat. 176.181.
This guide runs the sequence in the order the work actually happens, from the federal EIN through Day 90 of onboarding. It is written for owners and operators doing this themselves, without an HR department, in a state that expects a paper trail. I built FirstHR because tracking those deadlines by memory is where small teams lose money, and every deadline below maps to a task or a signature our platform already handles.
- Sign the offer letter
- Sign the employee handbook
- Workplace Safety course
Minnesota Hiring at a Glance: Every Deadline in One Place
Most of the requirements below fall due before the end of the first week. This is the full sequence, with the deadline, the exposure, and the agency that owns each one.
| When | Deadline | Penalty | Agency | |
|---|---|---|---|---|
| Get your federal EIN | Before Day 1 | Before any payroll or state registration | You cannot register with Minnesota agencies or run payroll without it | IRS |
| Register for a Minnesota Tax ID and a withholding tax account | Before Day 1 | Before you withhold any Minnesota income tax | A $100 penalty if you withhold before registering | MN Department of Revenue |
| Open your Minnesota unemployment insurance employer account | First payroll | As soon as possible after the first covered wages are paid | Back tax, interest, and penalties on unreported wages | DEED (Minnesota UI Program) |
| Buy workers’ compensation coverage or get self-insurance approval | Before Day 1 | Before your first employee performs any work | Up to $1,000 per employee per week uninsured, plus gross misdemeanor exposure for willful violations | MN Department of Labor and Industry |
| Publish a starting salary range and a benefits summary in the job posting (employers with 30 or more employees in Minnesota) | At posting | Every posting by a covered employer, at the moment it goes live | Minn. Stat. 181.173 names no penalty of its own, but a covered posting without the range still breaks state law | MN Department of Labor and Industry |
| Deliver the written employee wage notice and keep a signed copy | On or before Day 1 | At the start of employment, before the first shift | Compliance orders, plus up to $10,000 per violation per employee for repeated or willful violations (Minn. Stat. 177.27) | MN Department of Labor and Industry |
| Complete Form I-9 | Within 3 business days | Section 1 by the first day, Section 2 within three business days of the first day of work | Federal civil fines assessed per form, per employee | USCIS / ICE |
| Collect federal Form W-4 and Minnesota Form W-4MN | Before first paycheck | Before the first wage payment | Default to single with zero allowances, plus $50 per form not filed when required | IRS / MN Department of Revenue |
| File the new hire report | Within 20 days | 20 days from the hire or rehire date | $25 per intentionally unreported employee after a notice of noncompliance, $500 where employer and employee conspire | Minnesota New Hire Reporting Center |
| Give the Paid Leave notice, the earned sick and safe time (ESST) notice, and post the state poster set | Day 1 to Day 30 | ESST notice at the start of employment, Paid Leave notice within 30 days of hire | Paid Leave notice: $50 per employee for a first violation, $300 per employee after that | DLI / Minnesota Paid Leave |
| Onboard: handbook, training, 30-60-90 plan, scheduled check-ins | Day 1 to Day 90 | Ongoing through the first 90 days | No legal penalty, but early turnover is concentrated in this window | Internal |
Three items on that list surprise employers coming from a lighter-touch state. Workers' compensation is not optional. The written wage notice is a standalone legal obligation, not a formality. And Minnesota runs a state income tax, so payroll setup involves a second withholding registration that states like Texas and Florida do not have.
Step 1: Get Your Federal Employer Identification Number
Apply for a federal Employer Identification Number before anything else, because both Minnesota registrations ask for it. The IRS issues the EIN online at no cost, and an approved application gets its number immediately at the end of the session.
If you formed an LLC or corporation and already hold an EIN, reuse it. If you have been operating as a sole proprietor and filing under your Social Security number, you need an EIN now. Payroll tax reporting cannot run on a personal SSN once you have employees.
Keep the EIN confirmation letter somewhere you can find it in under a minute. You will retype that number into the Department of Revenue registration, the unemployment insurance registration, your workers' compensation application, and every new hire report you file for the life of the business.
