Isabella Carter
The federal minimum wage in the US is $7.25 per hour, as outlined in the Fair Labor Standards Act (FLSA). However, the minimum wage an employee is entitled to depends on the state in which they reside, as well as their employment status. For example, the minimum wage for tipped employees is $2.13 per hour, and full-time students are allowed to be paid 85% of the minimum wage. In some states, the minimum wage is higher than the federal minimum, while in others, it is lower. This discrepancy has led to a debate about what constitutes the 25 employee test for minimum wage, with the Biden administration signing an executive order in 2021 to raise the minimum wage to $15 for federal contractors, only to be revoked by the Trump administration in 2025.
| Characteristics | Values |
|---|---|
| Federal minimum wage | $7.25 per hour |
| Minimum wage for tipped employees | $2.13 per hour |
| Minimum wage for employees under 20 for their first 90 days of employment | $4.25 per hour |
| Minimum wage in Flagstaff, Arizona | $17.85 per hour |
| Minimum wage in Georgia and Wyoming | $5.15 per hour |
| Minimum wage for federal contractors | $13.30 per hour |
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What You'll Learn
Covered and non-exempt employees
The federal minimum wage in the US is $7.25 per hour, as established by the Fair Labor Standards Act (FLSA) in 1938. This applies to workers who are both covered and non-exempt.
Who are 'covered' employees?
Covered employees are those employed by a business with annual sales of $500,000 or more, or by a government agency, school, hospital, or residential nursing home. Covered employees also include those involved in interstate commerce or who are domestic workers, such as cooks, babysitters, and housekeepers. Non-profits are generally not considered covered organisations unless they have a commercial aspect, such as a gift shop or a service for a fee.
Who are 'non-exempt' employees?
Non-exempt employees are those who are paid by the hour and do not earn above a certain threshold, making them eligible for minimum wage. Exempt employees, on the other hand, earn a fixed salary that is not dependent on the number of hours worked, and they may also be paid above a specific threshold, excluding them from minimum wage requirements and often from overtime pay.
Minimum wage variations
While the federal minimum wage is $7.25 per hour, many states and cities have established their own minimum wages, with some setting rates more than double the federal minimum. In cases where an employee is subject to both state and federal minimum wage laws, they are entitled to the higher of the two minimum wages. Certain exceptions and exemptions also exist, where some workers may earn less than $7.25 per hour. For example, tipped employees may be paid a minimum of $2.13 per hour, as long as their tips bring their total earnings up to or above the federal minimum wage.
Other minimum wage programs
There are also programs that allow for the payment of less than the federal minimum wage, such as the Full-time Student Program, which permits students to be paid 85% of the minimum wage, and similar programs for workers with disabilities and student-learners. Additionally, the Youth Minimum Wage Program allows employees under the age of 20 to be paid a minimum of $4.25 per hour during their first 90 consecutive calendar days of employment, provided their work does not displace other workers.
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State and federal minimum wage laws
In the United States, the federal minimum wage for covered nonexempt employees is $7.25 per hour. This minimum wage was established in the Fair Labor Standards Act (FLSA) in 1938, which initially set it at $0.25 an hour. Since then, it has been amended periodically, with the most recent increase to $7.25 in July 2009. The FLSA outlines the criteria for “covered” employees, which include those employed by businesses with annual sales over $500,000, government agencies, schools, hospitals, and more. Additionally, it covers those involved in interstate commerce and domestic workers.
While the federal minimum wage sets a baseline, many states have also enacted their own minimum wage laws, which often exceed the federal standard. In cases where an employee is subject to both state and federal minimum wage laws, they are entitled to the higher of the two minimum wages. For example, states like California, Oregon, and Florida have implemented minimum wages that are higher than the federal rate. Furthermore, in some states, cities and municipalities are empowered to establish their own minimum wage rates, which may differ from the statewide minimum. This allows for a more tailored approach to address local cost-of-living considerations.
However, it is worth noting that not all states have a minimum wage mandate. As of 2019, five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—do not have a state-mandated minimum wage. Additionally, certain states have wage requirements below the federal minimum, applicable to employees who are not covered by the FLSA. The FLSA does not provide wage payment or collection procedures for employees' usual or promised wages beyond what is required by the Act. Nevertheless, some states have laws that allow for claims related to wages and fringe benefits.
The Youth Minimum Wage Program allows employers to pay employees under the age of 20 a minimum wage of $4.25 per hour for their first 90 consecutive calendar days of employment, provided that their employment does not displace other workers. Additionally, the Equal Pay Act of 1963 prohibits sex-based wage discrimination between employees of different sexes performing jobs requiring equal skill, effort, and responsibility. This Act ensures equal pay for equal work, regardless of gender.
The minimum wage laws are administered and enforced by the Department of Labor's Wage and Hour Division, which also provides resources for employees to understand their rights and protections under these laws.
