PEOs in Michigan

What makes Michigan different

• Unemployment reporting is client-level by law: since January 1, 2014, MCL 421.13m requires a PEO to report wages and pay contributions on each client's own account, and a client joining a PEO keeps its existing tax rate, so a Michigan PEO cannot offer a blended unemployment rate.
• The Earned Sick Time Act took effect February 21, 2025 (as amended by 2025 PA 2): every employer with at least one Michigan employee accrues 1 hour per 30 worked, with use cappable at 72 hours a year, or 40 paid hours for small businesses with 10 or fewer employees nationwide.
• The minimum wage is $13.73 for 2026 and rises to $15.00 on January 1, 2027 under the schedule reinstated after the 2024 Michigan Supreme Court ruling, while the tipped rate phases up from 40 percent of minimum wage in 2026 to 50 percent by 2031.
• 24 Michigan cities levy income taxes with withholding tied to both work location and residence. Detroit (2.4 percent resident, 1.2 percent nonresident) is administered by the state; the other cities self-administer, each with its own filings.
• Michigan is not an NCCI state: the Compensation Advisory Organization of Michigan (CAOM) maintains the state's own workers compensation classification system and experience mods, so class codes do not carry over from NCCI states.
• The unemployment taxable wage base is $9,500, dropping to $9,000 for employers with clean filing histories while the trust fund stays above $2.5 billion, and rates run from 0.06 to 12.2 percent in one of the most experience-rated systems in the country.

PEO regulation in Michigan

Michigan licenses PEOs under the Professional Employer Organization Regulatory Act (2010 PA 370, MCL 338.3721 to 338.3747) through LARA, which keeps a public list of licensees. Requirements include audited financials and $100,000 in working capital or an equivalent bond, and operating unlicensed is a misdemeanor. Out-of-state PEOs with no Michigan office and 50 or fewer Michigan employees can hold a limited license. Verify the exact contracting entity through LARA's license lookup before signing.

What a PEO does and does not solve here

Because your unemployment account, rate, and experience history stay yours by statute, the Michigan evaluation comes down to benefits, workers compensation handling under CAOM classifications, and administrative competence: earned sick time accrual and caps, minimum wage steps each January, and city income tax withholding for every employee who lives or works in one of the 24 tax cities. Ask a candidate PEO which of those it tracks automatically and which it expects you to flag.

Common questions

Do we keep our Michigan unemployment rate inside a PEO?

Yes, by law. MCL 421.13m requires client-level reporting: the PEO files a consolidated quarterly report, but wages and contributions post to each client's own account at that client's rate, and the PEO must notify the UIA within 30 days when a client joins or leaves. Any Michigan proposal quoting a program unemployment rate instead of your own rate misstates how the state works.

Can a PEO administer Michigan earned sick time correctly for a small business?

The mechanics matter at the 10-employee line, which counts all employees nationwide including part-time and temporary staff. Crossing to 11 or more for 20 workweeks raises the usage cap from 40 to 72 hours. Frontloading the full amount eliminates carryover and accrual tracking, so ask whether the provider frontloads or accrues, and who monitors your headcount as it moves around the threshold.