Understanding Michigan’s 2025 Premium Pay Guidelines for Direct Care Workers

As staffing shortages continue to challenge long-term care providers, Michigan’s latest Direct Care Worker (DCW) Premium Pay initiative offers temporary wage relief — but it comes with strict recordkeeping and compliance expectations. Whether you operate an Adult Foster Care (AFC) home, a Home for the Aged (HFA), or provide Medicaid waiver services, understanding the Region VII AAA Premium Pay procedure is key to staying compliant and ensuring your employees are properly compensated.

What Is the 2025 DCW Premium Pay?

The Direct Care Worker Premium Pay is a temporary hourly wage increase provided on top of regular pay to help improve retention across Michigan’s long-term care workforce. For 2025, DCWs delivering eligible services like Community Living Supports, Respite, Adult

Day Health, and Residential Services are entitled to receive this additional compensation.

✅ Current Premium Pay Rate: $3.40 per hour

Administrative Offset for Employers: $0.44 per hour

This increase is a supplement to wages, not a replacement or substitution for required minimum wage increases. The premium applies to specific service periods as designated by the Michigan Department of Health and Human Services (MDHHS) and must be paid within 30 days after the month closes.

Who Is Eligible for the DCW Premium Pay?

All direct care workers employed by agencies in the Region VII AAA provider network who deliver approved services are eligible, as long as:

• The agency has signed the official addendum outlining the payment procedure.

• The hours worked fall within the MDHHS-designated period.

• Documentation is maintained and reported according to MDHHS guidelines.

Workers may opt out, but this must be done in writing or electronically, and any unused funds must be returned to Region VII AAA by the employer.

Record Keeping Requirements: What You Must Do

To remain compliant, agencies must follow strict documentation procedures, especially when it comes to payroll and reporting.

Key Requirements:

• Premium Pay must appear separately on each pay stub.

• The pay stub must clearly show:

  • The pay period (e.g., Jan 1–Jan 31, 2025)

  • The number of hours worked

  • The rate and total amount of Premium Pay earned

• Final payments for separating employees must include any earned Premium Pay.

• All documentation must be retained and made available upon request from Region VII AAA or MDHHS.

Payroll Example:

Pay Period: 1/1/25 – 1/31/25  
Direct Care Hours: 40  
Premium Pay: $3.40 x 40 = $136  
Regular Pay: $10.00 x 40 = $400  
Total: $536.00

Why This Matters for Providers

Failing to comply with the premium pay guidelines can result in:

• Required repayment of misallocated funds

• Audit findings from Region VII AAA or MDHHS

• Disqualification from future funding initiatives

For business owners and administrators, this is more than a payroll change — it’s a compliance issue tied to your standing with Medicaid-funded programs and future participation in wage increase initiatives.

Best Practices to Stay Compliant

1. ✅ Train your payroll and HR teams on the exact formatting and timing of premium pay.

2. ✅ Keep a digital and hard copy of all employee pay records with clear notation of hours and pay rates.

3. ✅ Confirm that your agency’s addendum is signed and stored with your Medicaid waiver documentation.

4. ✅ Schedule monthly internal audits to verify pay accuracy and track deadlines.

5. ✅ Document any opt-outs and return unused funds promptly to Region VII AAA.

Final Thoughts

With the 2025 Premium Pay Guidelines in effect, providers must balance the positive impact on workforce retention with the administrative rigor of compliance. These funds offer critical support for DCWs — but only if implemented properly.

If you’re unsure how to structure your records or want help developing a payroll compliance strategy, Roseberri, LLC can help. We specialize in helping AFC and waiver providers navigate Medicaid wage compliance, documentation audits, and LARA regulations.

📧 Need help implementing Premium Pay guidelines in your facility? Contact us at roseberrimanagement@gmail.com for support, tools, and audit-prep strategies tailored to your team.