diff --git a/e2e/tags.spec.ts b/e2e/tags.spec.ts
index c2f65b93..26995641 100644
--- a/e2e/tags.spec.ts
+++ b/e2e/tags.spec.ts
@@ -88,3 +88,35 @@ test('test that multiple tags can be created via API and displayed in the table'
     await expect(page.getByTestId('tag_table')).toContainText(tagName1);
     await expect(page.getByTestId('tag_table')).toContainText(tagName2);
 });
+
+// =============================================
+// Employee Permission Tests
+// =============================================
+
+test.describe('Employee Tags Restrictions', () => {
+    test('employee can view tags but cannot create', async ({ ctx, employee }) => {
+        const tagName = 'EmpViewTag ' + Math.floor(Math.random() * 10000);
+        await createTagViaApi(ctx, { name: tagName });
+
+        await employee.page.goto(PLAYWRIGHT_BASE_URL + '/tags');
+        await expect(employee.page.getByTestId('tags_view')).toBeVisible({ timeout: 10000 });
+
+        // Employee can see the tag (tags are visible to all members with tags:view)
+        await expect(employee.page.getByText(tagName)).toBeVisible({ timeout: 10000 });
+
+        // Employee cannot see Create Tag button
+        await expect(employee.page.getByRole('button', { name: 'Create Tag' })).not.toBeVisible();
+    });
+
+    test('employee cannot see edit/delete actions on tags', async ({ ctx, employee }) => {
+        const tagName = 'EmpActionsTag ' + Math.floor(Math.random() * 10000);
+        await createTagViaApi(ctx, { name: tagName });
+
+        await employee.page.goto(PLAYWRIGHT_BASE_URL + '/tags');
+        await expect(employee.page.getByText(tagName)).toBeVisible({ timeout: 10000 });
+
+        // Actions button should not be visible for employee
+        const actionsButton = employee.page.locator(`[aria-label='Actions for Tag ${tagName}']`);
+        await expect(actionsButton).not.toBeVisible();
+    });
+});
diff --git a/resources/js/Components/Common/Tag/TagEditModal.vue b/resources/js/Components/Common/Tag/TagEditModal.vue
new file mode 100644
index 00000000..bd4d0083
--- /dev/null
+++ b/resources/js/Components/Common/Tag/TagEditModal.vue
@@ -0,0 +1,75 @@
+<script setup lang="ts">
+import TextInput from '@/packages/ui/src/Input/TextInput.vue';
+import SecondaryButton from '@/packages/ui/src/Buttons/SecondaryButton.vue';
+import DialogModal from '@/packages/ui/src/DialogModal.vue';
+import { ref } from 'vue';
+import PrimaryButton from '@/packages/ui/src/Buttons/PrimaryButton.vue';
+import { useFocus } from '@vueuse/core';
+import { useTagsStore } from '@/utils/useTags';
+import type { Tag, UpdateTagBody } from '@/packages/api/src';
+
+const { updateTag } = useTagsStore();
+const show = defineModel('show', { default: false });
+const saving = ref(false);
+
+const props = defineProps<{
+    tag: Tag;
+}>();
+
+const tagBody = ref<UpdateTagBody>({
+    name: props.tag.name,
+});
+
+async function submit() {
+    saving.value = true;
+    try {
+        await updateTag({ tagId: props.tag.id, tagBody: tagBody.value });
+        show.value = false;
+    } finally {
+        saving.value = false;
+    }
+}
+
+const tagNameInput = ref<HTMLInputElement | null>(null);
+
+useFocus(tagNameInput, { initialValue: true });
+</script>
+
+<template>
+    <DialogModal closeable :show="show" @close="show = false">
+        <template #title>
+            <div class="flex space-x-2">
+                <span> Update Tag </span>
+            </div>
+        </template>
+
+        <template #content>
+            <div class="flex items-center space-x-4">
+                <div class="col-span-6 sm:col-span-4 flex-1">
+                    <TextInput
+                        id="tagName"
+                        ref="tagNameInput"
+                        v-model="tagBody.name"
+                        type="text"
+                        placeholder="Tag Name"
+                        class="mt-1 block w-full"
+                        required
+                        autocomplete="tagName"
+                        @keydown.enter="submit()" />
+                </div>
+            </div>
+        </template>
+        <template #footer>
+            <SecondaryButton @click="show = false"> Cancel </SecondaryButton>
+            <PrimaryButton
+                class="ms-3"
+                :class="{ 'opacity-25': saving }"
+                :disabled="saving"
+                @click="submit">
+                Update Tag
+            </PrimaryButton>
+        </template>
+    </DialogModal>
+</template>
+
+<style scoped></style>
diff --git a/resources/js/Components/Common/Tag/TagMoreOptionsDropdown.vue b/resources/js/Components/Common/Tag/TagMoreOptionsDropdown.vue
index e67ae32a..7e1182bb 100644
--- a/resources/js/Components/Common/Tag/TagMoreOptionsDropdown.vue
+++ b/resources/js/Components/Common/Tag/TagMoreOptionsDropdown.vue
@@ -1,5 +1,6 @@
 <script setup lang="ts">
-import { TrashIcon } from '@heroicons/vue/20/solid';
+import { TrashIcon, PencilSquareIcon } from '@heroicons/vue/20/solid';
+import { canDeleteTags, canUpdateTags } from '@/utils/permissions';
 import type { Tag } from '@/packages/api/src';
 import {
     DropdownMenu,
@@ -9,6 +10,7 @@ import {
 } from '@/Components/ui/dropdown-menu';
 
