Minimum Wage: The Complete Employer Guide for Every State

The first employee I ever hired, I paid $12 an hour. I picked the number because it felt fair and it was what I could afford. I did not check the state minimum wage. I did not check whether my city had a local rate.

I did not know that the federal minimum wage, the state minimum wage, and the city minimum wage were three different numbers and that I was legally required to pay whichever was highest. I got lucky: $12 happened to be above all three. But I did not know that until months later, which means I was one bad guess away from a wage violation on my very first hire.

Minimum wage compliance sounds simple: pay at least the minimum. But for a small business owner in the United States, "the minimum" is a stack of federal, state, and local rates that change on different dates. Thirty states plus DC have rates above the federal $7.25, and dozens of cities and counties set their own. When there is no HR department to hand this to, keeping all of it straight falls on you.

This guide sorts that stack out for you: the current federal rate and why it has not changed since 2009, the rate in every state, which rate applies to each of your employees, and the rules on classification under the Fair Labor Standards Act (FLSA), tip credits, posters, records, and penalties. It also shows how minimum wage connects to the onboarding process that most employers overlook.

What Is Minimum Wage?

The concept is simple. Applying it is harder, because the United States does not have a single minimum wage but a patchwork of state and local rates layered on top of the federal floor. A restaurant chain with locations in three cities within one state might owe three different minimum wage rates. A remote-first company with employees in 10 states must follow 10 different rate schedules, each changing on different dates.

For small businesses, the practical question is never "what is the minimum wage?" It is "which minimum wage applies to each of my employees, and when does it change?" Getting that answer wrong is an easy route to wage violations, because owners assume there is one number when there are many.

What "Minimum Hourly Rate" and "Federal Wage" Mean

Minimum hourly rate is the same thing as minimum wage, phrased the way it appears on a job posting: the lowest amount a covered employer can legally pay for an hour of work, before tips, bonuses, or shift differentials. It covers every hour on the clock, including orientation and required training.

Federal wage, in this context, means the rate the FLSA sets nationally rather than anything a state legislature did. It is a floor, not a going rate, and it governs only where nothing higher applies. People also use the phrase for what the federal government pays its own staff, which runs on separate pay scales and says nothing about what a private employer owes.

The Federal Minimum Wage

The federal minimum wage is $7.25 per hour. It has not changed since July 24, 2009. This is the longest period without an increase in the history of the Fair Labor Standards Act, which established the first federal minimum wage in 1938.

Inflation has eaten into that rate since 2009. The Bureau of Labor Statistics CPI-U, its consumer price index for urban consumers, stood at 334.980 in August 2026. At that level, the $7.25 an employer paid in July 2009 would have to be $11.28 today to buy the same goods. The real value of the federal minimum wage has fallen by roughly 36% since the day it took effect.

The FLSA applies to enterprises with annual gross sales of at least $500,000 and to individual employees engaged in interstate commerce or producing goods for interstate commerce. In practice, this covers nearly every small business. Using the internet for business, accepting credit card payments, ordering supplies from another state, or serving customers who travel from other states all constitute interstate commerce. If your business does any of these things, the FLSA applies to you.

Multiple bills have been introduced in Congress to raise the federal minimum wage, including proposals for $15 and $17 per hour. None have become law.

With federal action stalled, states and cities took the lead: 30 states and DC now have rates above $7.25, and dozens of cities and counties have their own higher rates. The practical effect is that in most of the country, the rate you actually owe is a state or local one, not the federal one.

Who the Federal Minimum Wage Applies To

Federal coverage runs through two routes, the employer's annual sales or the employee's own interstate work, and it also reaches state and local government employees and qualifying domestic workers. Workers with disabilities and full-time students can be paid less only under a certificate from the Department of Labor (DOL).

Federal Minimum Wage History

Congress has raised the federal minimum wage 22 times since 1938, according to the DOL history of federal minimum wage rates. The gaps between increases have grown longer with each decade, and the current stretch at $7.25 is the longest in the law's history.

The peak purchasing power of the federal minimum wage was in 1968, when the rate stood at $1.60 per hour. Converted with the same CPI-U series, that is about $15.40 in 2026 dollars, more than double the current federal rate in real terms. The growing gap between the federal rate and the cost of living is the primary driver behind state and local governments setting their own, higher rates.

For employers, the historical pattern has a practical implication: when the federal minimum wage does eventually increase, it tends to increase in steps (the 2007-2009 increase went from $5.15 to $7.25 in three annual steps). Multi-step increases give employers time to adjust payroll budgets, but they also mean tracking a changing rate for two to three consecutive years.

