It may come as no surprise that many small business owners are unaware of their employees’ rights. From the Fair Labor Standards Act which dealt with minimum wage in US states to the Occupational Safety and Health Act, small businesses can have a difficult time understanding how federal regulations may affect their employees.
One such regulation that is often misunderstood is the federal minimum wage in various US states, which applies to those who are at least sixteen years old, do not have close relatives who are employed by the organization, and have just started working.
Thankfully, the Federal Minimum Wage Guide is available to help clarify any confusion with your pay stubs. This is an online tool that will help these organizations comply with federal wage regulations. The tool provides guidance as to what laws apply, what the law provides, and what is required by the legal bodies in and around the U.S.
The US Department of Labor created this guide so that small employers could catch up on what they need to do to comply with federal law, and the team at PayStubsNow has summarized it for your ease-of-reading and simplicity. The guide covers everything from how to comply with the Fair Labor Standards Act, which establishes and regulates the minimum wage as well as overtime pay, including salary level exemptions; what an employer must do if it hires minors; how to deal with discrimination and sexual harassment; and much more. In this article, we’ll summarize the minimum wage guide and provide simple, easy-to-digest information on the federal minimum wage in all US states.
Minimum Wage in All US States
The minimum wage in US states varies, but there are federal standards as well. The Fair Labor Standards Act (FLSA) establishes basic minimum hourly wages and is what governs in federal industries, such as hospitals and nursing homes, public agencies, laundries and dry cleaners, restaurants and cafeterias, transportation by air or rail, trucking companies, etc. The federal minimum wage is a regulation that sets the lowest rate a worker can be paid per hour
It was first introduced by the Fair Labor Standards Act in 1938. The Act set the national minimum wage at 25 cents per hour. Over time, this has been increased multiple times to its current rate of $7.25 per hour, but the FLSA also allows individual states to set higher rates within their borders for employers who don’t make at least $7.25 an hour on their own because they have a “fringe benefit” package that includes health insurance or tips or commissions or other forms of compensation in addition to hourly pay rate
In general, if an employer pays more than the federally required $7.25 per hour to a worker who receives it on a salary basis (that is, not hour-by-hour), then they may be exempt from complying with this section of FLSA regulations relating to hours worked over 40h in one week.
In most situations, the federal minimum wage is the lowest amount of money an employer can pay an employee without violating any employment laws. Various states and some cities in others set their own minimum wages higher than $7.25 per hour. This means that an employee paid at or below these lower rates will usually take home less pay than a worker in one of the states with a higher rate.
Let’s take a look at the current minimum wage in states throughout the US:
Minimum Wage by State & New 2022 Changes
|Name||Minimum Wage Rate|
|Alabama||$7.25 / hour|
|Alaska||$10.34 / hour|
|Arizona||$12.80 / hour|
|Arkansas||$11.00 / hour|
|California||$14.00 / hour|
|Colorado||$12.56 / hour|
|Connecticut||$13.00 / hour|
|Delaware||$10.50 / hour|
|Florida||$10.00 / hour|
|Georgia||$7.25 / hour|
|Hawaii||$10.10 / hour|
|Idaho||$7.25 / hour|
|Illinois||$12.00 / hour|
|Indiana||$7.25 / hour|
|Iowa||$7.25 / hour|
|Kansas||$7.25 / hour|
|Kentucky||$7.25 / hour|
|Louisiana||$7.25 / hour|
|Maine||$12.75 / hour|
|Maryland||$12.50 / hour|
|Massachusetts||$14.25 / hour|
|Michigan||$9.87 / hour|
|Minnesota||$10.33 / hour|
|Mississippi||$7.25 / hour|
|Missouri||$11.15 / hour|
|Montana||$9.20 / hour|
|Nebraska||$9.00 / hour|
|Nevada||$10.50 / hour|
|New Hampshire||$7.25 / hour|
|New Jersey||$13.00 / hour|
|New Mexico||$11.50 / hour|
|New York||$13.20 / hour|
|North Carolina||$7.25 / hour|
|North Dakota||$7.25 / hour|
|Ohio||$9.30 / hour|
|Oklahoma||$7.25 / hour|
|Oregon||$13.50 / hour|
|Pennsylvania||$7.25 / hour|
|Rhode Island||$12.25 / hour|
|South Carolina||$7.25 / hour|
|South Dakota||$9.95 / hour|
|Tennessee||$7.25 / hour|
|Texas||$7.25 / hour|
|Utah||$7.25 / hour|
|Vermont||$12.55 / hour|
|Virginia||$11.00 / hour|
|Washington||$14.49 / hour|
|West Virginia||$8.75 / hour|
|Wisconsin||$7.25 / hour|
|Wyoming||$7.25 / hour|
|Puerto Rico||$8.50 / hour|
|District of Columbia||$15.20 / hour|
|Federal||$7.25 / hour|
Source: Minimum-Wage.org – Updated on 08/15/2022
Federal minimum wage increases are still being debated.
