Michigan Household Employer Guide 2026
Your household employee — a nanny, caregiver, housekeeper, or anyone who works in your Michigan home — is a W-2 employee. Michigan household payroll includes a flat 4.25% state income tax, the Earned Sick Time Act, a 35-hour workers' comp threshold, and possible city income tax considerations.
Start Payroll Free →When the rules apply
Michigan household employers mainly need to watch federal payroll thresholds and the $1,000 quarterly state threshold for UI and Treasury registration.
How Nest Payroll handles this
Each pay period, you pay your employee the net amount directly — through Venmo, Cash App, Zelle, your banking app, or by check. Nest generates the pay stub, calculates payroll taxes, and registers you with Michigan UIA and Treasury once the $1,000 quarterly threshold applies.
Federal taxes — quarterly EFTPS payments
At the end of each federal quarter (March, May, August, December), Nest debits your bank account for the federal taxes owed — FUTA, employer + employee FICA, and any federal income tax withheld — and remits them to the IRS via EFTPS. You'll get a confirmation email a week beforehand. Your money stays in your account until taxes are actually due. We don't hold withholdings on your behalf. At year-end, Schedule H on your Form 1040 reconciles everything Nest already paid through the year; Nest produces a signature-ready version.
Michigan state taxes — after the $1,000 quarterly threshold
Once Michigan payroll obligations apply, Nest registers the required state accounts and handles quarterly UIA wage/tax reporting and Michigan Treasury withholding filings.
Setup checklist (before they start)
The one-time tasks that need to be done before — or shortly after — your household employee's first day.
Workers' Compensation Insurance
Under MCL 418.115, Michigan household employers must carry workers' compensation insurance if any household employee works 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks. This threshold captures many regular nanny / caregiver arrangements.
Workers' comp protects you from liability if your employee gets injured or sick on the job. Without it, you could be personally liable for medical expenses, lost wages, and potential lawsuits arising from a workplace injury — even one as ordinary as a slip in your kitchen or a back injury from lifting a child.
Two paths to coverage
- Homeowner's or renter's insurance rider — call your insurance company first. Many MI policies include or can add household-employee coverage as a low-cost rider.
- Standalone household-employer policy — available from MI-licensed private carriers if your homeowner's policy can't cover it.
Form I-9 (Employment Eligibility)
Federal law requires all employers to verify employment eligibility using Form I-9. Complete this before your household employee's first day of work.
Federal W-4 and Michigan MI-W4
Two withholding forms to collect at hire:
- Federal W-4 — determines federal income tax withholding.
- MI-W4 — determines MI state income tax withholding allowances (the $5,900-per-allowance exemption flows from this form). The federal W-4 alone is not sufficient — you need both.
Michigan New Hire Reporting
Michigan requires all employers — including household employers — to report newly hired and rehired employees to the Michigan New Hire Operations Center within 20 days of the hire date.
You'll provide your employee's name, address, SSN, hire date, and your contact information.
Required Employment Posters
Michigan employers must provide a number of state-mandated notices to their workers. For a household employer with a single employee, you can satisfy this by emailing or texting the link, or printing and giving them physical copies:
Written Work Agreement
Michigan state law doesn't require a written employment agreement, but a written contract prevents misunderstandings about hours, duties, PTO, and house rules.
Build a free contract with our editable template: Nest Payroll Household Employee Contract Builder — fill it out and download as a PDF.
Hand In Hand, a non-profit supporting domestic employers and employees, also offers free sample contracts and guidebooks.
Pay & compensation
Michigan has active wage and leave rules in 2026, including a higher minimum wage, paid sick time, and a twice-monthly pay-frequency floor.
Minimum Wage — $13.73/hr (2026)
Effective January 1, 2026, Michigan's standard minimum wage is $13.73 per hour, up from the prior $12.48 / $13.29 path. The rate now follows the SB 8 (2025) staircase, which accelerates the path to $15: $14.16 in 2027, $14.97 in 2028, then $15+ with CPI indexing.
| Worker Type | Hourly Rate |
|---|---|
| Standard employees (18+, employers with 2+ workers) | $13.73 |
| Tipped employees (cash wage at 40% of standard) | $5.49 |
| Workers under 18 (85% of standard) | $11.67 |
| Federal minimum wage (FLSA floor) | $7.25 |
Overtime
Michigan follows the federal Fair Labor Standards Act (FLSA) standard: 1.5× the regular hourly rate for all hours worked over 40 in a 7-day workweek. MI doesn't impose a stricter daily-overtime rule.
| Condition | Rate |
|---|---|
| Live-out, more than 40 hours in a workweek | 1.5× hourly |
| Live-in employees (any hours) | Exempt from overtime |
| Work performed on a holiday or weekend (otherwise routine) | No premium required |
"No Tax on Overtime" Deduction (2025–2028)
The federal overtime deduction may let household employees deduct the premium portion of qualifying overtime pay on their personal tax return. This is a federal income-tax rule; it does not change how you calculate overtime, FICA, Michigan withholding, or payroll records.
