Glossary of Human Resources Management and Employee Benefit Terms
Minimum wage is the lowest wage an employer can pay an hourly employee according to the Fair Labor Standards Act (FLSA). The current federal minimum wage for U.S. non-exempt workers is $7.25 per hour. Some states mandate a higher minimum wage than the federal minimum wage; employers must follow their state minimum wage if it is higher than the federal minimum wage. In states where the state minimum wage is lower than the federal minimum wage, employers must pay non-exempt employees the federal minimum wage.
Washington, D.C. has the highest minimum wage at 15 dollars per hour as of July 1, 2020. This is followed by Washington at $13.50 per hour and California at 13 dollars per hour. The state with the lowest minimum wage is Georgia at $5.15 per hour; however, because that is below the federal minimum wage, Georgia employers are required to pay the federal minimum rate. To review each state’s minimum wage laws, visit the U.S. Department of Labor website.
The federal minimum wage does not increase on a regular or set basis. In order for the minimum wage to increase, Congress must pass a bill and the president must sign it into law. As of July 2020, the last time the federal minimum wage was increased was in 2009. States are in control of their own minimum wage requirements and can increase it in accordance with state laws. In past years, this has been done by legislation, ballot, or state constitutional amendment.
The following employees are exempt from federal minimum wage:
Commissioned sales employees
Seasonal and recreational establishment workers
Executive, administrative, professional, and outside sales employees who are paid on a salary basis
Babysitters on a casual basis
Companions for the elderly
Workers with disabilities
Federal criminal investigators
Newspaper delivery people
Newspaper employees for limited circulation newspapers
Seaman on non-American vessels
Employers with workers in these areas should review federal and state minimum wage laws.
Employers may pay tipped workers a minimum of $2.13 an hour if:
That amount plus tips equals at least the federal (or state if it is higher) minimum wage
The employee keeps all tips
The employee regularly makes more than 30 dollars in tips each month
If an employee’s tips and $2.13 an hour wage do not equal minimum wage, the employer must make up the difference.
Some states have their own laws for paying workers who receive tips. Be sure to review all relevant labor laws in any state you have employees.
If an employee is under 20 years old, they can be paid a minimum wage of $4.25 per hour for their first 90 days of employment. If they are employed for more than 90 days or turn 20 during that time, they must be paid the federal or state minimum wage (whichever is higher).