Step 2: Register for a Minnesota Tax ID and a Withholding Account
Minnesota has a state income tax, so you must register with the Minnesota Department of Revenue for a Minnesota Tax ID Number and a withholding tax account before you withhold any state tax. Registration is available online or by phone. According to the 2026 withholding tax instructions, the Department may assess a $100 penalty if you start withholding before you register.
This is the step that catches founders who moved a business from a no-income-tax state. There is no way to short-circuit it. Minnesota withholding is calculated from a state form, Form W-4MN, and the amounts have to be remitted against a state account number that only exists once you register.
Register before you set a start date, not after. The account number flows into your payroll configuration, and a Minnesota payroll setup cannot file a withholding return without it.
Step 3: Open Your Minnesota Unemployment Insurance Employer Account
Minnesota unemployment insurance law requires every individual or organization that pays covered wages in the state to register with the Minnesota Unemployment Insurance Program, which is administered by the Department of Employment and Economic Development (DEED). The program asks employers to register as soon as possible after the first wages are paid for covered employment.
Note the trigger. Unlike states that use a dollar threshold before liability attaches, Minnesota ties registration to paying covered wages at all. If you are hiring a W-2 employee, you are registering. There is no waiting period to sit out.
When you register, the program asks what industry you are in and assigns a new employer rate accordingly. Minnesota maintains dozens of separate new employer rates rather than a single entry rate, and construction employers are rated differently from non-construction employers.
According to DEED figures for 2026, a base tax rate of 0.4 percent is added to every employer rate, and the taxable wage base is $44,000 per employee.
Step 4: Buy Workers' Compensation Coverage Before Anyone Starts
Minnesota workers' compensation coverage is mandatory, and there is no minimum number of employees. The Department of Labor and Industry states that an employer with only one part-time employee generally must provide coverage, so your first hire is enough to trigger the requirement.
The exceptions are narrow and specific. Workers in private homes earning less than $1,000 in cash in a three-month period, certain farming arrangements, and some immediate-family employment situations fall outside the requirement under Minn. Stat. 176.041. Sole proprietors, partners, qualifying LLC managers, and certain closely held corporate officers are not required to cover themselves, although they may elect to be covered.
The penalty for going without is calculated per employee per week, not per incident. Under Minn. Stat. 176.181, subdivision 3, the commissioner may order a penalty of up to $1,000 per employee per week during which the employer was uninsured, and subdivision 4 makes willful and intentional failure to comply a gross misdemeanor.
Nick Anisimov, FirstHR founder
Step 5: Write a Job Posting That Meets Minnesota Disclosure Rules
Minnesota regulates the posting itself, not just the offer. Minn. Stat. 181.173 took effect January 1, 2025 and requires employers with 30 or more employees at one or more sites in Minnesota to disclose the starting salary range and a general description of all benefits and other compensation, including health and retirement benefits, in every posting for every opening.
The range must reflect a good faith estimate at the time of posting and may not be open ended. An employer that does not plan to offer a range must list a fixed pay rate instead. The obligation follows the posting, so a recruiter or staffing agency publishing on your behalf does not take the duty off you.
Two more rules shape the interview stage. Minnesota banned salary history inquiries effective January 1, 2024 through an amendment to the Minnesota Human Rights Act, which prohibits asking about, considering, or requiring disclosure of the pay history of an applicant from any source when setting compensation. An applicant may still volunteer the information while negotiating.
Minnesota also has a ban-the-box law. Minn. Stat. 364.021 bars public and private employers from asking about, considering, or requiring disclosure of criminal history until the applicant has been selected for an interview, or, where there is no interview, before a conditional offer is made.
