As the calendar turned to 2025, Minnesota employers were one year away from implementing a new Minnesota Paid Leave program for employees.
Employers of all sizes that have employees working in Minnesota must provide paid time away for a variety of reasons, according to the Minnesota Paid Leave regulations. Exceptions include federal employees, certain seasonal workers in the hospitality industry, independent contractors, and self-employed people. Through Minnesota Paid Leave, employees will have two buckets of leave available for each 52-week benefit year, says Sarah Dahl, a benefits consultant with Marsh McLennan Agency, who has been meeting with Enterprise Minnesota’s Peer Councils to provide information and answer questions.
The rules say that full- and part-time employees will have access to a maximum of 20 weeks total paid leave annually. One bucket provides 12 weeks for their own serious health condition, such as cancer, surgery, or childbirth. Another bucket covers 12 weeks for bonding time with a new child, caring for a seriously ill family member, safety leave, or to support a military family member who is deployed. If an employee has both a serious health condition and family support needs during a benefit year, they don’t receive 12 weeks for each situation. Then a 20-week maximum applies, and employees would need to cap one of their leaves at eight weeks.
Both buckets require a health care provider or authorized professional to certify the need for the leave and the amount of time off required, Dahl says.
As with any new benefit, questions abound about the finer details of implementing the paid leave program. “Employers in Minnesota are all having to deal with this,” Dahl says. “Many employers have similar concerns and fears going into it. They should partner with resources such as their benefits broker or employment law attorney to walk them through the options.”
Dahl has been helping manufacturers solve the puzzle of how Minnesota Paid Leave fits into various other programs, including the state’s new Earned Sick and Safe Time program, short-term disability, and federal Family and Medical Leave Act (FMLA). First steps for manufacturers involve selecting the structure for their programs. The choices include:
A public option that will be funded through a payroll tax paid to the State of Minnesota in which employers cover half (or more) of the cost and employees pay the rest. With this plan, the state will administer claims and pay out benefits to employees. The rate is estimated to land on at least 0.88% of earnings capped at Social Security taxable wages but will be reduced for employers with fewer than 30 employees.
A fully insured private plan that will enable employers to pay premiums to a private insurance company, which will administer claims and benefits. Costs could be higher or lower for employers depending on the insurer; employers may not charge employees more than they would under the state plan.
Employers could opt to pay for the cost of the program out of their own pockets through a self-funded private plan, backed by a surety bond. Odds are that most manufacturers won’t pick this option, where they would need the cash on hand to fund leave benefits for up to 20 weeks a year, Dahl says.
In any setup, the barrier for obtaining access to Minnesota Paid Leave is lower than FMLA and other programs. Employees are eligible if they have earned 5.3% of the state’s average annual wage — roughly $3,800 total — from any Minnesota employer in the four quarters prior to their leave. “Employees don’t need to have earned a lot of money to be eligible, and it doesn’t need to come from one specific employer,” Dahl says.
Many manufacturers are concerned about how they will keep operations running if employees take significant time off. “Minnesota Paid Leave is going to mean that more employees will be able to take more time off of work,” Dahl says. “In some cases, that’s a good thing because you don’t want people to come to work if they can’t safely do it.”
There is relief for small manufacturers who worry about covering the premium cost, Dahl says. In addition to reduced premiums for small businesses, those with 30 or fewer employees might be eligible for assistance to cover the cost of hiring temporary workers or increasing existing workers’ wages, according to the Minnesota Department of Employment and Economic Development.
Other manufacturers have been asking Dahl about how to pay staff on leave. The state will send wages to employees — similar to when it pays unemployment benefits — based on a graded income scale. Based on the new regulations, the less people earn, the more they will be paid through the program, Dahl says. Employers are responsible for continuing group insurance coverage during employee leaves.
Employers should not count on the Legislature pulling the plug on this program before it gets off the ground, although it might tweak some aspects during the current session. Whether manufacturers support or oppose the new regulations, they can make their opinions known to legislators during this session, Dahl says.
Abbey Hellickson, an Enterprise Minnesota business growth consultant, says that employers should ensure that employees understand the terms of Minnesota Paid Leave. They will need to know what types of leaves are covered, how they initiate access to the program, and how Minnesota Paid Leave functions with other federal programs like FMLA, she says. (FMLA is a federal program that will run concurrently with Minnesota Paid Leave when applicable, providing job protection but no wages.)
“The big thing is to plan now,” Hellickson says. “Be proactive and figure out what your structure will be so that in 2026 you are ready to roll.” Employees with qualifying events in 2025 may be eligible to use their paid leave right away in 2026, she adds. “That’s where employers need to be on the ball.”
Return to the Spring 2025 issue of Enterprise Minnesota® magazine.
