If you have any employees who work out of Minnesota, you need to follow the new requirements for sick leave between the Earned Sick & Safe Time (ESST) and Paid Family & Medical Leave (PFML, also frequently called “Paid Leave”).
How do you know which policy to use? In this article, I’ll explain how to make that decision and how a Payroll Specialist would handle these policies.
At CSI Accounting & Payroll, we’ve provided financial services to small businesses for 60 years. That means we’re versed in staying on top of new laws, especially in Minnesota (where we’re headquartered!). Let’s discuss:
- What’s the difference between ESST and PFML?
- How do I know which policy to use?
- How do I handle ESST and PFML in payroll?
ESST vs PFML
Let’s compare the two Minnesota policies, discuss why business owners get confused about which to use, and cover what happens if you choose the wrong policy.
Definitions
Earned Sick & Safe Time (ESST) took effect statewide in 2024 and accrues one hour for every 30 hours worked (up to 48 hours each year required, but the employer can offer more). This is funded by the employer and is used for:
- Medical. Employee’s mental or physical illness, treatment, or preventive care.
- Caring. Family member’s mental or physical illness, treatment, or preventive care.
- Safety. Domestic assault, sexual abuse, or stalking.
- Closings. Employee’s workplace or their family member’s school or place of care closes due to weather or a public emergency.
- Communicable disease. When an employee or a family member is at risk of infecting others with a communicable disease.
- Bereavement. Arrange or attend a funeral or memorial or address financial or legal matters that arise after the death of a family.
Paid Family & Medical Leave (PFML, or “Paid Leave”) took effect in 2026 and is to be used alongside ESST. It’s paid by the state and grants 12 weeks of family leave, 12 weeks of medical leave, or a combination capped at 20 weeks per year. The employee must apply for it through the state in advance and must have a healthcare provider or designated professional certify the need for the leave. PFML is used for:
- Medical. Employee’s mental or physical illness, treatment.
- Caring. Family member’s mental or physical illness, treatment.
- Safety. Domestic assault, sexual abuse, or stalking.
- Parental leave. Bond with a new child after birth, foster, or adoption.
- Active duty. Family member on active duty or notified of impending order.
We often use this visual to explain the differences.
Why the Confusion?
Both policies cover “medical” time off, which can be confusing even if you read their definitions. They’re also both fairly new. CSI’s Payroll Specialists say they’re currently being asked about the differences a few times per week, but that’s already down from when PFML began in January.
So, let’s decide which to use when your employee needs sick time off!
Which One to Use
Let’s use some key points to decide whether a sick time off request should be ESST or PFML, then I’ll tell you what happens if you get it wrong.
How to Decide Between ESST & PFML
First of all, is this leave planned or unplanned? If they give short notice or no notice, it’s typically ESST. Due to the application process, it would only make sense to use PFML if it’s a planned leave.
Next, what’s the reason for the leave? ESST covers a run-of-the-mill cold, flu, and even doctor appointments, whereas undergoing treatments or dealing with a serious condition like cancer would fall under PFML and would require a medical professional’s note.
Finally, how long do they expect to be out sick? ESST is often used for short-term situations (hours to days), but PFML provides up to 12 weeks of medical leave.
Using the Wrong Policy
ESST or PFML… What happens if you make the wrong choice? CSI’s Payroll Specialists told me they’ve never seen a prospect or client who’s used the wrong policy, but they are both still very new.
After some thought, I realized since PFML is paid by the state, this is the policy that would have consequences… but it’s nearly impossible to accidentally use PFML because of the application process. ESST is paid by employers, so there are no consequences for accidental misuse.
I say when in doubt, use ESST. If I wanted to take a few days off because I had a minor surgery coming up shortly, I might be eligible for PFML, but I’d consider using ESST if I had that balance just because the process is easier and there’s no wait.
Handling Sick Time Off in Payroll
There’s one last thing to discuss. How should you handle ESST and PFML on your payroll?
ESST & Payroll
If you’ve ever offered a PTO policy, you’ll be very familiar with how ESST works in payroll. Some employers even combine their PTO policy and their ESST policy to create one compliant plan.
ESST is tracked similarly to PTO since it accrues based on hours worked (making its setup in payroll a breeze). Used hours are removed from the total balance throughout the year. ESST pay will also be taxed the same.
PFML & Payroll
On the other hand, since PFML is not paid by the employer, it’s not run through payroll.
Full details are not available yet, but it’s rumored that PFML will send out pay reports at the end of each year starting in 2027. Taxation processes are also unclear because the medical leave portion may be taxable, but the family leave portion is not taxable. Stay tuned for more details!
Get Guidance & Payroll Management!
Now that you know about the difference between ESST and PFML, how to know which to use, and how each is handled in payroll, are you ready to check out payroll services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
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