| Stage | Allowed | Not Allowed |
|---|---|---|
| Job posting | Starting salary range or fixed rate, benefits summary, required qualifications | Open ended ranges, omitted compensation data for covered employers |
| Application form | Skills, experience, availability, work authorization attestation | Criminal history checkbox, pay history questions |
| Interview | Compensation expectations for this role | Prior salary, prior bonus, prior benefits value |
| After interview selection | Criminal history questions and background screening | Ordering a screening company report without the stand-alone disclosure and written consent required by the Fair Credit Reporting Act (FCRA) |
| Conditional offer | Background check, reference check, drug testing under a written policy | Cannabis testing for most non-safety-sensitive roles |
Drug testing deserves its own note. The Minnesota Drug and Alcohol Testing in the Workplace Act requires a written policy before any testing occurs, and Minn. Stat. 181.938 treats cannabis as a lawful consumable product. Under Minn. Stat. 181.951, pre-employment cannabis testing is generally prohibited outside safety-sensitive positions and other narrowly defined categories such as peace officers, firefighters, and certain healthcare and childcare roles.
Step 6: Send the Offer With Minnesota's Written Employee Wage Notice
Minnesota requires a written notice to every employee at the start of employment, and requires you to keep a signed copy on file. This obligation comes from Minn. Stat. 181.032, added by the state Wage Theft Act, and in my experience it is the most commonly missed item on this list.
Paragraph (d) of the statute lists nine required items, which group into the seven blocks below. The statute requires every item, so a notice that skips any one of them is still a violation.
| Required element | What it means in practice |
|---|---|
| Rate or rates of pay and the basis | Hourly, shift, day, week, salary, piece, commission, or other method, plus how any additional rates apply |
| Allowances claimed | Any permitted meal and lodging allowances counted toward wages |
| Paid time off terms | Vacation, sick time, or other paid leave accruals and the terms of use, including earned sick and safe time |
| Employment status | Whether the employee is exempt from minimum wage and overtime, and the specific basis for that classification |
| Deductions | A list of the deductions that may be taken from pay |
| Pay cycle | Days in the pay period, the regular payday, and the payday on which the first wages will be received |
| Employer identity | Legal name, operating name if different, plus physical address and telephone number |
The notice must be provided in English, and the English version has to tell the employee they may request it in another language. If they request one, you provide it. Any later change to the information in the notice must be given to the employee in writing before the change takes effect.
Work through the blocks in the order below, one worksheet per employee, before the start date. The blank you cannot fill is the one to resolve now rather than after the first shift, and the change log at the bottom is what keeps the notice accurate the first time you adjust a rate or a payday.
Practically, this belongs in the offer packet. Send the offer letter, the wage notice, the ESST notice, and the direct deposit form as one signature request so the acknowledgment lands before the start date rather than during the first week. That is exactly the workflow the e-signature and new hire paperwork tools in FirstHR were built to run.
Step 7: Complete Form I-9 by the Third Business Day
Every employer in the United States must complete Form I-9 for every new hire, and the two sections carry different deadlines. Section 1 is completed by the employee on or before the first day of work.
Section 2 is completed by you, after examining original documents, by the end of the third business day after work begins, so a Monday start is due Thursday.
You may not tell the employee which documents to present. They choose from the acceptable document lists, and you record what they show you. Directing the choice is itself a violation, separate from any deadline problem.
E-Verify is voluntary for private employers in Minnesota. The exception is state procurement: Minn. Stat. 16C.075 requires vendors and subcontractors on state service contracts above $50,000 to certify that they have implemented or are implementing E-Verify for new hires performing that work. Voluntary participation does not replace the I-9 for anyone.
Step 8: Collect Form W-4 and Form W-4MN Before the First Paycheck
Minnesota employees complete two withholding forms, not one. Federal Form W-4 sets federal income tax withholding. Minnesota Form W-4MN sets state withholding, and the Department of Revenue directs employers to withhold at the single filing status with zero allowances when an employee does not complete a W-4MN.
There is a second obligation attached to W-4MN. Certain forms must be sent to the Department of Revenue rather than simply retained, and the Department may assess a $50 penalty for each form not filed with it when required. Check the current instructions each year, because the submission triggers are the part employers most often get wrong.
Both forms belong in the pre-start packet with the wage notice. Collecting them on Day 1 works, but collecting them before Day 1 means the first payroll run is not blocked while you chase a signature.
