Wage Rules
 
Minimum Wage & Overtime
            By both state and federal law, any employer with 2 or more employees over the age of 16 is subject to minimum wage and overtime requirements(1, 2). As of July 1, 2008, the minimum wage in Michigan for employees 18 or older is $7.40 per hour. Though the federal minimum wage is lower ($6.55), employees are entitled to the higher of the two wages. If you employ a minor ages 16-17, their minimum wage is $6.55until July 24, 2009(1). On this date, the federal minimum wage will rise to $7.25(1). Employers are only required to pay overtime if they are also required to pay minimum wage. One exception is for domestic employers who have employee that lives with them. That employee is required to receive minimum wage but is not required to receive overtime(2).
 
Stipends, Overnights, & On-Call Time
There are situations in which stipends may be paid:
  • An employee is scheduled to stay at an employer’s residence overnight. If the employee is scheduled to work 24 consecutive hours or less, they are considered to be working, even though they are allowed to sleep or perform other activities when they are not busy. If an employee is scheduled to work 24 hours or more consecutively, they may make an agreement with the employer for a sleeping period of up to 8 hours. These hours would not be included as working hours. Such an agreement can only be made if the employer provides adequate sleeping accommodations and the employee can enjoy uninterrupted sleep for at least 5 hours. If the employee cannot obtain 5 consecutive hours of sleep, the entire time must be treated as regular work time(2).
  • An employee is required to be on-call but not required to be on the employer’s premises. If an employee must remain on-call while at home or somewhere other than the employer’s premises, the employee is considered to be not working and can be paid a stipend if the employer chooses. If the employee is required to remain on the employer’s premises while on-call, then the employee is considered to be working and must be paid their regular wage (minimum wage and overtime, if applicable)(1).
 
Frequently Asked Questions
Q. Are employers required to give meal periods or breaks?
A. Employees under age 18 must be given a 30-minute break period for every 5 hours of work. There are no other employer requirements for meals or breaks.
 
Q. Can my paycheck be withheld by my employer?
A. No. An employee must give written consent to the employer for a paycheck to be withheld.
 
Q. Should I be paid for training time?
A. Yes. Any training related directly to the job is time worked and should be paid. Any new employees ages 16-19 can receive a training wage of $4.25 for the first 90 days of employment.
 
Q. Doesn’t my employer have to pay me extra for working on holidays?
A. There is no law stating that employees must be paid extra for working on holidays. The employer must only do so if they have a written policy stating they will pay extra for working holidays. In addition, the employer must pay for the holidays they designate as being paid holidays.
 
Q. If I had unused sick or vacation pay when I left my employer, does the employer have to pay that amount to me?
A. Only if the employer has a written policy stating that they are required to do so.
 
Q. Can my employer make overtime mandatory?
A. Yes. Additionally, the employer must only pay you 1 ½ times your normal hourly rate if they are subject to overtime requirements (see above section on minimum wage and overtime).
 
Q. Is there any limit to the amount of time my employer can schedule me each week?
A. Generally no. The only exception is for employees under 18, whose total work and school time in a week cannot exceed 48 hours.
 
Any questions or concerns about wage laws should be submitted to the Michigan Wage & Hour Division by phone at (517) 335-0400 or e-mail at whinfo@michigan.gov.
 
Sources: (2) Federal Fair Labor Standards Act (FLSA); (1) Wage & Hour Division, Michigan Department of Labor and Economic Growth (DLEG)
 
 
Payroll Taxes
 
FICA
FICA refers to federal Social Security and Medicare taxes that are required to be withheld from employees’ wages. The social security tax rate is 12.4% and the Medicare rate is 2.9%. Half of this amount is withheld from an employee’s paycheck and the other half is paid by the employer. 
The Internal Revenue Service (IRS) allows certain employees of household employers to receive all of their withheld taxes (including FICA, federal withholding, and state withholding) back at the end of the calendar year. In 2009, an employee must make less than $1,700.00 in gross wages during the year in order to have their taxes refunded(1). After the last payroll of the year is completed, our office reviews the year’s wages for all employees and refunds the taxes to those who make less than the limit set by the IRS. Those employees do not receive a W-2 and do not need to report their wages and taxes on their individual income tax return(1).
 
Federal and State Withholding
            Household employers are not required to withhold federal or state income taxes. In practice, however, they are normally withheld. When a new employee is hired they must complete a Form W-4. On this form they indicate their income tax filing status (single or married) and the number of exemptions they are claiming. The more exemptions, the less tax is withheld. It is especially important that employees have adequate taxes withheld when they work for multiple employers.
 
 
Unemployment
 
Who is required to pay it?
            By both Michigan and federal law, a domestic employer is only liable for unemployment taxes if they pay $1,000.00 or more in gross wages in a calendar quarter (1, 2). If this occurs, the employer is liable for both federal (FUTA) and state unemployment tax (SUTA)(1, 2). Once liable, an employer must continue to pay unemployment taxes for two years after the date they became liable. If an employer never pays $1,000.00 or more in gross wages in a quarter, they are not liable for FUTA and SUTA. Employees do not pay unemployment tax; this burden is solely on the employer.
 
How much is the tax?
The tax rate for FUTA is .8%. FUTA is only charged for the first $7,000.00 in gross wages an employee makes during the year(2). Therefore, the maximum amount of FUTA per employee is $56.00 ($7,000.00 X .008 = $56.00) per year(2). The tax rate for SUTA can vary. The standard beginning rate for employers is 2.7%(3). This rate changes each year based on whether unemployment benefits have been paid during the year. If benefits have been paid, the rate will likely increase the following year, and vice versa if benefits have not been paid. SUTA is charged for the first $9,000.00 in gross wages an employee makes during the year(3). For example, if an employer has three employees making $12,000.00 each during the year, this creates a total of $36,000.00 in wages. Since SUTA taxes the first $9,000.00 of each employee’s wages, only $27,000.00 of that amount would be taxable.
 
What should an employee do to file an unemployment claim?
            An employee must contact the Unemployment Insurance Agency (UIA) during their first week of unemployment(4). The unemployed worker should visit the UIA website at www.michigan.gov/uia. Alternatively, the worker can call the UIA toll-free at 1-866-500-0017. Bear in mind that you must call at the time scheduled by the last two digits of your Social Security Number. Check the UIA website for details.
 
Sources: (1) IRS Publication 926 – Household Employer’s Tax Guide, (2) IRS Publication 15 – Employer’s Tax Guide, (3) Michigan Employment Security Act (MES), (4) UIA Fact Sheet #36 – Claiming Unemployment Benefits in Michigan