What Minnesota Businesses Need to Know About the New Paid Family & Medical Leave Law, The SBS Way

(And What It Means for Small-Business Families)

When you run a small business, you wear every hat:

leader,

bookkeeper,

parent,

partner,

chief problem-solver.

So when new policies come along that affect both your business and your family, it’s worth taking a few minutes to understand what’s changing and how to prepare.

Starting January 1, 2026, Minnesota will roll out its new Paid Family and Medical Leave (PFML) program. The goal is to create a consistent statewide system that provides income replacement for employees who need time away for major health or family reasons.

We are breaking it down in plain language. The SBS Way: How it works, and what small-business owners can do to prepare before next year.

The Basics: What’s Actually Changing for Minnesota Businesses & Employees?

Here’s a straightforward look at what’s included:

• Start Date: January 1, 2026

• Administered by: Minnesota Department of Employment and Economic Development (DEED)

• Who’s Covered: Nearly all employers and employees in Minnesota, regardless of company size

• Duration:

  • Up to 12 weeks for an employee’s own serious health condition (including pregnancy or recovery)

  • Up to 12 weeks for family leave (bonding with a new child, caring for a family member, safety leave, or military-related leave)

  • Capped at 20 weeks total in a single benefit year

• Funding:

  • The program is funded by payroll premiums split between employer and employee.

  • The initial contribution rate is 0.88% of taxable wages.

  • Premiums will be filed and paid alongside your quarterly Unemployment Insurance tax filings. No separate process required.

• Private Plan Option:

  • Employers can apply for a private or “equivalent” plan through an insurance broker if they meet the state’s criteria.

  • For smaller employers, the state plan will typically be the simplest and most cost-effective option.

  • If you’d like to explore a private plan, we can refer you to a trusted broker.

 Think of this as Minnesota adding another line to your existing payroll process, not an entirely new system.

Why It Matters For Families and Family-Run Business in Minnesota

For families, this program offers a level of financial protection during key life events, whether that’s welcoming a child, recovering from surgery, or caring for a loved one.

For small-business owners, understanding this policy early means you can plan for it rather than react to it. The goal isn’t to overhaul how you do business; it’s to make sure your systems and budget can absorb the new structure when it takes effect.

What this policy offers:

• A clear statewide process for paid leave coverage

• Predictable costs for employers and employees

• Integration with systems you already use for payroll and unemployment filings

What it requires:

• Budgeting for the new payroll premium beginning in 2026

• Updating employee materials and onboarding forms to include PFML details

• Communicating clearly with your team so expectations are set well before launch

For family-owned or small, close-knit businesses, planning ahead helps avoid disruption and keeps day-to-day operations running smoothly when someone needs to step away for health or family reasons.

Preparing Now: Steps MN Businesses Can Take Before 2026

Here’s a practical checklist to help you get ready:

1. Review your payroll setup

Make sure your payroll provider or accountant can add the PFML premium starting in 2026.

2. Run cost scenarios

Estimate how the 0.88% contribution rate will impact your quarterly filings and total payroll expenses.

3. Update your policies

Add a Paid Family and Medical Leave section to your employee handbook or HR materials before the required notice date (December 1, 2025).

4. Explore coverage options

Ask your insurance broker if a private plan makes sense for your business, or plan to remain in the state-administered system.

5. Communicate early

A short email or staff meeting to explain what’s changing and when it takes effect will go a long way toward keeping everyone informed and prepared.

If you’d like help understanding how Minnesota’s Paid Family and Medical Leave program fits into your specific payroll or filing process, our team is happy to walk you through the details and answer questions before the 2026 rollout. 

At Stillwater Business Solutions, we’re proud to be part of the Minnesota small-business community, and especially proud to call Stillwater, MN our home. Supporting local businesses and families through growth, change, and everyday operations is at the heart of what we do.

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Stillwater Business Solutions is run by Karolyn and Bryan, a tech-savvy and community-focused team who believe bookkeeping should feel collaborative and empowering—not confusing. Whether you're looking to simplify your systems or get support you can trust, we're here when you're ready. No pressure. Just people-first accounting that fits your business.