Step 9: File the New Hire Report Within 20 Days
Minnesota employers must report every newly hired and rehired employee within 20 days of the hire date. Reports go to the Minnesota New Hire Reporting Center, which a private vendor operates under contract with the state, and can be filed by internet, mail, or fax.
The report needs your business name, address, and federal EIN (FEIN), plus the employee first, middle, and last name, mailing address, Social Security number, and date of hire or rehire.
The reporting center also accepts reports on independent contractors. Read that carefully: under Minn. Stat. 142A.29, subdivision 9, contractor reporting is mandatory for government employers and optional for private payors, so most small businesses report contractors by choice rather than by rule.
The underlying obligation is both state and federal. Minnesota codified it at Minn. Stat. 142A.29, and the federal Personal Responsibility and Work Opportunity Reconciliation Act requires state-level new hire directories at 42 U.S.C. 653a.
Minnesota penalties start only after the state mails a written notice of noncompliance. A later violation then costs $25 for each intentionally unreported employee, or $500 for each one where an employer and employee conspired to skip the report or file a false one.
| Requirement | Minnesota rule | Where it comes from |
|---|---|---|
| Reporting deadline | 20 calendar days from hire or rehire date | Minn. Stat. 142A.29 and 42 U.S.C. 653a |
| Who receives the report | Minnesota New Hire Reporting Center | State contract administration |
| Contractors reportable | Optional for private payors, mandatory for the state and local governments | Minn. Stat. 142A.29, subd. 9 |
| Employer data required | Name, address, FEIN | New hire reporting program |
| Employee data required | Name, mailing address, SSN, date of hire | New hire reporting program |
| Penalty after a notice of noncompliance | $25 per intentionally unreported employee | Minn. Stat. 142A.29, subd. 6 |
| Conspiracy penalty | $500 per intentionally unreported employee | Minn. Stat. 142A.29, subd. 6 |
Do not wait for Day 20. File the report the same day you finish the I-9, because both tasks fit in the first week, both take minutes, and batching them means one reminder instead of two.
Step 10: Deliver the Paid Leave and Sick Time Notices and Post the State Posters
Minnesota added two notice obligations with its sick time and paid leave laws, and both attach to individual employees rather than to the wall. Getting them out late is the most common compliance gap I see in Minnesota onboarding.
Earned Sick and Safe Time Notice
Employers must give employees a notice at the start of employment explaining earned sick and safe time, in English and in the primary language the employee identifies. If you provide an employee handbook, it must also include a notice of employee rights and remedies under the ESST law.
Accrual starts with the first hour worked. Employees earn at least one hour of ESST for every 30 hours worked, up to 48 hours a year unless you allow more, and no employer size threshold applies.
Every pay period also ends with a balance report. Under Minn. Stat. 181.9447, you tell each employee, in writing or electronically, how many ESST hours are available and how many were used during the period. A line on or attached to the earnings statement satisfies the rule, and so does an electronic system employees can check.
Minnesota Paid Leave Notice
Minnesota Paid Leave took effect January 1, 2026. Under Minn. Stat. 268B.26, employers must notify new employees about the program within 30 days of hire, in the primary language of the employee, and collect a written or electronic acknowledgment that the information was received.
If an employee refuses to acknowledge the notice, you must be able to show how you notified them. A workplace poster is required in addition to the individual notice.
On the money side, the premium is 0.88 percent of covered wages in 2026 and again in 2027, or 0.66 percent for qualifying small employers. It applies to wages up to $192,000 per employee from January 1, 2027 ($185,000 for 2026), because Minn. Stat. 268B.01 ties the cap to the Social Security wage base rounded to the nearest $1,000.
Employers may deduct up to 0.44 percent of wages from employees and must cover the balance, which is 0.44 percent at the standard rate and 0.22 percent at the small employer rate, as Minn. Stat. 268B.14 sets out. The Minnesota Paid Leave program collects premiums quarterly alongside wage detail reporting.
Required Posters
The Department of Labor and Industry publishes the state poster set at no cost, and the posters can be printed from the department website, ordered online, or requested by email. Not every poster on the state page is mandatory, though: some are published as informational only.
