Minnesota Payroll: Employer Tax Guide

Minnesota added an entirely new payroll obligation in 2026, and unlike most compliance changes it arrived with money attached from the first pay period. My advice: get that obligation right before you compare software, because for most employers it costs more than the software does. This guide covers what Minnesota requires, what changed for 2026, and how 10 payroll providers price the work.

The state Paid Leave program went live on January 1, 2026, funded by a premium of 0.88 percent of covered wages split between employer and employee. The first quarterly payment was due April 30, 2026.

For an employer with a $2 million Minnesota payroll, the employer share alone runs roughly $8,800 a year, more than double the annual cost of the cheapest payroll subscription on this page at 50 employees.

Around the new premium sit the obligations Minnesota already had: four income tax brackets running to 9.85 percent, an unemployment wage base that rose to $44,000, three different minimum wages inside the state, and a prohibition on the tip credit that makes Minnesota one of the most expensive states in the country for restaurants.

What Minnesota requires from employers

Minnesota employers withhold state income tax, fund unemployment insurance, split a Paid Leave premium with employees, and pay the minimum wage for each work location. In 2026, Paid Leave joined that list.

Registration runs through two agencies. Withholding is registered with the Minnesota Department of Revenue, which requires every new employee to complete Form W-4MN alongside the federal W-4. Unemployment insurance is registered with the Department of Employment and Economic Development at uimn.org, and that same employer account now carries Paid Leave reporting and premium payments.

There is no local income tax anywhere in Minnesota, so unlike in Ohio, Indiana, or Pennsylvania, you never have to match each employee's address to a local tax rate. The local layer here is wage rules rather than tax jurisdictions.

The paid leave program and its quarterly premium

Minnesota Paid Leave runs on a premium that employers share with employees and pay quarterly. It is the largest change to payroll in this state in years, and because it launched mid-cycle for many employers, it is also the item most likely to have been set up hastily.

According to Minnesota Paid Leave, the 0.88 percent total splits into 0.61 percent for medical leave and 0.27 percent for family leave. Under Minnesota Statutes section 268B.14, premiums are owed on taxable wages, which section 268B.01 defines as pay up to the Social Security wage base rounded to the nearest $1,000: $185,000 for 2026, the cap the state Paid Leave website lists, and $192,000 for 2027.

Qualifying as a small employer

Two conditions must both hold. The employer must have 30 or fewer employees in each quarter, and must pay an average wage no higher than 150 percent of the statewide average, currently $27,745.88 per quarter. The average is calculated by dividing wages from the highest-paid quarter by the highest employee count, measured over a basis period covering the four quarters ending September 30 of the prior year.

The wage test catches employers who assume headcount alone decides the answer. A ten-person professional services firm paying well can exceed the wage test and pay the standard rate despite being small by any ordinary definition.

Timing and administration

Employers may run an approved private or self-insured plan instead of the state program, but it must deliver equivalent benefits and cannot charge employees more than the state premium rate. Employers must also put up a workplace poster, give each employee an individual notice, and submit quarterly wage detail reports.

Unemployment insurance and the industry rate

Minnesota unemployment insurance is an employer-only tax on wages up to an annual base, and a new business starts at its industry's average rate.

Minnesota sets its wage base each year at 60 percent of the state average annual wage as of June 30 of the prior year, which put it at $44,000 for 2026. That formula is why the base moves in step with wages, not by legislative action.

The new employer rate works differently here than in most states. Instead of one flat figure for every new business, Minnesota assigns a rate based on the average experience rate of employers in that industry, meaning the rate each earns from the benefits charged to its own account. A new construction company and a new accounting firm start at different rates.

Under Minnesota Statutes section 268.051, a base tax rate is added on top of whichever rate applies. The state sets it each year between 0.10 and 0.50 percent, depending on the balance of its unemployment trust fund on March 31 of the prior year, and it is 0.40 percent for 2026.

Three minimum wages and no tip credit

Minnesota has three minimum wages: the statewide rate, a higher Minneapolis rate, and a St. Paul rate set by employer size. None allows a tip credit.

The statewide rate is indexed to inflation and adjusts every January 1, and the January 1, 2027 adjustment is a 3.99 percent increase.

Minneapolis applies a single rate to all employers regardless of size, and coverage depends on where the employee physically performs the work, not where the employer is based. St. Paul still sets its rate by employer size, and its small and micro employers take their next step on July 1, 2027 rather than January 1.

Two more rules govern how you communicate pay, not how much.

Pay transparency in job postings

Since January 1, 2025, every job posting from an employer with 30 or more employees in Minnesota must include a good faith estimate of the starting salary range, or a fixed rate where one applies, plus a general description of benefits and other compensation. Ranges cannot be open ended. The requirement sits in Minnesota Statutes section 181.173.

