On Feb. 20, 2025, the Michigan Legislature amended the state’s Wage Act in a compromise measure that accelerated the schedule of minimum wage increases but prevented a complete phaseout of the tip credit for workers who receive tips. The Senate Bill 8 (bill) was signed by Governor Gretchen Whitmer on Feb. 21, 2025.  

Background 

In 2018, Michigan voters approved significant ballot initiatives that substantially raised the state's minimum wage and eliminated the employer tip credit for employees who regularly earn tips. Although the state legislature sought to mitigate the effects of these initiatives, the Michigan Supreme Court struck down their efforts on procedural grounds, affirming the original measures as enacted by voters. 

The court provided a 205-day grace period, ending on Feb. 21, 2025, before its ruling would take effect. On Feb. 20, 2025, in a last-minute move, the Legislature implemented amendments to ease the potential impact of the court-upheld statutory changes. 

Minimum Wage Revisions 

Following Michigan's minimum wage increase to $10.56 per hour on Jan. 1, 2025, a further rise to $12.48 per hour was set to take effect on Feb. 21, 2025, coinciding with the expiration of a state Supreme Court stay. The bill upheld this increase, while introducing a larger-than-anticipated hike for Jan. 1, 2026, raising the minimum wage to $13.73 per hour (up from the original projection of $13.29) and adjusting the formula for future annual minimum wage increases. 

The bill also significantly reduced the planned Feb. 21, 2025, increase for tipped employees. The tipped minimum wage now stands at $4.74 per hour, representing 38% of the standard minimum wage, instead of the initially proposed $6.49 per hour. Additionally, the bill repealed the elimination of the tip credit for employers of tipped workers. Instead, it introduced a gradual reduction of the tip credit by 2% annually until 2031, when it will settle at 50% of the standard minimum wage. The bill also established a $2,500 civil penalty for violations of the minimum wage requirements for tipped employees.  

Below is a chart the details the revisions and the schedule of increases to the minimum wage and tipped minimum wage.  

Takeaway for Employers 

The revised Wage Act introduces both reduced requirements in certain areas and heightened obligations in others. To remain compliant, employers should carefully examine their current pay structures and budget. An additional provision that may be of particular concern for employers is the removal of a prior exclusion addressing overtime provisions. Previously, Michigan employees were exempt from overtime coverage if their inclusion in the act was solely due to the state’s minimum wage exceeding the federal minimum wage. With this amendment, Michigan employers not covered under the Fair Labor Standards Act exemptions must now comply with the state's overtime regulations. 

By preparing for these changes and considering its implications carefully, businesses can better navigate the transition and continue to thrive in a changing regulatory landscape. If you need further clarification on the legislation or have questions on how this may impact your business, our payroll advisors stand ready to assist you.