Michigan is one of the largest states in the US, both in terms of land area and population. It’s the 11th-largest by area and, with a population of over 10.14 million people, the 10th most-populated state in the Union. Michigan’s GDP is also significant. At over $719 billion, Michigan’s economy would rank 22nd in the world if it were a nation, after Taiwan’s and larger than Belgium’s. This economic clout makes Michigan a very important market and one that’s increasingly attractive to investors.

In August 2025, Michigan was also home to a labor force of over 5.063 million workers. A moderate unemployment rate of 5.2% means that there are also 264,000 workers currently looking for employment. Employment is up 1.0% year-on-year, especially in construction, finance, and education, health, and other services. However, mining, logging, manufacturing, and professional services have seen a decline in employment in the past year.

Less than 1.0% of the state’s workers are employed in agriculture. Manufacturing and other industrial activities, such as mining, logging, construction, and utilities, provide far more jobs for Michiganders. Manufacturing alone employs over 14% of the workforce, especially in the automotive and mobility industries. Important services like healthcare, business services, trade, transportation, and technology are also major employers of the state’s skilled workers.

If you plan to do business in Michigan, hiring and managing employees in partnership with a PEO can help you reduce your costs, administrative burden, and risk when operating in this state.

What Are PEOs in Michigan?

A Michigan Professional Employment Organization, or PEO, is a type of service provider that helps you manage employees in this state. When you work with a PEO, it acts as a ‘co-employer’ and performs many administrative and HR functions on your behalf. PEOs in Michigan also help you to stay compliant with all of the state’s tax and employment laws, thus reducing your risk exposure greatly. Because PEOs have multiple clients, they work at scale to provide services for less than most small and medium businesses (SMBs) can in-house.

Essentially all modern PEOs now base their services on extensive, cloud-based online platforms with extensive functionality. These platforms are highly efficient for managing payroll, benefits administration, leave management, and other core HR services. Many also offer additional functions that can include performance management, employee engagement, talent acquisition, and more. These platforms are supported by staff with expertise in Michigan’s tax, employment, and legal systems who help to monitor legal changes and adapt their systems accordingly. Increasingly, they also integrate AI technology. Employees can usually access their information through employee portals, helping to reduce your administrative burden even further.  

PEOs are very similar to another type of service provider known as an Employer of Record or EOR. While both of these providers allow you to outsource your HR functions, EORs also provide the additional service of hiring your workers if you don’t own a business entity in Michigan. They use their registered entities to hire on your behalf and take on full responsibility for legal compliance. Otherwise, PEOs and EORs provide most of the same services, and the terms are often used interchangeably.

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Why Hire through a PEO in Michigan?

The labor market in Michigan may have cooled off slightly in the past year, but this is still a major market full of talented and skilled workers. Michigan assesses a moderate state CIT (corporate income tax) rate on employers while providing many incentives to businesses that set up within its borders. The state features some of the highest technology for manufacturing in the country while offering extensive transportation networks to help get products to market. It’s also a significantly cheaper place to do business than the national average. While already doing well with nearly 52% of the workforce holding skills certificates and degrees, Michigan is also taking strides to increase this rate to 60% by 2030.

While the advantages are there, hiring and managing workers in Michigan can be difficult if you’re not familiar with the state’s employment regulations. When you work with a PEO, however, you can leverage the knowledge of its experts and the accuracy of its automated systems to help you stay compliant. Important labor rules to be aware of include:

  • Regular hours: Employees in Michigan can generally work only 40 regular hours per week. Employers are not required to provide breaks except to employees under the age of 18, who are entitled to a 30-minute break if they work more than five hours.
  • Overtime: Employees must be paid at least 150% of their normal wages when they work overtime. The federal Fair Labor Standards Act (FLSA) and state-level Michigan Improved Workforce Opportunity Wage Act (IWOWA) both require this overtime rate.
  • Annual Leave: Michigan doesn’t require employers to offer paid annual leave, though most do on their own initiative to attract talent.
  • Minimum Wage: The minimum wage in Michigan rose in February 2025 to $12.48/hour, significantly higher than the federal minimum wage of $7.25 per hour. This wage will also increase annually for the next three years to reach $14.97/hour in 2027.
  • Parental leave: Michigan doesn’t require specific maternity or paternity leave. Instead, it follows the federal Family and Medical Leave Act (FMLA), which requires employers to provide 12 months of unpaid family leave if they have 50 or more employees.
  • Sick leave: The Michigan Earned Sick Time Act (ESTA) requires all employers with at least one employee to provide paid sick leave for employees who accrue this leave at the rate of one day for every 30 days they work. Small business employees may use 40 hours of sick time per year, while other employees of larger businesses can use up to 72 hours.

Managing compliance with these and other laws can be very challenging, and PEOs can help to reduce the administrative burden and risk of non-compliance that this represents. Employers can offer their employees professional HR services and still save money compared to internal HR management when they partner with PEOs.

Which Services Do PEOs Provide in Michigan?

While providers vary widely in what they offer, most PEOs provide the following core services to their clients in Michigan:

Payroll Management

Payroll management requires an extensive knowledge of state tax and employment regulations and is therefore one of the most important services provided by Michigan Professional Employer Organizations. They generally manage this complicated function through their online platforms, providing a high degree of accuracy while maintaining schedules effectively.

New hires are added to your payroll, and each employee is given a regular calculation that takes into account their compensation, deductions, and tax obligations. You’ll need to collect their time and attendance data and provide this to the PEO so it can manage its calculations for each pay period. It will determine how much the employee is owed and how much must be deducted, and will normally pay their net salaries for you by bank transfer.

