Business owners are still confused over how the Michigan Sick Time law affects them.
Here is the basic information you need to know. The law went into effect February 21, 2025.
All restaurants in Michigan will be subject to a mandatory “paid sick time” for employees with the accrual of hours starting February 21, 2025.
Restaurants with 10 or fewer employees are considered a SMALL EMPLOYER. If over the last two years if you had 10 or fewer employees on the payroll for any 20 non-consecutive workweeks then you are a small employer.
Small business must accrue 1 hour of sick time for every 30 hours worked to a maximum of 40 hours per year. Unused sick pay will be carried over to the next year.
Accrual of sick pay hours begin when you hire someone or February 21 for current employees.
Kallas recommends that you establish a “paid sick time” policy which is strict enough to avoid unnecessary abuse of sick pay. Kallas can provide you a suggested sick pay policy recommendation.
Large employers (11 employees or more) must accrue 1 hour of sick time for every 30 hours worked to a maximum of 72 hours per year. Unused sick pay will be carried over by the employee to the next year.
If you currently offer paid vacation, personal time off, or sick time, you can use those hours to comply with the 72 hour (40 hours for small employers) requirement and you need to do nothing more.
Rather than accruing 1 hour for every 30 hours worked you may “frontload” hours. (72 for large employers and 40 for small employers).
Many restaurateurs are favoring the “frontloading” option to comply with this new law as it requires less recordkeeping and has no carryover requirements.
Frontloading means you establish 72 hours of paid sick pay (40 for small employers) at the beginning of each year that the employee can use during the year.
If you “frontload”, you do not have to accrue hours and there is no carryover of hours to the next year.
Part-time employees can be “frontloaded” a smaller amount than full time employees based on expected and prior hours worked. Kallas can do this calculation for you.
The reimbursement pay rate for “paid sick time” for tipped employees does not include tips.
Small employers only need to pay a maximum of 40 hours of sick pay per year. A small employer is defined as 10 or fewer employees. An employer is NOT a small business if it maintained more than 11 employees on its payroll during any 20 or more calendar workweeks in either the current or immediately preceding calendar year. If you are unsure, Kallas can do this calculation for you.
COMPLYING WITH THE SICK PAY LAW:
The “Accrual” Method – Each business will have to keep track of hours worked. The employee earns 1 sick hour for each 30 hours worked to a maximum of 72 hours per year (40 for small businesses). Any unused hours can be carried forward. Employees cannot exceed 72 paid hours in a year (40 for small businesses). Kallas payroll service can manage earned sick hours to help ensure compliance. This is by request only.
Frontloading – Frontloading grants the employee the full 72 hours (40 hours for small employers) of sick pay per year regardless of actual hours worked. When an employee takes a sick day, you are required to pay them regardless of the hours they work but there is no carryforward of hours and no tracking requirements. This is a far simpler method of ensuring compliance.
If you currently offer paid time off, in not less than the amounts provided above, that can be used for personal or sick time, then you comply with the requirement and need to do nothing more.
OTHER THINGS YOU NEED TO KNOW:
Kallas needs to know how you plan to proceed. Time is a factor since hours need to be tracked effective 2/21/25. We’re already on the clock.
If you would like Kallas to maintain the “Accrual” method of compliance, we charge a one-time $199 set up fee and a $15 per month maintenance fee.
The “Accrual” method of administering earned sick time will require a signed Sick Pay Determination Engagement Agreement with us. This is available upon request.
However you choose to proceed, Kallas recommends that you establish a “paid sick time” policy which is strict enough to avoid unnecessary abuse of paid time off. Kallas can provide you with our suggested sick pay policy letter. Samples of “paid sick time’ policies and posters can also be obtained at: www.michamber.com/content_resources/paid-leave-minimum-wage-toolkit-download/ for free.
Part-time employees can be “frontloaded” a smaller amount than full time employees based on expected and prior hours worked. However, that could require a written agreement up front indicating how many hours the employee is expected to work for the year at the time of hire. If the employee works more hours than provided in the written agreement, the employer must provide the employee with the additional earned sick time. This could require the “Accrual” method of tracking time.
The reimbursement pay rate for “paid sick time” for employees does not include overtime pay, holiday pay, bonuses, commissions, tips, or gratuities.
