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Minimum Wage in 2022: An Employer’s Guide to Fair Payment of Employees

by Brian Keefe on Feb 8, 2022 8:48:54 AM

Did you know that in addition to the federal minimum wage, all but 5 states have their own laws that govern what you need to pay workers? And if you’re a restaurant owner, you have different requirements for tipped employees. Add to that legislated increases for 2022 and there’s a lot to worry about when it comes to minimum wage. To ensure you’re in compliance, it’s essential that you understand how to pay your workers, or risk penalties.

At Complete Payroll Solutions, we have been providing outsourced payroll services to thousands of companies for over 18 years and know all the minimum wage rules you need to comply with to stay compliant. To help you understand your responsibilities when it comes to paying your workers, here we’ll discuss:

  • What is minimum wage
  • What is the minimum wage in my state
  • Who must pay minimum wage
  • Is minimum wage different for small employers
  • What workers are exempt from minimum wage
  • What are the penalties for not paying minimum wage

After reading this article, you’ll know the steps to take to ensure you’re paying your employees correctly.

What is minimum wage?

Minimum wage is the base level of pay employers are required to pay certain covered employees. Currently, the federal minimum wage for those businesses covered by the Fair Labor Standards Act is $7.25 an hour. Although this is an hourly wage, you don’t have to pay workers by the hour. You can also pay a salary or commission, but the total paid divided by hours worked must equal minimum wage.

In addition to the federal minimum wage, most states also have their own minimum wage that can be the same or more than the federal requirement. If you are subject to both the federal and a state minimum wage law, you’ll need to pay your employee the higher of the two wages.

What must I pay workers in my state?

As we mentioned earlier, five states don’t have their own minimum wage laws, in which case the federal minimum wage applies. Those states are:

  • Alabama
  • Louisiana
  • Mississippi
  • South Carolina
  • Tennessee

In 29 states and the District of Columbia, the minimum wage is above the federal requirement. Two states, Georgia and Wyoming, have minimum wages below $7.25 an hour.

To find out what the minimum wage is in your state, the Department of Labor has a complete listing of the laws. We’ve also compiled them in the chart below.

State

State Minimum Wage

Comments

Alabama

N/A

Employers subject to the FLSA must pay current federal minimum wage

Alaska

$10.34

 

Arizona

$12.80

 

California

$14.00 for employers with 25 employees or less; $15.00 for those with 26 or more

 

Colorado

$12.56

 

Connecticut

$14.00

 

Delaware

$10.50

 

Florida

$10.00

 

Georgia

$5.15

Employers subject to the FLSA must pay the current federal minimum wage

Hawaii

$10.10

 

Idaho

$7.25

 

Illinois

$12.00

Applicable to employers with 4 or more employees

Indiana

$7.25

Applicable to employers with 2 or more employees

Iowa

$7.25

 

Kansas

$7.25

 

Kentucky

$7.25

 

Louisiana

N/A

Employers subject to the FLSA must pay the current federal minimum wage

Massachusetts

$14.25

 

Maine

$12.75

 

Maryland

$12.50 for employers with 15 or more employees; $12.20 for those with 14 or fewer employees

 

Michigan

$9.87

Applicable to employers with 2 or more employees

Minnesota

$10.33 for large employers; $8.42 for small employers

Large employers are those with annual revenues of $500,000 or more

Missouri

$11.15

 

Mississippi

N/A

Employers subject to the FLSA must pay the current federal minimum wage

Montana

$9.20 for businesses with gross sales of over $110,000; $4.00 for businesses not covered by the FLSA with gross sales of $110,000 or less

 

North Carolina

$7.25

 

North Dakota

$7.25

 

Nebraska

$9.00

 

New Hampshire

$7.25

 

New Jersey

$13.00

 

New Mexico

$11.50

 

Nevada

$9.75 if the employers doesn’t provide health insurance benefits; $8.75 for employers who provide health insurance benefits

 

New York

$13.20; $15.00 for Long Island & Westchester County; $15.00 for New York City

 

Ohio

$9.30 for employers with gross receipts of $342,000 or more; $7.25 for employers with gross receipts under $342,000

 

Oklahoma

$7.25 for employers with 10 or more employees and employers with gross sales over $100,000; $2.00 for all other employers not covered by the FLSA

