What Is Minimum Wage?

Put simply, the minimum wage is the minimum monetary compensation required of the majority of enterprises by state and federal laws. Click here to see if your company is required to comply.

What Is Important for Employers to Know About Minimum Wage?

Per the Department of Labor, “Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each violation.” Compliance is not only the right thing to do for your workers, but also better for your bottom-line. With the importance of legal compliance in mind, these are the specifics to watch out for:

  • State-specific laws. Not only are there state-mandated minimum wage requirements, there can also be federal and state laws entitling employees to the higher of the two minimum wages.
  • Overtime specifications. Minimum wage legal requirements also specify minimum overtime pay requirements.
  • Exemptions. Legally required wages vary to cover exceptions for workers with disabilities, full-time students, those under the age of 20 (in their first 90 days), tipped employees and student learners.
  • Subject to change. It is common for minimum wage to be adjusted for a variety of reasons and each company is responsible for ensuring their minimum wage remains in line with the changing legal requirements.

Employees That Are Exempt From Minimum Wage

Minimum wage laws are very thorough and cover many different situations where the wage will vary. These exemptions include:

Workers With Disabilities

These workers are defined as impaired by a physical or mental disability. This includes issues related to age or injury. These workers are subject to subminimum wage to prevent loss of employment opportunities for these individuals. An organization looking to pay their disabled workers subminimum wage must obtain a subminimum wage certificate from the Wage and Hour Division of the Department of Labor (DOL).

Full-Time Students

Student-workers in this category are eligible for the Fair Labor Standards Act (FLSA) full-time student program. This enables employers to pay these workers no less than 85% of the minimum wage and limits the hours the student may work. Additionally, it requires the employer to follow all child labor laws. For organizations to utilize this program they must obtain a certificate from the DOL Wage and Hours Division.

Workers Under 20

For their first consecutive 90 calendar days of employment, an employer can opt to pay these individuals no less than $4.25/hour. After the first 90 days or the worker reaches age 20 (whatever comes first), they must receive wages compliant with federal minimum wage laws.

Tipped Employees

Employees in an industry or position who regularly receive more than $30 of tips a month can be subject to tipped employee wages. The amount of this kind of wage is dependent on both federal and state laws.

Student Learners

This classification of workers refers to high school students at least 16 years of age who are enrolled in vocational education or “shop courses.” Students who meet these requirements can be paid no less than 75% of minimum wage. An employer must hold the proper certificate from DOL’s Wage and Hour Division’s, the National Certification Team, to employ student learners.

When Does Minimum Wage Increase?

The minimum wage does not automatically increase. The federal minimum wage goes through a process and must be passed by Congress and then signed into law. How often the state minimum wage is adjusted depends on the state. It is typically reviewed annually.