Federal posters come from the U.S. Department of Labor and the Equal Employment Opportunity Commission. Do not pay a vendor for either set.
| Poster or notice | Source | Status |
|---|---|---|
| Minimum-wage rates | MN Department of Labor and Industry | Required, all Minnesota employers |
| Age discrimination | MN Department of Labor and Industry | Required, all Minnesota employers |
| Employer-sponsored meetings or communications | MN Department of Labor and Industry | Required, all Minnesota employers |
| Safety and health protections on the job | MN Department of Labor and Industry | Required, all Minnesota employers |
| Workers’ compensation | MN Department of Labor and Industry | Required, all Minnesota employers |
| Unemployed? (unemployment insurance) | MN Department of Labor and Industry | Required, all Minnesota employers |
| Minnesota Paid Leave (standard or equivalent plan version) | MN Department of Labor and Industry | Required as of January 1, 2026 |
| Veterans benefits and services | MN Department of Labor and Industry | Required for employers with more than 50 full-time employees |
| Earned sick and safe time | MN Department of Labor and Industry | Informational, encouraged but not required |
| Federal minimum wage (FLSA) and Employee Polygraph Protection Act | US Department of Labor | Required for employers covered by each federal law |
Step 11: Onboard From Day 1 Through Day 90
Compliance puts someone legally on payroll. Onboarding decides whether they stay, because the first weeks are when a new hire decides whether the job matches the pitch.
The practical goal is to finish everything that can happen before the start date, so Day 1 is about the work and the team rather than a stack of forms. The steps that cannot happen earlier, such as I-9 Section 2, the new hire report, and the Paid Leave notice, each get a date on the calendar.
Here is the shape that has worked for the Minnesota teams I have helped set up.
| Timeline | What happens | Owner |
|---|---|---|
| Pre-Day 1 | Offer letter, employee wage notice, ESST notice, W-4, W-4MN, direct deposit, and handbook acknowledgment collected by e-signature. I-9 Section 1 is completed on Form I-9 itself. | Founder or manager |
| Day 1 | Welcome, introductions, workspace and tool access, role expectations, company overview. Begin I-9 Section 2. | Founder or manager |
| First 3 business days after Day 1 | Finish I-9 Section 2 (hard deadline: a Monday start is due Thursday). Confirm posters are up and visible. | Founder or manager |
| Week 1 | Role-specific training, buddy assignment, first manager check-in, payroll test run | Manager and buddy |
| Day 20 | New hire report filed. Verify the confirmation is stored with the employment record. | Founder or manager |
| Day 30 | Paid Leave notice acknowledgment on file. First formal check-in against 30-day goals. | Manager |
| Day 60 | Second check-in. The employee should be contributing without daily supervision. | Manager |
| Day 90 | Formal 90-day review. Transition from onboarding into ongoing performance management. | Manager |
The AI onboarding wizard in FirstHR generates a 30-60-90 day plan from the job description, assigns the training modules, and holds the compliance tasks on the same timeline as the people tasks. FirstHR is an onboarding and HR platform, not a payroll provider, so the withholding and premium filings still run through your payroll system. The paperwork, signatures, and deadlines live here.
Minnesota Employment Rules That Change How You Operate
Minnesota sits toward the employee-protective end of the state spectrum, and several rules affect decisions you make in the first week rather than in year three. These are the ones that come up most often once the hire is on payroll.
Two of those deserve expansion. The minimum wage is indexed: the Department of Labor and Industry recalculates it for inflation and publishes the new rate ahead of each January 1.
The rate is $11.87 an hour for all employers from January 1, 2027, with a 90-day training wage of $9.68 for workers under age 20. Budget for an increase every year rather than treating the current rate as fixed.