Employee Benefits Administration

Employers in Michigan must provide certain benefits for their employees, and employees also have parts of their wages for social protection schemes. Both contribute to Social Security, and employees also make payments to Medicare. Employers, on the other hand, must provide workers’ compensation and unemployment insurance on varying levels. These contributions are listed below as a percentage of each employee’s salary:

BenefitEmployee ContributionEmployer Contribution
Workers’ Compensation Insurancen/a1.0% (on average)
Michigan Unemployment Insurancen/a0.06–10.3% up to a wage base limit of $9,000
Social Security6.2% up to a wage base limit of $176,1006.2% up to a wage base limit of $176,100
Medicare1.45% (+0.9% on income over $200,000)n/a

If you want to provide your employees with more benefits, especially to attract top talent with competitive compensation packages, your PEO partner can help. Most PEOs either connect you with plan providers or offer their own plans that you can choose to sign your employees up to. Most employers work with PEOs to offer additional benefits like health insurance, life insurance, equity plans, and retirement savings plans.

Tax Compliance

PEOs in Michigan must be licensed to do business in the state and must renew their licenses annually. This requirement is largely due to the important role they play in managing employee taxes for their clients. They normally calculate, withhold, and remit employees’ income taxes, and are legally responsible for any errors they make.

PEOs calculate your employees’ tax obligations according to their income and filing status. In addition to the between 10% and 37% of their earnings they must pay to the IRS in federal income taxes, employees in Michigan are also liable for a flat 4.25% state tax. Your PEO partner will normally remit this state tax to the Michigan Department of Treasury on your behalf.

Recruitment and Employment Contracts

Some employers come to PEOs with their employees already hired, while others have identified the talent they want to engage. Those clients who don’t have their people in place, however, can often benefit from the recruitment services offered by many PEOs. Some PEOs employ recruiters who will actively seek out the talent you need in Michigan. Others leave active recruitment up to you, but provide you with the tools you need to perform this function effectively. These tools may include applicant tracking systems (ATSs), access to talent pools, and interview form templates.

Many PEOs continue their support beyond the candidate selection process and help with hiring. They often advise their clients on appropriate levels of compensation to offer their candidates, and can help with strategic negotiations of salaries, benefits, and working conditions. They also use their legal expertise in the state to create and manage contracts in full compliance with Michigan’s employment laws. They may also help to manage candidate commitments and timelines for them to start working.

Employment agreements in Michigan can be verbal as long as they don’t last longer than a year, though written contracts are less risky. These contracts have to include details of the parties, start (and, if relevant, the end) date, job title, duties, compensation, payment, and termination. Optional conditions like probation periods and non-disclosure agreements can also be included.

Onboarding

New employees have to be onboarded by both you, as their workplace employer, and the PEO. Your onboarding tasks will typically include providing orientation, job-specific training, and access to the tools, data, and systems the employees will need to do their work. Your PEO partner will handle most administrative tasks involved in onboarding. They’ll usually collect the employees’ information and important documentation and register them with Social Security and the state and federal tax authorities. They’ll also add them to your payroll and set up their automatic calculations, plus arrange bank transfers for their salary payments.

Terminations

Michigan is an ‘at-will’ employment state, and this means that both the employee and the employer can choose to terminate their agreement at any time they choose. Employees don’t need to give their employers notice, and employers don’t need to furnish notice, severance, or justifications if they dismiss workers. However, if you choose to provide your workers with notice and/or severance pay, your PEO partner can help you manage these conditions in line with their contracts.

Advantages of Using a PEO in Michigan

While hiring and managing HR for employees on your own, working with a PEO in Michigan can make these processes easier, more affordable, and more professional. Some of the main advantages you can obtain from partnering with a PEO include:

Risk Mitigation

PEOs’ automated systems are highly accurate and reliable, and this helps to keep your employees’ pay, taxes, and benefits managed correctly. PEOs also employ legal professionals to monitor state laws and adapt their systems to any changes that may occur.

Cost Savings

Most small and medium businesses (SMBs) can’t manage high-quality HR services for their employees more cost-effectively than PEOs, with their automated processes and economies of scale, can.

Recruitment

If you need help to find talent in Michigan, many PEOs offer active recruitment services or self-recruitment tools to help you.

Fast Time to Hire

PEOs with professional recruiters can help you find the talent you need extremely quickly. Most PEOs can also onboard new employees in just one day to help you get them started as soon as possible.

How to Engage a Michigan PEO

When you’ve decided that partnering with a PEO is the best choice for your organization, you can engage one by:

1

Choosing a Provider

Compare different PEOs’ reputations, experience, prices, and service provisions, and choose the best match for your company.

2

Requesting a Consultation

Once you’ve selected a partner you trust, ask for a consultation. They’ll offer you a service proposal and a quote for their fees.7 hours of night work between 10 pm and 6 am.

3

Entering Into a Service Agreement

If the proposal is to your liking, you can sign a monthly or annual service agreement to engage the PEO. Once you do, it will begin either recruiting for you or onboarding your existing employees to its platform.

Want to dive deeper? Check out our full guide: PEO vs. EOR: What’s the Difference?

Michigan PEO Services

If you’re not experienced with the labor market and employment regulations in Michigan, managing HR for your local employees can be intensely challenging. Instead, partnering with a Michigan PEO can help you provide your employees with professional HR services, save money, and reduce the administrative burden your organization needs to take on.

To hear more about how a PEO can help your business, contact Remote People today.