Meanwhile, Democrats in the House and Senate have launched the Raise the Wage Act of 2021, which would gradually raise the federal minimum wage to $15 per hour by 2025. The nationally mandated minimum wage was last increased to $7.25 per hour in 2009. In addition, the United States Department of Labor has released new minimum pay rates for employees who work on or are associated with federal contracts. For existing contracts, the cost will rise to $11.25 per hour on January 1, 2022. Starting January 30, 2022, the rate for work performed on new, renewed, and extended contracts will be $15.
The effect of increased minimum wage on company
Some business owners believe that wage increases will have little impact on their operations because they currently pay over the minimum wage in the US. According to CNBC, wages have increased at a 6% annual rate over the last six months. Due to workforce shortages, many jobs, including part-time and entry-level employment, now provide starting rates that are greater than the mandated wage. This means that hourly wage jobs are being paid at never-before-seen levels.
Employers are evaluating their compensation structures and other benefits in light of today’s tight labor market and severe competition. According to a recent Washington Post piece, employers have stated that, in addition to addressing the labor crisis, wage hikes help recruit stronger candidates, minimize attrition, and improve corporate morale and culture. PeopleReady recently collaborated with a major national store to develop a temp-to-hire staffing model that included higher salaries, which increased attendance and employee retention.
New overtime and salary regulations are scheduled in 2022.
Higher state minimum salaries imply an increase in the minimum salary required to be overtime exempt in 2022. In some places, the minimum salary criterion for overtime exemption rises in lockstep with the minimum wage in 2022. According to the Society of Human Resource Management, employers may be obliged to raise exempt employees’ salary or reclassify them as nonexempt and pay overtime fees.
Employers must first examine employment duties that qualify for a specific exemption, which may differ under federal and state law. They must also evaluate the pay norms of the counties and towns in which they do business to verify that all rules and regulations are followed.
Minimum Wage Workers’ Characteristics
Workers under the age of 25 accounted for 48% of those paid the federal minimum wage or less, although accounting for just under one-fifth of hourly paid workers.
Status as full-time or part-time
Part-time workers (those who work fewer than 35 hours per week) received around 4% of the federal minimum wage or less, compared to about 1% of full-time workers.
Leisure and hospitality had the biggest percentage of workers earning hourly pay at or below the federal minimum wage in 2020 (about 8%). This industry employed three-fifths of all workers paid at or below the federal minimum wage, virtually entirely in restaurants, bars, and other food services. For many of these employees, tips may supplement their hourly salary.
The states with the highest percentages of hourly paid workers earning at or below the federal minimum wage in the South, with South Carolina accounting for nearly 4% and Alabama, Louisiana, Mississippi, and Virginia accounting for around 3%. California, Colorado, Hawaii, Minnesota, Montana, Nebraska, Nevada, Oregon, Vermont, and Washington all had less than 1% of their hourly workers earning at or below the federal minimum wage.
In conclusion, it’s important to know the federal minimum wage for both your workforce and any part-time workers you might employ to ensure you don’t violate any employment regulations and run afoul of state and federal labor laws.
So long as you understand the minimum wage guidelines, and enact them wherever appropriate, your business or company can continue to grow legally and sustainably.
Lastly, remember to rely on the Federal Minimum Wage Guide for further clarification where necessary!