Running a small or midsized business in Maine is a full-time balancing act. You’re managing your employees, talking care of your customers, and worrying about finances. On top of that, employment laws seem to change constantly. Just when you feel like you’ve wrapped your head around one requirement, a new update rolls in.
And for Maine businesses, in 2026, it is no different. Between wage increases, new leave benefits becoming available, federal tax changes, and evolving reporting rules, many business owners and managers are wondering: “What do I actually need to know right now?”
This article is meant to help answer that. We’ll walk through the most important Maine labor law changes and federal employment law updates that affect Maine businesses in 2026. By the time you’re done reading, you should feel more informed, more prepared, and a little less overwhelmed.
Key Takeaways from This Article
Maine’s minimum wage, tipped wage, and exempt salary threshold all increase in 2026 and must be reflected in payroll starting January 1.
Paid Family & Medical Leave benefits become available to employees in 2026, even though contributions started earlier.
Maine’s Earned Paid Leave law has been updated to now allow carryover and accrual to stack, meaning employees can have more time available.
Several federal updates, including IRS contribution limits and tax treatment of tips and overtime, impact payroll and reporting.
Staying compliant in 2026 is less about learning everything at once and more about knowing where changes affect your business.
Each year brings a mix of brand-new laws, updates to existing rules, and reminders about requirements that are easy to forget. Below are the Maine-specific labor laws that employers should be paying close attention to in 2026.
Beginning January 1, 2026, Maine’s minimum wage increases to $15.10 per hour. This is up from $14.65 in 2025 and reflects the state’s annual cost-of-living adjustment requirement. Tipped workers must be paid at least $7.55 per hour.
This change applies to nearly all hourly employees in Maine. Employers need to ensure payroll systems are updated so that any hours worked on or after January 1, 2026, are paid at the new rate—even if the pay period started in December.
Some municipalities, like Portland and Rockland, have higher local minimum wages. If you operate in places like these, it’s important to watch for local guidance and confirm you’re paying the correct rate based on where the work is performed.
Starting January 1, 2026, Maine’s salary threshold for exempt employees increases to $871.16 per week, or $45,300.32 annually.
This threshold is only one part of the exemption test. To classify an employee as exempt from overtime, they must meet both the salary requirement and the duties test under the executive, administrative, or professional (EAP) exemptions. Simply paying someone above the threshold does not automatically make them exempt.
For employers, this is a good time to review exempt classifications, especially for employees whose salaries are close to the new threshold.
Maine’s Earned Paid Leave law continues to evolve, and a recent amendment significantly impacts how leave carries over and accrues.
Under this law, businesses with more than 10 employees must allow employees to earn one hour of paid leave for every 40 hours worked, up to 40 hours per year. This earned time can be used for any reason, including illness, vacation, personal needs, or emergencies.
The new change is how carryover works. Employees may now carry over up to 40 unused hours into the next year and still accrue up to 40 new hours. This means an employee could have as much as 80 hours available in a given year, depending on usage.
For employers, this change means reviewing time-off policies, payroll tracking, and employee handbooks to make sure they reflect the updated rules. Consistency is critical—how time is earned, used, carried over, and tracked should be clearly defined and applied evenly.
Maine’s Paid Family & Medical Leave program has been in place since the beginning of 2025, and 2026 is a major milestone: employees will become eligible to begin receiving PFML benefits in May of 2026.
Eligible employees may take up to 12 weeks of paid leave per year for qualifying reasons, including their own serious health condition, caring for a family member, bonding with a new child, certain military-related needs, or safe leave.
Employers should be prepared for employee questions in 2026. Even if you already offer paid leave or short-term disability, PFML operates separately unless you have an approved private plan. Employers are still required to file quarterly wage reports and remit contributions, even if they opt out through a private plan.
Maine’s new “Report to Work” law adds another compliance item for certain employers. This law applies to businesses with at least 10 employees that are open more than 120 days per year.
If an employee reports to work for a scheduled shift and that shift is canceled or shortened, the employer must pay the lesser of two hours at the employee’s regular rate or the total amount the employee was scheduled to earn for that shift.
For tipped employees, this pay must be calculated using the full minimum wage—not the tipped wage.
There are limited exceptions, such as weather-related closures or emergencies, and the law allows flexibility if the employer makes a documented, good-faith effort to notify the employee before they report to work. Still, this law reinforces the importance of accurate scheduling, communication, and documentation.