Pay Frequency
Household employees are virtually always hourly under federal FLSA — even when you've agreed to pay a "salary," it's treated as a wage covering a fixed number of hours per week, with overtime owed on hours past 40. Under the Michigan Payment of Wages and Fringe Benefits Act (MCL 408.472), employers must pay employees on a regular, scheduled payday no less frequently than twice per month (semi-monthly is the floor; weekly and bi-weekly are common alternatives).
Whatever cadence you pick, designate the regular paydays in writing at hire and stick to them — even a simple email or text confirming "you'll be paid every Friday" satisfies the requirement.
Mileage Reimbursement
Michigan does not require mileage reimbursement, but you must reimburse necessary work-related driving expenses if those costs would otherwise reduce your employee's wages below the minimum wage. Most MI employers use the IRS standard rate:
$0.725 per mile (2026)
Common reimbursable household-employee miles: driving children to activities, running household errands, taking a senior client to medical appointments. (Commuting to/from work doesn't count.)
Paystub Requirements
Under MCL 408.479, each pay period you must provide your employee with an itemized statement showing hours worked, rate of pay, gross wages, deductions itemized, and net wages. Records must be retained for at least 3 years.
Michigan payroll has a few moving parts, but it is manageable with the right setup.
Nest Payroll handles federal and Michigan payroll, ESTA tracking, W-2s, and Schedule H — starting at $42/mo. 14-day free trial.
Time off & leave
Michigan's main paid-leave program is the Earned Sick Time Act (ESTA), which was significantly amended in 2025. There's no Michigan paid family leave or temporary disability program.
Earned Sick Time Act (ESTA) — 40 hours/year for households
Effective February 21, 2025 (and amended through 2025 to soften coverage for small employers), the Michigan Earned Sick Time Act (MCL 408.961) entitles every Michigan employee — including domestic workers — to paid sick time. Coverage and hours depend on employer size:
| Employer Size | Annual Cap | Accrual | Compliance Date |
|---|---|---|---|
| Small employer (≤10 workers, every household) | 40 hours | 1 hour per 30 worked | October 1, 2025 |
| Standard employer (11+) | 72 hours | 1 hour per 30 worked | February 21, 2025 |
Employees can use ESTA after a 90-day waiting period for a wide range of permitted reasons: their own or family illness, mental or physical health treatment, preventive care, weather/closure-related school days, time related to domestic violence, and similar uses.
Accrual vs. frontloading — and why frontloading is simpler
Frontloading is generally better for household employers — no accrual tracking, no carryover to manage at year end. ESTA does not require payout of unused sick time at separation.
Vacation & PTO
Michigan does not require paid vacation. If you offer it, document the policy in writing — under MI law, vacation pay is enforceable to the extent your written policy states it will be paid out at separation. Without a written policy, MI courts have generally treated accrued vacation as wages owed.
A note on Michigan city income taxes
Michigan is one of the few states with widespread local (city) income taxes — 24 cities impose their own income tax on residents and / or non-residents who work there. Major examples:
| City | Resident Rate | Non-resident Rate |
|---|---|---|
| Detroit | 2.4% | 1.2% |
| Grand Rapids | 1.5% | 0.75% |
| Lansing | 1.0% | 0.5% |
| Ann Arbor | No city income tax | |
Upon departure
Final wages: Under MCL 408.474, all wages owed to a separated employee — whether terminated or resigning — must be paid by the next regularly scheduled payday following the separation.
Unused vacation/PTO: Vacation pay is enforceable to the extent your contract or written policy states it will be paid out at separation. Without a written policy, MI does not require payout.
Final W-2: Provide the federal Form W-2 by the regular January 31 deadline (or earlier if requested by the former employee).
Year-end forms
Your responsibilities
- Hand the W-2 to your household employee by January 31 — Nest produces this; you deliver it
- Attach Schedule H to your Form 1040 by April 15 — Nest produces a signature-ready version
What Nest handles for you
- Quarterly federal tax payments to the IRS via EFTPS
- W-3 + Copy A of W-2 filed with the Social Security Administration
- Michigan UIA quarterly filings once registration applies
- Michigan Treasury withholding filings once registration applies
Tax breaks for household employers
Paying your household employee legally unlocks meaningful federal tax breaks that often offset most of your employer-side payroll tax cost.
Dependent Care FSA (DCFSA)
For 2026, the federal max contribution is $7,500 (married filing jointly) — up significantly from prior years under the OBBBA. Note: your employer's specific plan may still cap at $5,000.
Child & Dependent Care Tax Credit
Up to 50% of qualifying care expenses for 2026 — up from 35% in 2025. Capped at $3,000 of expenses for one qualifying child or $6,000 for two or more. At the 50% rate, a family with two or more dependents could receive a credit of up to $3,000.
→ See our complete guide to nanny tax breaks — includes DCFSA, Care Credit, EAP (Educational Assistance Program), and ICHRA (health reimbursement).
Resources & free tools
Ready to pay your Michigan household employee legally?
Nest Payroll handles EIN setup, MI UIA + Treasury registrations, payroll calculations, and quarterly tax filings — all automatically. 14-day free trial.
Disclaimer: The information on this page is general in nature. This is not tax, legal, benefits, financial, or HR advice. Rules and regulations change over time. The 2025 ESTA amendments, Michigan workers' comp 35-hour threshold, and city income tax requirements can be complex — consult an attorney, financial advisor, or licensed insurance broker for your specific situation.