Michigan Payroll Rules & Regulations: A guide
When it comes to paying your employees, there are many rules and regulations to keep in mind to comply with the Fair Labor Standards Act (FLSA). Chances are, you’re aware of all the statutes that regulate wages, overtime pay, and other similar ideas. However, not everything is as clearly defined as these, and many payroll professionals struggle to understand many grey areas. As if this isn’t confusing enough, these guidelines vary from state to state.
As a Michigan payroll company covering all US states, we at AAB Payroll can help you break down some of these regulations to ensure you’re ready to process payroll and avoid any fines and penalties that might sneak up on you.
MICHIGAN PAYROLL: PAY FREQUENCIES
In Michigan, employers must designate regular paydays for their employees. Those days can be distributed in the following increments:
Once per month
In this instance, you must pay employees no later than the 1st of the month following the month in which the wages were earned.
Twice per month
If you pay your employees twice per month (sometimes known as semi-monthly), you must pay employees for wages earned during the first 15 days of the month on or before the first of the month directly following. Any wages earned from the 16th to the last day of the month must be paid out on or before the 15th of the following month.
Every two weeks or every week
Whether you pay your employees every two weeks or every week, you must do so within 14 days of the end of the pay period in which the wages were earned.
More frequently
So long as you’re meeting the above minimum criteria, you are always welcome to pay your employees more frequently than once a week. Check out our blog for helpful information: The different pay frequencies and how to choose the right one for your business.
MICHIGAN PAYROLL: PAY METHODS
There are four typical methods for paying your employees: cash, check, paycard, or direct deposit. Since the FLSA doesn’t state specifics of the form of payment it is up to the employer and the employer’s state of business to choose a method to pay employees. Depending on your business location, you will have varying guidelines.
Examples of specific Michigan payroll pay method rules:
Michigan does not require employees to participate in direct deposit, but an employer may strongly encourage, or even incentivize it.
In Michigan, you cannot implement added fees on employees for ‘withdrawing’ their pay once it has been deposited in their account.
Michigan employees have the right to choose which financial institution their check will be deposited to.
If you operate your business outside of Michigan please look up the rules and regulations specific to your state.
If you have chosen to issue payment through a paycard and your business operates in Michigan, you are required to adhere to the following:
Employees are allowed to transfer or withdraw money no more than once a week per pay period without incurring a fee.
If an employee requests a change in payment method, that request must be implemented within one pay period.
Changes in fees or terms must be made available to employees at least 21 days prior.
Employees must be able to check their balance without incurring fees, either electronically or by phone.
The paycard cannot be linked to any credit line, loan, or cash advance.
Written disclosure must be provided to employees for the following: ways to obtain balance inquiries without fees, the right to change payment method at any time, and the card is not a savings or checking account.
Again, these regulations are specific to paycards issued in the state of Michigan. Other states may have separate requirements.
MICHIGAN PAYROLL: TERMINATED EMPLOYEES
Whether the employee is fired, laid off, or terminates their employment voluntarily, you must pay all wages they are owed by the regularly scheduled payday for the period in which the termination occurs. The only exception to this rule is in the case of hand-harvesting employees. If an employee harvests crops by hand they must be paid within one working day of termination.
It’s worth noting that there are no specific Michigan payroll rules or laws that address paying employees who leave employment due to labor disputes (such as going on strike). However, your best bet is to pay these employees their wages due by their regularly scheduled payday to avoid falling out of compliance with other known laws.
MICHIGAN PAYROLL: UNCLAIMED PAYCHECKS
If an employee (current or former) fails to retrieve or cash their paycheck, it falls to the employer to contact the employee before they reach abandoned status. Employers must prove they have made a diligent effort to contact the employee before transferring those funds to the appropriate state agency. In Michigan, unclaimed wages are abandoned after 1 year.
If an employee becomes deceased during their term of employment, you must understand the rules within your state. These rules will vary in the maximum amount to be paid out, to whom, and what conditions apply. According to Michigan payroll regulations, employers must pay out all unpaid wages earned by the employee including any fringe benefits to whomever the employee deemed as their designee. If the employee did not assign a designee, the wages will be allotted to the employee’s surviving spouse, children, or parents, in that order.
MICHIGAN PAYROLL: PAY STUBS
There is information that must be reflected on each employee’s pay stub. In Michigan, you must have your pay stubs depict the employee’s hours worked, their gross earnings, the specific pay period, and a detailed list of their deductions. After that, it is up to the employer to include additional information if they so choose. Additional information you may want to consider adding is your employees’ paid time off (PTO) balance, their 401(k) match, and health benefits paid on behalf of the company.
MICHIGAN PAYROLL GUIDANCE AND HELP
As you can see, there are a lot of important Michigan payroll rules & regulations you must be aware of. However, that doesn’t mean you have to face it all alone. Having a quality payroll service like AAB Payroll at your disposal will ensure you’re processing payroll as efficiently as possible while staying in compliance with FLSA regulations. Request a free payroll software demo today to see what we can do for you, or contact our expert payroll team if you have any questions.
