By JD Farrugia
Aug. 26, 2022
Employers in the United States are bound by different laws when it comes to minimum wage rates, depending on the state or even the city they’re in. The federal minimum wage rate is a fixed national rate set by the Fair Labor Standards Act (FLSA) and enforced by the U.S. Department of Labor (DOL).
The federal minimum wage was last revised in 2009 and is currently set at $7.25 per hour. President Biden has been pushing for this to increase to $15 and recently bumped the minimum wage for federal contractors to $15 — possibly as a precursor to a nationwide increase.
In response to the inertia on the federal level, many states and cities have taken the initiative to institute higher minimum wage rates in their jurisdictions. In cases like these, the law favors the rate most beneficial to the employee — in other words, the highest minimum wage.
States with higher minimum wage rates include Connecticut at $14.00 and Oregon at $13.50. Cities with minimum wage rates higher than those of their states include New York City ($15 — $1.80 more than in New York State) and Portland ($13, $0.25 higher than Maine).
As an employer, it’s important to understand and stay up to date with all the laws and regulations regarding minimum wage increases or decreases. Using the right workforce management software ensures that you remain compliant with little effort.
Effective January 2022, 30 states, as well as Washington DC, Guam, and the Virgin Islands, have a minimum wage higher than the federal rate. Fifteen states, as well as Puerto Rico and the Northern Mariana Islands, use the federal minimum wage rate of $7.25 per hour. Five states have not adopted their own minimum wage rate law and therefore default to the federal rate of $7.25.
States with MW greater than federal
States with MW equal to federal ($7.25)
States that have not adopted a state MW law
|Alaska $10.34||Northern Mariana Islands||Alabama|
|California $14.00||Idaho||South Carolina|
|District of Columbia $16.10||Kentucky|
|Delaware $10.50||North Carolina|
|Florida $10.00||North Dakota|
|Hawaii $10.10||New Hampshire|
|Missouri $11.15||Puerto Rico|
|New Jersey $13.00|
|New Mexico $11.50|
|New York $13.20|
|Rhode Island $12.25|
|South Dakota $9.95|
|West Virginia $8.75|
|Virgin Islands $10.50|
Currently, the District of Columbia is the entity that has the highest minimum wage at $16.10 per hour. There are 18 states (AK, AZ, CA, CO, DC, FL, ME, MN, MO, MT, NV, NJ, NV, NY, OH, OR, SD, and WA) that have scheduled adjustments to their MW rates. These vary from state to state, but most increases will occur in January 2023. More information can be found on each respective state’s website, which you can find through this DOL link.
Some state laws exempt some jobs or sectors from the minimum wage labor law. For example, in New Jersey, such exemptions include salespersons of motor vehicles and employees caring for children in the home of their employers.
In some cases, some states set subminimum rates for groups such as minors and students or training wages for new hires. In Rhode Island, full-time students under the age of 19 who work for nonprofit religious, education, librarial, or community service organizations are entitled to a minimum wage rate of $11.03. The state’s standard minimum wage rate is $12.25.
As of January 2022, the minimum wage in the state of California is $14, $6.75 higher than the federal minimum. In the case of large employers with 26 or more employees, the minimum wage is $15.
Since January 2017, there has been a gradual $1 increase in minimum wage per year. By January 2023, the state of California’s minimum wage will be set at $15 for both large and small employers.
In some cases, meals or lodging can be used to meet part of the minimum wage obligation. This can only be done if agreed upon by both the employer and employee and is supplemented with a voluntary written agreement. The amounts credited to the employee’s minimum wage are also limited based on the information found via this official notice.
California has some exemptions to its minimum wage law. Such exemptions and exceptions include:
Beginning in 2023, fast food workers could receive a minimum wage increase up to $22/hour due to recently passed legislation that creates a fast food council.
Employers who have tipped employees such as those in the hospitality industry and meet eligibility requirements under the FLSA may credit some of the tips received toward the minimum wage. The employees must pay a direct wage equal to the state’s minimum wage ($10) minus the tip credit of $3.02.
The state minimum wage in Texas is $7.25, equal to the federal rate. This has been in effect since January 24, 2009.
Employers can count tips, meals, and lodging toward the minimum wage with specified restrictions on how much can be allocated to them. There are conditions where an employer can pay a rate lower than minimum wage to an employee who is a patient of the Texas Department of Mental Health and Mental Retardation. This can also include individuals of a certain age or with “productivity impairments.”
Other exemptions covered by Texas Minimum Wage Act include:
With so many differences and exemptions that affect different states and even different cities within those states, it can be tricky for an employer to remain compliant with the law.
Industries where workers earn tips can be particularly tricky, according to Workforce.com’s chief strategy officer Josh Cameron:
In hospitality or anything where you earn tips, you can pay the staff a minimum wage much lower than the normal one. So it would be $7.50 an hour if they’re not tipped, but it’s $2.50 if it’s tipped. As long as they get enough tips to get them over that—it’s called the tip credit—then they can receive the lower $2.50 per hour from their employer.
Apart from the legal implications and the hefty fines, underpaying employees can be a PR nightmare for your business. Andrew Stirling, Workforce.com’s head of product compliance, argues, “An underpayment scandal can bring companies to their knees. Customers can decide to take their business elsewhere. People are less likely to visit a restaurant or shop that has been reported for underpaying their people.”
Workforce management software like Workforce.com takes state and local laws into account. Workforce’s labor compliance software allows you to pay your staff in accordance with federal, state, and regional wage laws. This includes exemptions and special situations, including tipped employees.
The system remains up to date as laws change, and it also undergoes regular audits, ensuring you remain compliant and avoid unnecessary penalties.
Workforce.com offers time and attendance software that gives you the resources you need to calculate pay and remain up to date in the ever-changing minimum wage landscape. You can apply new compliance rules to the system as new minimum wage rates are put in place and new legislation is passed.
The system calculates correct pay for all your employees based on minimum wage, hours worked, and overtime, automatically creating highly accurate electronic timesheets. These timesheets can then be exported directly into your payroll system for processing.
We build robust scheduling & attendance software for businesses with 500+ frontline workers. With custom BI reporting and demand-driven scheduling, we help our customers reduce labor spend and increase profitability across their business. It's as simple as that.
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