In addition to Maine-specific laws, several federal changes affect how employers manage payroll, benefits, and reporting in 2026.
The IRS adjusts retirement plan contribution limits each year, and 2026 brings several increases.
For 401(k), 403(b), and 457(b) plans, the employee contribution limit increases, with additional catch-up contributions available depending on age. SECURE Act 2.0 also introduced age-banded catch-up limits, with enhanced contributions for employees ages 60 to 63.
| Age Range | 401(k), 403(b), & 457(b) | SIMPLE IRA (<25 EE) | SIMPLE IRA (26-100 EE) |
| <50 years old | $24,500 | $18,100 | $17,000 |
| 50-59 years old | $32,500 ($8,000 catch-up) | $22,100 ($4,000 catch-up) | $21,000 ($4,000 catch-up) |
| 60-63 years old | $35,750 ($11,250 catch-up) | $23,350 ($5,250 catch-up) | $22,250 ($5,250 catch-up) |
| 64+ years old | $32,500 ($8,000 catch-up) | $22,100 ($4,000 catch-up) | $21,000 ($4,000 catch-up) |
There is also an important payroll-related change: starting in 2026, certain higher earners must make catch-up contributions on a Roth (after-tax) basis. This affects how contributions are withheld, reported, and communicated to employees.
SIMPLE IRA limits differ based on employer size, and IRA income phase-out ranges have also increased. While these changes are generally positive for employees, they require payroll systems to be configured correctly and benefits information to be communicated clearly.
One of the most talked-about federal changes affecting employers comes from the One Big Beautiful Bill and how it treats tips and overtime for federal income tax purposes. While it’s often described as “no tax on tips or overtime,” the reality is more specific.
Starting with wages earned in 2025, eligible employees can claim a federal income tax credit when they file their tax return for:
up to $12,500 in overtime pay (only the OT premium rate is exempt from federal income tax, not the full overtime amount)
up to $25,000 in tip income each year.
These limits double for married couples filing jointly and apply only to employees earning under $150,000 per year ($300,000 for couples).
This change applies only to federal income tax and is currently set to run through 2028.
For employers, it’s important to know that nothing changes about withholding right now. Federal income tax must still be withheld on all wages, including tips and overtime, and those wages remain subject to Social Security, Medicare (FICA), and state income taxes. The benefit to employees happens later, when they file their tax return and claim the credit. Not all tipped employees qualify, and certain professions—such as healthcare, legal, accounting, financial services, and consulting—are excluded.
From a payroll standpoint, this change increases the need for accurate tracking. Employers should continue to track tips and overtime separately and be aware that the IRS has introduced new W-2 reporting codes for 2026:
Businesses with tipped workers or frequent overtime may want to review their payroll and timekeeping setup to ensure these amounts are being captured correctly as guidance continues to evolve.
Maine requires employers to give their employees rest breaks. Most employees are only permitted to work for six consecutive hours at a time unless given the opportunity to take at least 30 consecutive minutes of rest.
The rest break requirement doesn’t apply in emergency situations when there is danger to property, life, public safety, or public health. Additionally, this requirement doesn’t apply to places of employment where fewer than three employees are on duty at one time and the nature of the work allows them frequent breaks during their work day.
Child labor laws are designed to protect young workers. In Maine, strong restrictions are in place to protect the health, safety, and educational opportunities of minors in the workplace. These laws cover working hours, prohibited occupations, and permits. Some of these include:
Minors under 16 years old
Minors 16 and 17 years old
Check out this page for a more information on child laws.
For employees who are classified as non-exempt, federal law requires that they be paid overtime for any hours worked over 40 in a single workweek. Overtime must be paid at a rate of one-and-a-half times the employee’s regular rate of pay.
Things can get a little more complicated when an employee works multiple roles with different rates of pay during the same workweek. In those situations, employers generally cannot simply apply overtime based on the employee’s highest or lowest hourly rate. Instead, overtime must be calculated using what’s called the blended overtime method.
Employment laws in Maine don’t stand still—and 2026 is a good example of how changes can build on one another. Wage increases, new leave benefits becoming available, federal tax updates, and expanded reporting requirements all impact small businesses this year.
It’s important to understand which changes apply to your business, update systems and policies where needed, and ask questions before small issues turn into big problems.
If staying compliant feels complicated, you’re not alone. Many business owners and managers are navigating the same challenges. Taking the time now to understand the 2026 changes can make the year ahead smoother—for you and for your employees.
Written: January 2026
Written by: Jon Portanova