The Federal Minimum Wage
Since July 24, 2009, the federal minimum wage has been $7.25 per hour. The federal minimum wage applies in the following two scenarios:
- If the state has no set minimum wage rate, or
- If the state’s minimum wage is lower than the federal rate.
States may have a lower minimum wage rate, but employers are obligated to pay their
employees whichever rate is higher. If the federal minimum wage is higher, then
employers must pay the federal minimum wage. If the state minimum wage is higher,
then employers are obligated to pay the state minimum wage. Therefore, the federal
minimum wage sets the bare minimum for employee wages. For example, any state that
sets a minimum wage lower than $7.25 (federal minimum wage) is still obligated to
pay a minimum of $7.25 because employers are obligated to pay the higher minimum
Minimum Wage by State
Each state is afforded the opportunity to create their own minimum wage standards.
They typically implement minimum wages that are higher than the federal minimum
wage. In fact, as of 2015, 29 states and the District of Columbia have minimum wages
that are higher than the federal minimum wage. This means that employers with employees
in those states are obligated to pay the state’s minimum wage because employers
are forced to pay the higher wage established by either the federal or state minimum
Minimum Wage for Tipped Employees
Employees that receive tips fall into a different minimum wage bracket, and employers
can pay them the federal minimum wage for tipped employees. Employees are considered
to be tipped employees if they meet BOTH of these two criteria:
- The employee receives at least $30 per month in tips, AND
- The employee’s monthly wage from tips is equal to, or more than, the amount
they would be receiving if they were to be paid the federal or state minimum wage.
If your employee meets BOTH of these criteria, then employers can compensate the
employee according to the federal minimum wage for tipped employees, at a rate of
$2.13 per hour.
An Exception to the Rule:
Minimum Wage for Workers under Age 20
If you have employees under the age of 20, they can be paid a special minimum wage
of $4.25 per hour. This is only the case for the first 90 consecutive calendar days
of their employment. After those 90 consecutive days are over (or when the employee
turns 20) the employee must receive the appropriate minimum wage.
Minimum wage is a constantly evolving aspect of employee administration
Minimum wage debates are not just a national issue. Local, state, and federal legislators
are continuously making efforts to change the minimum wage. If you are an employer,
it is essential that you pay attention to each of the municipalities that affect
your organization so you aren’t caught off guard by minimum wage changes.
Failing to stay current on these issues will result in fines, back-payments to employees,
and other fiduciary violations that can affect your business.