 

Oregon

$13.50

 

Pennsylvania

$7.25

 

Rhode Island

$12.25

 

South Carolina

N/A

Employers subject to the FLSA must pay the current federal minimum wage

South Dakota

$9.95

 

Tennessee

N/A

Employers subject to the FLSA must pay the current federal minimum wage

Texas

$7.25

 

Utah

$7.25

 

Vermont

$12.55

 

Virginia

$11.00

 

Washington

$14.49

 

Wisconsin

$7.25

 

West Virginia

$8.75

 

Wyoming

$5.15

Employers subject to the FLSA must pay the current federal minimum wage

District of Columbia

$15.20

 

Who must pay minimum wage?

The FLSA – and its minimum wage rules – applies to employees who work at businesses that have gross sales of $500,000 as well as to smaller companies where employees are engaged in interstate commerce or the production of goods for commerce.

Even if your business is exempt from the federal minimum wage requirements, you may still be subject to your state law so it’s important to check the requirements with your department of labor. For example, you may not be subject to federal minimum wage rules if you’re under a certain size, but you may still have to comply with the minimum wage in your state.

Do small businesses have to pay the same wage? 

While the federal minimum wage does not vary, as you can see from the chart above, some states have a lower minimum wage for small employers, like California. Each state with a different rate based on size determines what qualifies as a “small employer” using their own criteria, which could be sales or number of employees.

What workers are exempt from minimum wage?

On a federal level, there are certain groups of workers that are exempt from minimum wage requirements such as white collar employees, farm workers on small farms, seasonal recreational employees, and companions for the elderly.

Many states have other exemptions. For example, in Rhode Island, individuals who work between May 1 and October 1 in a resort establishment that regularly serves meals to the public and is only open 6 months a year are exempt.

In addition, you may be able to pay a lower federal minimum wage for other employees. Under the FLSA, these include:

  • Workers with disabilities: Employers who receive a certificate from the Department of Labor can pay subminimum wage to workers who have disabilities, which must be commensurate wage rates based on the employee’s productivity in proportion to the wage and productivity of experienced workers without disabilities.
  • Full-time students: If you obtain a certificate from the Department of Labor for the Full-time Student Program, you can pay 85% of the minimum wage.
  • Youth under age 20 in their first 90 days of employment: These workers have a minimum wage of $4.25 an hour.
  • Tipped employees: You may pay a tipped employee a minimum of $2.13 an hour in wages if that amount plus what they make in tips equals at least the minimum wage; otherwise, you’ll need to make up the difference.
  • Student learners: High school students aged 16 and over who are enrolled in vocational education classes can be paid 75% of the minimum wage if you obtain a certificate from the Department of Labor.

Similarly, many states outline circumstances in which different wages may be paid such as lower rates for minors so it’s important that you check your state’s laws with your department of labor.

What are the penalties for not paying minimum wage?

If you’re covered by the FLSA and not paying the federal minimum wage, the Department of Labor’s Wage and Hour Division may investigate to determine your compliance with the law. If they find a violation, they may recommend changes in your practices or, if the violations are willful, you may face civil penalties of up to $1,000 for each violation.

A state can also take action if you violate its applicable minimum wage law. For example, in New York, if you don’t pay the state minimum wage, the Commissioner of Labor may require you to pay minimum wage underpayments and liquidated damages plus interest and civil penalties up to 200% of unpaid wages.

How to Stay Compliant with my State’s Wage Rules

As you can see, there’s a lot to consider when it comes to paying your workers properly. And understanding all the differences in rates based on your size, industry, and type of worker can be daunting. To ensure you get payroll right, you may be thinking about partnering with an outsourced payroll provider who can help you understand the federal, state, and local laws you need to comply with.

If you’re looking at vendors, Complete Payroll Solutions may be a good fit for you if you want:

  • Data security with 24/7 monitoring
  • A stable vendor
  • A team of local payroll specialists
  • Solutions beyond payroll such as outsourced HR and employee benefits
  • Seamless integration with your other business systems
  • Paperless payroll options that make pay more instantaneous

To learn more about our offerings, visit our dedicated payroll page. For more information on payroll requirements to ensure you get minimum wage and steps right, read our beginner’s guide to payroll.

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