Overtime has a split threshold that trips up new employers. The Minnesota Fair Labor Standards Act sets overtime at more than 48 hours in a seven-day period, while the federal FLSA sets it at more than 40. Most employers fall under the federal standard and owe overtime after 40, so the state threshold matters only for businesses outside FLSA coverage.
| Topic | Minnesota rule | Practical effect |
|---|---|---|
| State income tax | Yes, withholding required | Form W-4MN in addition to federal W-4, plus a state withholding account |
| Workers’ compensation | Mandatory, no headcount threshold | Policy bound before the first day of work |
| Minimum wage | $11.87 from January 1, 2027, indexed annually | Rebuild pay bands every year, not every few years |
| Tip credit | Not allowed | Tipped staff receive full minimum wage plus tips |
| Rest break | Paid, at least 15 minutes for every four consecutive hours worked | Schedule coverage for breaks in shift-based roles |
| Meal break | Unpaid, at least 30 minutes when working six or more consecutive hours | Build the break into shift templates |
| Paid sick leave | ESST, one hour per 30 hours worked, with a 48-hour annual accrual cap unless you set a higher one | Report hours available and used every pay period, on the pay stub or electronically |
| Pay frequency | At least once every 31 days on a payday set in advance | Commissions at least once every three months |
| Final pay (discharge) | Due immediately on demand, default at 24 hours | Penalty of average daily earnings for up to 15 days |
| Final pay (resignation) | Next regular payday, with a five-day and 20-day rule | Off-cycle payment may be required |
| Non-competes | Void for agreements signed on or after July 1, 2023 | Use confidentiality and non-solicitation instead |
| Discrimination law coverage | Minnesota Human Rights Act applies at one employee | Anti-discrimination policy from the first hire |
Nick Anisimov, FirstHR founderOne more item belongs on your calendar: the state retirement mandate. Under Minn. Stat. 187.03, an employer that has done business in Minnesota for at least a year, has five or more covered employees, and has not sponsored or contributed to a retirement savings plan in the past 12 months is a covered employer under the Minnesota Secure Choice program.
A covered employer must enroll its employees in a state-administered IRA once its enrollment window opens, and contributions default to Roth unless the employee elects pretax (Minn. Stat. 187.05 and 187.07). It is not a Day 1 hiring task, but it belongs on the roadmap alongside your first benefits decisions.
City Requirements: Minneapolis and St. Paul
Minnesota allows local employment ordinances, and two cities use that authority aggressively. If your employee performs work inside Minneapolis or St. Paul city limits, the city rules apply on top of state law, and in both cases the city minimum wage is materially higher than the state rate.
Minneapolis sets one citywide minimum wage, $17.02 an hour from January 1, 2027, and it applies to every employer regardless of business size. St. Paul is still tiered by headcount, so confirm your tier on the city schedule before you set pay.
According to the City of Saint Paul, its macro and large tiers (101 or more employees) reach $17.02 on January 1, 2027. The small business tier (6 to 100 employees) reaches $17.02 on July 1, 2027 ($16.37 until then), and the micro business tier (5 or fewer) reaches $15.00 the same day ($14.25 until then).
| City | Requirement | Status | What to do |
|---|---|---|---|
| Minneapolis | Citywide minimum wage of $17.02 per hour | Effective January 1, 2027, for all employers | Pay the city rate for hours worked in Minneapolis |
| Minneapolis | Sick and safe time ordinance | Amended effective January 2026 to align with state ESST | The city states the ordinance does not require time off beyond state law, so follow state ESST and the city complaint process |
| Minneapolis | Wage Theft Prevention Ordinance | In effect since January 1, 2020, enforced by the city Labor Standards Enforcement Division | Keep the signed pre-hire wage notice, show sick and safe time balances on every earnings statement, and post the city wage theft poster and share it with new hires |
| St. Paul | Tiered minimum wage | Macro and large tiers at $17.02 from January 1, 2027; small tier at $17.02 and micro tier at $15.00 from July 1, 2027 | Confirm your tier on the city schedule before setting pay |
| St. Paul | Earned sick and safe time ordinance | Amended in January 2024 to align with the state ESST law | Apply state ESST; the city ordinance reaches anyone working in Saint Paul for at least 80 hours a year |
| St. Paul | Wage theft ordinance | In effect since January 1, 2025 | Follow city notice and recordkeeping rules |
| Duluth and Bloomington | Earned sick and safe time ordinances | Not on the state list: the state labor department lists local ESST ordinances only in Minneapolis and St. Paul | Follow state ESST |
The practical rule for a small employer with a mixed workforce: apply state law everywhere, then layer the city rule on top for anyone whose hours are worked inside Minneapolis or St. Paul. Do not average. The higher standard governs hour by hour, and both cities enforce locally rather than relying on the state.
