Minimum wage is the lowest amount that you can pay an employee per hour. It is regulated by the Fair Labor Standards Act (FLSA) and is enforced by the U.S. Department of Labor.
The current federal minimum wage is $7.25 per hour.
State minimum wage
Each state can set its own basal wage. If your state’s minimum is greater than the federal minimum, you must pay employees at least the state’s minimum wage.
For example, the minimum rate in Nevada is $8.25. All employers in Nevada must pay employees at least the state’s minimum since it is greater than the federal minimum wage.
The chart below lists all the states that have a minimum hourly pay rate greater than the federal minimum wage. If your state is not listed, you should pay employees at least the federal minimum wage. How much is minimum wage in your state?
|District of Columbia||$10.50|
Local minimum wage
Some cities create a local minimum wage. So far, local basal wages are most common in big cities. If your city’s minimum pay rate is greater than the state and federal minimum wage, you must pay employees the local minimum.
For example, the minimum wage in San Francisco is $12.25. Employers in San Francisco must pay employees at least the local basal wage since it is greater than the state and federal minimum.
Exceptions to minimum wage
There are some exceptions to paying your employees minimum wage.
Minimum wage for tipped employees
The FLSA permits a special federal minimum wage for tipped employees. This applies to employees who earn more than $30 in tips per month. The tipped minimum wage is $2.13. Tipped employees can have a lower basal wage because their tips should make up the rest of their wages. This requires particular tipped income reporting that you might not be familiar with.
Individual states can also have minimum wage laws for tipped employees. Check your state’s minimum wage laws to learn more.
Youth minimum wage
The FLSA also permits a special youth minimum wage. You can pay employees under age 20 a wage of $4.25 for the first 90 days of employment. Avoid penalties by checking your state minimum wage laws when it comes to employing youth. Some states have a youth minimum that is greater than the federal youth minimum wage.
Want to make your payroll process easier? Try our payroll software. We make payroll simple, and for a low price! Get a free trial today.
This article was updated on 11/25/2015 to reflect current information. (Original publish date: 3/22/2012.)