 const emit = defineEmits<{
+    edit: [];
     delete: [];
 }>();
 const props = defineProps<{
@@ -38,6 +40,16 @@ const props = defineProps<{
         </DropdownMenuTrigger>
         <DropdownMenuContent class="min-w-[150px]" align="end">
             <DropdownMenuItem
+                v-if="canUpdateTags()"
+                :aria-label="'Edit Tag ' + props.tag.name"
+                data-testid="tag_edit"
+                class="flex items-center space-x-3 cursor-pointer"
+                @click="emit('edit')">
+                <PencilSquareIcon class="w-5 text-icon-active" />
+                <span>Edit</span>
+            </DropdownMenuItem>
+            <DropdownMenuItem
+                v-if="canDeleteTags()"
                 :aria-label="'Delete Tag ' + props.tag.name"
                 data-testid="tag_delete"
                 class="flex items-center space-x-3 cursor-pointer text-destructive focus:text-destructive"
diff --git a/resources/js/Components/Common/Tag/TagTableRow.vue b/resources/js/Components/Common/Tag/TagTableRow.vue
index 8fae5759..cb0918c8 100644
--- a/resources/js/Components/Common/Tag/TagTableRow.vue
+++ b/resources/js/Components/Common/Tag/TagTableRow.vue
@@ -2,13 +2,17 @@
 import type { Tag } from '@/packages/api/src';
 import { useTagsStore } from '@/utils/useTags';
 import TagMoreOptionsDropdown from '@/Components/Common/Tag/TagMoreOptionsDropdown.vue';
+import TagEditModal from '@/Components/Common/Tag/TagEditModal.vue';
 import TableRow from '@/Components/TableRow.vue';
-import { canDeleteTags } from '@/utils/permissions';
+import { canDeleteTags, canUpdateTags } from '@/utils/permissions';
+import { ref } from 'vue';
 
 const props = defineProps<{
     tag: Tag;
 }>();
 
+const showTagEditModal = ref(false);
+
 function deleteTag() {
     useTagsStore().deleteTag(props.tag.id);
 }
@@ -25,10 +29,12 @@ function deleteTag() {
         <div
             class="relative whitespace-nowrap flex items-center pl-3 text-right text-sm font-medium sm:pr-0 pr-4 sm:pr-6 lg:pr-8 3xl:pr-12">
             <TagMoreOptionsDropdown
-                v-if="canDeleteTags()"
+                v-if="canDeleteTags() || canUpdateTags()"
                 :tag="tag"
+                @edit="showTagEditModal = true"
                 @delete="deleteTag"></TagMoreOptionsDropdown>
         </div>
+        <TagEditModal v-model:show="showTagEditModal" :tag="tag"></TagEditModal>
     </TableRow>
 </template>
 
diff --git a/resources/js/packages/api/src/index.ts b/resources/js/packages/api/src/index.ts
index 8b5432f1..888c4046 100644
--- a/resources/js/packages/api/src/index.ts
+++ b/resources/js/packages/api/src/index.ts
@@ -66,6 +66,7 @@ export type InviteMemberBody = ZodiosBodyByAlias<SolidTimeApi, 'invite'>;
 export type MemberRole = InviteMemberBody['role'];
 
 export type CreateTagBody = ZodiosBodyByAlias<SolidTimeApi, 'createTag'>;
+export type UpdateTagBody = ZodiosBodyByAlias<SolidTimeApi, 'updateTag'>;
 
 export type ImportType = ZodiosResponseByAlias<SolidTimeApi, 'getImporters'>['data'][0];
 export type ImportReport = ZodiosResponseByAlias<SolidTimeApi, 'importData'>;
diff --git a/resources/js/utils/permissions.ts b/resources/js/utils/permissions.ts
index 8d6446cf..e3e35207 100644
--- a/resources/js/utils/permissions.ts
+++ b/resources/js/utils/permissions.ts
@@ -101,6 +101,10 @@ export function canCreateTags() {
     return currentUserHasPermission('tags:create');
 }
 
+export function canUpdateTags() {
+    return currentUserHasPermission('tags:update');
+}
+
 export function canDeleteTags() {
     return currentUserHasPermission('tags:delete');
 }
diff --git a/resources/js/utils/useTags.ts b/resources/js/utils/useTags.ts
index 436ed1f5..e86bbb70 100644
--- a/resources/js/utils/useTags.ts
+++ b/resources/js/utils/useTags.ts
@@ -1,9 +1,9 @@
 import { defineStore } from 'pinia';
-import type { Tag } from '@/packages/api/src';
+import type { Tag, UpdateTagBody } from '@/packages/api/src';
 import { getCurrentOrganizationId } from '@/utils/useUser';
 import { api } from '@/packages/api/src';
 import { useNotificationsStore } from '@/utils/notification';
-import { useQueryClient } from '@tanstack/vue-query';
+import { useMutation, useQueryClient } from '@tanstack/vue-query';
 
 export const useTagsStore = defineStore('tags', () => {
     const { handleApiRequestNotifications } = useNotificationsStore();
@@ -54,5 +54,27 @@ export const useTagsStore = defineStore('tags', () => {
         }
     }
 
-    return { createTag, deleteTag };
+    const { mutateAsync: updateTag } = useMutation({
+        mutationFn: async ({ tagId, tagBody }: { tagId: string; tagBody: UpdateTagBody }) => {
+            const organizationId = getCurrentOrganizationId();
+            if (organizationId) {
+                return await handleApiRequestNotifications(
+                    () =>
+                        api.updateTag(tagBody, {
+                            params: {
+                                organization: organizationId,
+                                tag: tagId,
+                            },
+                        }),
+                    'Tag updated successfully',
+                    'Failed to update tag'
+                );
+            }
+        },
+        onSuccess: () => {
+            queryClient.invalidateQueries({ queryKey: ['tags'] });
+        },
+    });
+
+    return { createTag, updateTag, deleteTag };
 });