Employee or Independent Contractor: The Warning Minnesota Employers Ignore
Misclassification is the most expensive hiring mistake available in Minnesota, and the penalties for misclassifying employees as independent contractors were increased effective July 1, 2024. The construction industry also moved to a stricter multi-factor test on March 1, 2025.
Outside construction, Minnesota agencies apply a common law analysis that looks at five factors: the right to control the means and manner of performance, the mode of payment, the furnishing of tools and materials, control over the premises where the work is done, and the right of discharge.
Under the unemployment insurance rule, the right of control and the right to discharge without liability are the two most important factors, but all five are weighed together.
| Factor | Points to employee | Points to contractor |
|---|---|---|
| Control of means and manner | You direct how the work gets done | The worker decides the method and sequence |
| Mode of payment | Hourly or salaried on your payroll cycle | Per project, per deliverable, or against an invoice |
| Tools and materials | You supply equipment, software, and supplies | The worker supplies their own |
| Control of premises | You control the site and the schedule on it | The worker controls where and when the work happens |
| Right of discharge | You can end the relationship at will | Termination is governed by contract terms |
Two practical points. First, the worker's preference is not a factor. A signed agreement calling someone a contractor does not survive a control analysis that says otherwise. Second, a misclassification finding cascades: unpaid unemployment insurance tax, unpaid Paid Leave premiums, missing workers' compensation coverage for the period, and missing ESST accrual all surface at once.
If the analysis is close, classify as W-2. The cost difference between employing someone correctly and defending a reclassification is not comparable.
Whichever way it lands, write down how you got there while the engagement is still being set up. An analysis you ran in your head is worth nothing two years later; a dated page naming what was actually true about the work is the thing an auditor reads. Fill this in before the first day, not after a question arrives.
The Five Mistakes That Cost Minnesota Small Businesses the Most
These are the failures I see repeatedly, and every one of them is a scheduling problem rather than a knowledge problem. The owner knows the rule. The rule came due on a week when three other things were on fire.
The pattern is worth naming. Every item on that list has a fixed deadline attached to a specific date, and none of them generate a reminder on their own.
No agency emails you on the second business day about the I-9. Nothing prompts you on Day 19 about the new hire report. If the reminder does not exist inside your own system, the deadline depends on memory during a busy week, which is exactly when it fails.
That is why I keep pushing small teams toward task workflows rather than checklists in a document. A checklist tells you what to do. A workflow tells you what is late. For a first hire, the difference is the whole ballgame.
Frequently Asked Questions
Do I need to register with the state before hiring my first employee in Minnesota?
Yes, and with two separate agencies. The Minnesota Department of Revenue issues your Minnesota Tax ID Number and sets up the withholding tax account you need before you take any Minnesota income tax out of a paycheck. Its withholding instructions say an employer who starts withholding before registering may be assessed a $100 penalty. The second agency is the Department of Employment and Economic Development, which runs the Minnesota Unemployment Insurance Program. Any individual or organization paying covered wages in the state has to register there, and the program wants you registered as soon as possible after you first pay covered wages. One registration does not stand in for the other. Get your federal EIN from the IRS first, because both state applications ask for it.
What is the deadline to report a new hire in Minnesota?
Twenty days. Counting from the hire or rehire date, a Minnesota employer has 20 days to report each newly hired or rehired employee, which matches what federal law requires under the Personal Responsibility and Work Opportunity Reconciliation Act at 42 U.S.C. 653a. You file with the Minnesota New Hire Reporting Center online, by mail, or by fax. Have your business name, address, and federal EIN ready, along with the employee’s full name, mailing address, Social Security number, and date of hire or rehire. The center also takes reports on independent contractors, but under Minn. Stat. 142A.29, subdivision 9, only government employers must send them, and private payors can choose. Penalties start after the state mails a written notice of noncompliance. If you break the rule again, the civil penalty is $25 per intentionally unreported employee, or $500 per employee where employer and employee conspired to skip or falsify the report.
