You can’t pay just any amount you want when it comes to setting the salaries or wages of your employees. There’s a minimum wage law that you must follow.
Employers must understand the minimum wage to comply with labor laws. It’s essential to note, however, that you might have differing local, state, and federal minimum wage rates, depending on the location of your business. So, what’s a minimum wage? More on it below.
Minimum Wage: What Is It?
The most important thing to remember about the minimum wage is that you can pay more than it, but you can’t pay less than the set amount. It’s the lowest amount an employer can pay to their specific employee per hour of work. As already mentioned, the minimum wage may vary on the federal, state, and local levels.
How Much Is The Federal Minimum Wage?
The federal minimum wage rate hasn’t increased since 2009, although it’s actually subject to change. It was raised to $7.25 in 2007 (made effective in July 2009) through The Fair Minimum Wage Act. All nonexempt employees must be paid by this rate for each hour of work up to and including 40 hours in a calendar workweek. A time-and-half calculation is going to be made for overtime pay. It covers any time beyond 40 hours. It works out to a minimum of $10.88 per hour.
The FLSA or Fair Labor Standards Act regulates the federal minimum wage. It’s enforced by the United States Department of Labor.
The minimum wage doesn’t only apply to hourly workers. That said, even if you actually don’t pay the employees of your company on an hourly basis, the federal minimum wage law still applies to you.
Even if the law states that the minimum wage should be paid for every hour worked, it doesn’t require employers to pay their employees on an hourly basis. What happens is that you’ll be required to pay all covered employees for a workweek with an amount of money that’s at least equal to what the minimum wage is.
All you need is to multiply the minimum wage by the total hours of work. As long as the minimum requirement of $7.25 is followed, an employee may be paid on piecework, through a monthly salary, or on an hourly basis.
How Much Is the State Minimum Wage?
The United States Department of Labor has an overview of minimum wage requirements for every state. All you need is to visit their website or look for the most up-to-date state minimum wage requirements online.
Many states across the US maintain the federal’s minimum wage, which is $7.25. Utah, Idaho, and Texas are some of the states that do it. States like Oregon and California are on the other end of the spectrum. They require a higher minimum wage of $11.25 and $11, respectively. Of all the states, New York currently sets the highest in the whole country at $13.
It’s essential to note that a city may require employers to pay a higher minimum wage amount than the state requires. You’ll commonly encounter it in big cities where there’s a much higher cost of living compared to others. A good example is the state of Washington, which requires just $11.50. However, one of its cities, Seattle, has a minimum wage requirement of $15.45.
Minimum wage requirements for every state are helpful because they give employers a non-negotiable place where they can start determining their employees’ pay scale. Also, ensuring that you’re offering the right minimum wage and other benefits to your staff is one way of showing your employees you care.
Local Minimum Wage
As already mentioned, aside from federal and state minimum wage requirements, your city may also create a local minimum wage. Bigger cities often have local base wages. The minimum pay rate in your city can be greater than both the federal and state minimum wage requirements.
For example, San Francisco’s minimum wage of $15.59 is higher than California’s. It’s also more than double the federal requirement of $7.25. So, what happens if your city’s minimum wage is higher than the federal and state minimums? Learn what you should do below.
Federal Vs. State Vs. Local Minimum Wage
What happens if the local wage is higher than the federal one? What about if the state’s minimum wage is higher than the federal requirement?
If the state minimum wage is higher than the federal wage, employers must pay their employees at least the state rate. Similarly, if the local rate is higher than the federal, you must pay the minimum wage set by your city. That means you’ll have to pay your employees whichever is the higher minimum wage rate.
It’s of utmost importance that employers comply with the minimum wage rates set by both the federal and state governments. Under federal law, a minimum wage should be established as required by the Fair Labor Standards Act (FLSA). Generally, all employees who aren’t exempted from the law should receive that minimum wage.