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Tipped employees
The federal minimum wage for covered nonexempt employees is $7.25 per hour. However, the minimum an employer must pay depends on the state in which the employee resides. Many states have mandated minimum wages that differ from the federal minimum. For example, in California and Washington, employers are required to pay the full minimum wage before tips. In contrast, other states like Georgia, Kansas, Oklahoma, Texas, and Utah have minimum wage laws that do not apply to tipped employees.
Regarding tipped employees, a federal law defines a tipped worker as anyone who makes at least $30 per month in tips. The tipped minimum wage rate is $2.13 per hour, and employers can pay this lower base wage as long as the employee's tips bring their total earnings up to the federal or state minimum wage. This is known as a "tip credit," and employers can claim a tip credit for the difference between the base wage and the minimum wage. For example, in a state with a $7.25 minimum wage, employers can pay tipped workers $2.13 per hour and claim a tip credit of $5.12. However, many states require higher direct wage amounts for tipped employees.
In some states, there are additional requirements for employers to claim a tip credit. For instance, in New Jersey, employers can only apply a tip credit if tipped employees have been informed in advance of the cash wage they will be paid, the amount of the tip credit claimed, and the relevant regulations. In North Carolina, employers must obtain a signed certification of the amount of tips received from each employee monthly or during each pay period to claim a tip credit.
While supporters of the tipped minimum wage argue that it helps restaurants manage labour costs and allows servers to earn above the minimum wage through tips, critics argue that it creates income instability for workers and makes them overly reliant on customer generosity. As a result, there is a divide among policymakers, business owners, and labour advocates regarding maintaining a separate, lower minimum wage for tipped workers.
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Full-time students
The Fair Labor Standards Act (FLSA) sets the federal minimum wage for covered non-exempt employees at $7.25 per hour. However, the FLSA also allows for certain exceptions, including for full-time students.
The certificate limits the number of hours a student may work to eight hours a day, 20 hours a week when school is in session, and 40 hours when school is out. It also requires the employer to follow all child labor laws. Once a student graduates or leaves school, they must be paid the full federal minimum wage of $7.25 per hour.
It is important to note that the FLSA does not consider interns and students as employees in some cases. Courts use the "primary beneficiary test" to determine whether an intern or student qualifies as an employee under the FLSA. This test examines the "economic reality" of the relationship between the intern and the employer to determine who is the primary beneficiary. If the intern or student is found to be the primary beneficiary, they are not considered employees and are not entitled to minimum wage or overtime pay under the FLSA.
In addition to federal minimum wage laws, many states also have their own minimum wage legislation. In Ontario, the minimum wage for students under the age of 18 who work 28 hours or less per week when school is in session or during school breaks is $17.20 per hour.
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Youth minimum wage
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record-keeping, and youth employment standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. The federal minimum wage for covered non-exempt employees is $7.25 per hour. However, the federal minimum wage varies for tipped employees, who must be paid at least $2.13 an hour if that amount plus tips equals at least the federal minimum wage.
The Youth Minimum Wage Program, authorized by Section 6(g) of the FLSA, allows employers to pay employees under 20 years of age a lower wage of $4.25 per hour for a limited period of 90 calendar days after they are first employed. This program is applicable to young workers under the age of 20 during their first 90 consecutive days of employment with an employer, as long as their work does not displace other workers. After 90 days of employment, or when the worker reaches the age of 20, the worker must receive at least the federal minimum wage.
The FLSA contains certain protections for employees that prohibit employers from displacing any employee in order to hire someone at the youth minimum wage. It is illegal for employers to terminate employees or reduce their hours, wages, or benefits for the purpose of employing someone at the youth minimum wage.
In addition to the Youth Minimum Wage Program, there are other programs that allow for payment of less than the full federal minimum wage for young workers. These include the Full-Time Student Program, which is for full-time students employed in retail, service stores, agriculture, or colleges and universities. Employers can obtain a certificate from the Department of Labor that allows students to be paid not less than 85% of the minimum wage. The certificate limits students to working no more than 8 hours per day and 20 hours per week when school is in session, and 40 hours when school is out. There is also a program for high school students enrolled in vocational education (shop courses), who can be paid not less than 75% of the federal minimum wage while they are enrolled in the program.
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Frequently asked questions
The federal minimum wage in the US is $7.25 per hour.
The federal minimum wage for tipped employees is $2.13 per hour, as long as the amount plus tips equals at least the federal minimum wage.
No, five states — Alabama, Louisiana, Mississippi, South Carolina, and Tennessee — do not have a state-mandated minimum wage.
Full-time students can be paid 85% of the minimum wage, which is $6.16 per hour.
Employees under 20 can be paid a minimum wage of $4.25 per hour for their first 90 days of employment.