Is workers’ compensation insurance required in Minnesota?
Yes, and there is no headcount threshold. According to the Minnesota Department of Labor and Industry, every employer must either buy workers’ compensation insurance or get approval to self-insure, and even a business with one part-time employee generally needs coverage. Coverage is not elective the way it is in Texas. Narrow exceptions exist for household workers earning under $1,000 in a three-month period, certain farm situations, and some family employment arrangements. Sole proprietors, partners, qualifying LLC managers, and certain closely held corporate officers do not have to cover themselves, though they can choose to. Operating uninsured exposes you to a commissioner-ordered penalty of up to $1,000 per employee for each week uninsured under Minn. Stat. 176.181, subdivision 3, and willful, intentional non-compliance is a gross misdemeanor under subdivision 4.
What is Minnesota’s minimum wage and does it change every year?
Minnesota’s minimum wage is $11.87 an hour from January 1, 2027, and yes, it changes every year. The same rate applies to every employer in the state, whatever its size. The Department of Labor and Industry adjusts it for inflation each January 1, so the 2027 figure replaces the 2026 rate of $11.41, and state law caps any single annual increase at 5 percent. Workers under age 20 can be paid a training wage of $9.68 during their first 90 consecutive days on the job. Minnesota has no tip credit: tipped employees get the full state minimum for every hour worked, with their tips on top. Minneapolis and St. Paul set higher local minimums, so employers in those cities pay the city rate rather than the state rate.
Does Minnesota require E-Verify?
No, not for private employers. A private business in Minnesota can choose whether to use E-Verify. The one exception sits in state procurement law: under Minn. Stat. 16C.075, a vendor or subcontractor on a state service contract worth more than $50,000 must certify that it has implemented, or is implementing, E-Verify for the newly hired employees who will do the work for the state. Using E-Verify never replaces the paperwork, though. Every employer, with or without E-Verify, still completes Form I-9 for each new hire. The employee finishes Section 1 on or before the first day of work, and you finish Section 2 no later than the third business day after that first day.
Do I have to put a salary range in a Minnesota job posting?
If your business has 30 or more employees at one or more Minnesota sites, yes. Since January 1, 2025, Minn. Stat. 181.173 has required covered employers to put the starting salary range in every posting for every job opening, along with a general description of every benefit and other form of compensation, health and retirement benefits included. The range must be a good faith estimate made when you post, and it cannot be open ended. If you do not plan to offer a range, list a fixed pay rate instead. The duty attaches to the posting rather than to whoever publishes it, so it still applies when a recruiter or staffing agency posts the job for you.
What forms does every new hire in Minnesota need to complete?
Five documents form the baseline. Form I-9 verifies work authorization: Section 1 is due on or before the first day, and Section 2 within three business days after the start date, which means Thursday for someone who starts on a Monday. Federal Form W-4 sets federal withholding. Minnesota Form W-4MN covers state withholding, and when an employee never provides one, you withhold as single with zero withholding allowances. The written employee wage notice required by Minn. Stat. 181.032 must be delivered at the start of employment and returned signed. The earned sick and safe time notice also goes out at the start of employment. Direct deposit authorization and a handbook acknowledgment are strongly recommended but not statutory.
When is a final paycheck due in Minnesota?
It depends on who ended the employment. When the employer discharges the worker, Minn. Stat. 181.13 makes the wages payable immediately on the employee’s demand. If they are still unpaid 24 hours after that demand, the employer is in default and owes a penalty equal to the employee’s average daily earnings for up to 15 days. When the employee quits, Minn. Stat. 181.14 sets the due date at the first regularly scheduled payday after the final day of employment. If that payday falls fewer than five calendar days after the last day worked, the employer may pay on the following payday, but never later than 20 calendar days after the final day of employment. Migrant workers who resign must be paid within three days.
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