Michigan Minimum Wage and Unemployment Benefit Increases Take Effect Jan. 1

What's new: Michigan employers will face higher wage and benefit costs beginning Jan. 1, 2026, as both the state minimum wage and unemployment benefit caps increase under recently enacted laws.

The big picture: The wage and benefit increases were passed despite the Michigan Chamber’s strong opposition under the Democratic trifecta in 2024.

• Michigan’s minimum wage will rise from $12.48 to $13.73/hour under the Improved Workforce Opportunity Wage Act (IWOWA). The minor wage (ages 16-18) remains at 85% of the full minimum wage but increases to $11.67/hour. The tipped employee wage will increase to $5.49 per hour (40% of the full minimum wage), provided the employee receives at least $8.24 per hour in tips.
  • Reminder: Tipped employees must be informed of their employer’s tip provisions, receive and report tips and receive equal to or above the minimum wage rate by combination of tips and minimum hourly rate (or the employer must pay the shortfall).
• Unemployment benefits will also increase, with new claims filed after Jan. 1, 2026, eligible for up to $530 per week. In addition the amount an unemployed worker receives for each dependent (up to a total of five) will increase to $19.33.
  • It’s important to note that, unlike the COVID-19 claims, not all claimants are eligible to receive the maximum weekly benefit rate; how much an individual is approved for is based on their wage history. 

The bottom line: While many Michigan employers will experience higher hourly wage obligations as a result of the minimum wage changes, unemployment insurance payroll taxes are not expected to increase due to the expanded benefit allocations. Now is an opportune time to review pay practices and ensure that all labor law posters reflect the correct minimum wage rate.