Notice of pay changes

Minnesota Statutes section 181.032 requires employers to give each employee written notice of any change to their rate of pay before the change takes effect. That includes the January minimum wage adjustment for anyone paid at the wage floor, so the annual indexing brings an annual notice obligation, not just a rate update in the payroll system.

10 payroll providers for Minnesota employers compared

Every provider below files Minnesota state withholding and unemployment contributions. Since 2026 the clearest difference between them is whether the platform calculates and remits the Paid Leave premium correctly, including the small employer rate and any employer election to cover more than the minimum.

OnPay

OnPay sells one payroll plan at $49 per month plus $6 per employee, so there is no tier to climb; HR tools and time tracking are paid add-ons. Tax filing covers all 50 states with no multi-state surcharge, and year-end W-2 and 1099 filing sits in the base price.

OnPay maintains a Minnesota payroll tax and registration guide and a Minnesota Paid Leave setup article, a reasonable proxy for whether a vendor tracked the Paid Leave launch.

Gusto

Gusto is a common first payroll purchase for US small businesses, with automatic tax filing, published pricing, and onboarding built into the same account. Simple runs $49 per month plus $6 per employee after a base increase from $40 during 2025.

The constraint is the single-state limit on Simple. One hire in Wisconsin, Iowa, or the Dakotas moves you to Plus at $80 plus $12 per employee.

Patriot Software

Patriot Full Service is the lowest-cost full-service payroll on this page at every headcount modeled below, at $37 per month plus $5 per employee. It files federal and state taxes, Paid Leave premiums included, though new hire reporting stays with the employer.

Patriot Basic is $17 plus $4 if you file taxes yourself, which in Minnesota now means handling the quarterly Paid Leave remittance as well as the withholding and unemployment returns.

Square Payroll

The Square Payroll full-service plan runs $35 per month plus $6 per person paid. For a Minneapolis or St. Paul restaurant, the case for Square is stronger here than in most states: with no tip credit permitted, accurate hours and location data drive both the wage floor and the Paid Leave premium base, and Square keeps timecards and payroll in one system.

SurePayroll

SurePayroll is owned by Paychex and built for very small employers and household employers. The Small Business plan is $29 per month plus $7 per employee, with a flat $9.99 monthly multi-state fee rather than a per-state charge.

QuickBooks Workforce Payroll

Workforce Payroll, formerly QuickBooks Payroll Core and renamed in May 2026, runs $50 per month plus $7 per employee after the per-employee increase of July 1, 2026. The argument for it is unchanged: if your books live in QuickBooks Online, payroll reaches the general ledger without an export.

ADP RUN

ADP says every RUN package comes with the same tax service: it calculates, files, deposits, and reconciles payroll taxes, responds to agency inquiries, and pays the resulting fines if it makes a filing error.

A brand new state program is where that service earns its keep: the Paid Leave rules arrived with a small employer test, a wage base tied to the federal limit, and an employer election to cover more than the minimum, all of which had to be built rather than adjusted.

The cost is opacity. ADP publishes no RUN rates, so every package from Essential to HR Pro is quoted individually. No contract is required, though: ADP says services can be terminated at any time.

Paychex Flex

Paychex Flex is a service relationship rather than a software subscription, with a payroll specialist included on the Complete package. Pricing is quote-only across the Basic, Foundations, Advanced, and Complete packages, and the standard service agreement can be ended with 30 days of notice.

With a state program as new as Paid Leave, having someone to call about the small employer determination has real value.

Paylocity

Paylocity sits between small-business payroll and full human capital management (HCM) suites, aimed at companies that have outgrown basic payroll: its clients average more than 150 employees, per its annual report. It publishes a Minnesota wage and payroll tax facts page and prepares and files state withholding returns. Pricing is quote-based and implementation is a project rather than a signup.

Rippling

Rippling puts payroll, HR, and IT provisioning on one employee record. Its small-business page starts payroll plans at $8 per user per month plus a $40 monthly base fee.

Its blog prices the core platform at $8 per employee and the payroll module, sold separately, at another $8 billed annually or $10 billed monthly, while the pricing page itself is a quote form. A configured quote can therefore run higher, and the final cost depends on which other products you add.

What each provider actually costs a Minnesota employer

The table below models published rates at three headcounts, and Patriot is the cheapest published option at every one, with Square close behind. Read it alongside the Paid Leave premium rather than in isolation, because in Minnesota the software is no longer the main number.

Gusto Simple is competitive until one cross-border hire forces the Plus tier, taking a 25-person payroll from $199 to $380 per month. ADP RUN, Paylocity, and Rippling are left out: their totals depend on a quote or on the modules you add.

Choosing a payroll provider for Minnesota

Test every provider on the Minnesota rules most likely to go wrong: Paid Leave, small employer status, city minimum wages, and the tip credit ban. Ask each one these five questions before you sign.

Before you choose

FirstHR covers the document and notice layer around payroll, while payroll processing, tax filing, Paid Leave remittance, and benefits administration come from the providers above. In a state that added a new premium with quarterly remittance in 2026, choosing a platform that handles it correctly is the most consequential decision on this page.

That layer means onboarding workflows that put Form W-4MN, the federal W-4, and Form I-9 on each new hire's first-day task list, e-signature on offer letters and acknowledgments, employee records, and document management that keeps completed forms in the employee file, for US small businesses at a flat $98 a month for up to 10 people or $198 for 11 to 50.

Several Minnesota obligations are document and notice problems rather than payroll problems, namely collecting W-4MN alongside the federal W-4 before day one, issuing the written notice of pay rate changes the state requires, distributing the Paid Leave notice to employees, and filing the new hire report.

Choose the payroll provider on how it handles Paid Leave, then put each of those forms and notices on the onboarding plan as a task with an owner and a deadline, while the forms, the notices, and the new hire report themselves are completed outside the platform.

Frequently Asked Questions

What are the Minnesota payroll taxes an employer has to handle?

Three at state level plus federal: income tax withholding on four brackets from 5.35 to 9.85 percent, unemployment insurance on the first $44,000 of wages, and the Paid Leave premium of 0.88 percent launched in 2026. There is no local income tax, though Minneapolis and St. Paul set their own minimum wages.

What is the Minnesota Paid Leave premium?

0.88 percent of covered wages for 2026, comprising 0.61 percent medical and 0.27 percent family leave, on wages up to $185,000, the Social Security wage base rounded to the nearest $1,000 ($192,000 from January 1, 2027). The employer pays at least 0.44 percent and may withhold up to 0.44 percent from the employee. Qualifying small employers pay 0.66 percent total.

At the 2027 wage cap an employee can be charged at most $844.80 a year, and the full premium is $1,689.60, or $1,267.20 for a small employer ($814.00, $1,628.00 and $1,221.00 at the 2026 cap).

Which Minnesota employers qualify for the reduced paid leave rate?

Those with 30 or fewer employees in each quarter and an average wage no higher than 150 percent of the statewide average, currently $27,745.88 per quarter. The average divides wages from the highest-paid quarter by the highest employee count over the four quarters ending September 30 of the prior year. Both conditions must be met.

When are Minnesota Paid Leave premiums due?

Quarterly, with the first payment for 2026 due April 30 and each later one due the last day of the month after a quarter ends. Premiums are collected by the state alongside quarterly wage detail reports.

Paid Leave runs through the existing unemployment insurance employer account at uimn.org, where a Paid Leave Administrator must be designated. Approved private plans are permitted if they provide equivalent benefits and charge employees no more than the state rate.

What is the Minnesota unemployment insurance wage base?

$44,000 for 2026, up from $43,000, set at 60 percent of the state average annual wage as of June 30 the prior year. New employers receive a rate based on their industry average rather than a single flat figure, and experience rating starts in the third calendar year at the earliest. A base tax rate of 0.40 percent is added on top for 2026.

What is the minimum wage in Minnesota?

$11.87 statewide from January 1, 2027 ($11.41 in 2026), with a 90-day training wage of $9.68 for workers under 20 ($9.31 in 2026). Minneapolis is $17.02 for all employers from the same date ($16.37 in 2026).

St. Paul is $17.02 for employers of 101 or more from the same date ($16.37 in 2026), $17.02 for employers of 6 to 100 from July 1, 2027 ($16.37 until then), and $15.00 for micro employers of five or fewer from July 1, 2027 ($14.25 until then).

Does Minnesota allow a tip credit?

No. Tipped employees must receive the full applicable minimum wage in cash and tips cannot count toward it. In Minneapolis that means $17.02 per hour before tips from January 1, 2027 ($16.37 in 2026), compared with a $2.13 federal tipped cash wage in states permitting the credit. This is the largest single cost difference for tipped businesses between Minnesota and most neighboring states.

Does Minnesota have a pay transparency requirement?

Yes, since January 1, 2025, for employers with 30 or more employees in the state. Every job posting must include a good faith estimate of the starting salary range or a fixed rate, plus a general description of benefits and other compensation, under Minnesota Statutes section 181.173. Ranges cannot be open ended.

How do Minnesota employers register for payroll?

Withholding registration through the Department of Revenue, where every new employee also completes Form W-4MN alongside the federal W-4, and unemployment registration through the Department of Employment and Economic Development at uimn.org. That same employer account now handles Paid Leave reporting and premiums, and a Paid Leave Administrator must be designated.