Minimum Wage by State: All 50 States + DC

The following table shows the minimum wage rate for every US state and the District of Columbia, taken from the DOL Consolidated State Minimum Wage Update Table as revised July 1, 2026. Where a state runs regional tiers, the rate column shows the range and the notes break out each tier.

Where a row leads with a January 1, 2027 rate, that rate is already published or written into state law, and the 2026 rate follows in parentheses. Other states publish or legislate their 2027 changes on their own timetables, so confirm with the state labor department before you set January payroll.

Three patterns stand out for employers. First, geographic clustering: the highest rates are concentrated on the West Coast (WA, OR, CA), in the Northeast (CT, NJ, NY, MA), and in select Midwest states (IL, MO, NE). The lowest rates sit in the South and parts of the Mountain West.

Second, the $15 tier keeps growing. In 2020 the District of Columbia was the only jurisdiction at that level; now eighteen states plus DC sit at $15.00 or above, counting Florida from September 30, 2026. Third, automatic indexing is becoming standard: a large group of states now adjusts its rate by formula, most often tied to the consumer price index (CPI), so the number changes every year without new legislation.

Highest and Lowest Minimum Wage States

The gap between the highest and lowest minimum wage jurisdictions in the United States is dramatic: $18.40 per hour in Washington DC versus $7.25 in 20 states. For a full-time worker (2,080 hours/year), that is the difference between $38,272 and $15,080 in annual gross earnings.

Local rates add another layer. Burien, Washington has the highest general local minimum wage in the country at $21.78 per hour for employers with 501 or more employees. Tukwila follows at $21.65 and Seattle at $21.30, while SeaTac pays $20.74 to hospitality and transportation workers.

Several California cities exceed the state rate: West Hollywood at $20.25, San Francisco at $19.61, and San Jose at $18.45. Denver, Colorado raises its local rate to $19.84 on January 1, 2027 ($19.29 through December 31, 2026), well above the new $15.71 state rate.

For small business owners, the practical takeaway is that knowing your state rate is necessary but not sufficient. If you operate in a city with its own minimum wage ordinance, or have employees working in one, you must pay the city rate whenever it is higher.

What the Average Minimum Wage Actually Is

Average the rate an FLSA-covered employer has to pay across all 50 states and the District of Columbia and the answer is about $11.53 an hour, with a median of $11.85. That calculation uses each state's standard rate where regional tiers exist, Florida's $15.00 from September 30, 2026, and $7.25 in the states whose own figure sits below the federal floor.

The spread underneath the average is the useful part. Twenty jurisdictions still sit at $7.25 because they match the federal rate, sit below it, or have no wage law of their own, and 31 are above it. An average weights Wyoming the same as California, so it describes the map rather than the workforce, and no payroll anywhere is run at that number.

States Raising Their Minimum Wage

Twenty-two states raised their minimum wage at some point during 2026. Nineteen of those increases took effect January 1. Alaska and Oregon moved on July 1, and Florida moves on September 30, which is the pattern that catches employers who check their rates once a year.

The January 1, 2027 round is already partly published. New Jersey moves from $15.92 to $16.48, according to its minimum wage chart (MW-570, 9/26). California goes to $17.40, Colorado to $15.71, Minnesota to $11.87, Montana to $11.20, Michigan to $15.00 under Senate Bill 8, and Virginia to $13.75 under its amended statute.

Eight states with minimum wages above the federal rate did not increase in 2026: Arkansas ($11.00), Delaware ($15.00), Illinois ($15.00), Maryland ($15.00), Massachusetts ($15.00), Nevada ($12.00), New Mexico ($12.00), and West Virginia ($8.75). None of them index to inflation, so their rates hold until new legislation passes.

The difference between indexed and legislatively set rates matters for long-term planning. If your employees work in a state that indexes its rate, expect a change every year, in most of those states in January, and budget for it. If they work in a state that raises its rate by legislation, the rate holds until the next law passes, which could be years.

Federal vs State Minimum Wage: Which One Applies?

The rule is simple and absolute: pay whichever rate is highest. This is not an either/or decision. Both federal and state laws apply at the same time, and when a state rate differs from the federal minimum wage, the higher rate governs. The DOL states this explicitly: "In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages."

The federal-vs-state question gets more nuanced in three specific situations. First, employers with operations in multiple states must apply the correct rate for each location separately. You cannot average the rates or apply your headquarters rate to all employees.

The second situation is an employee who works in several jurisdictions, such as a delivery driver crossing state lines. No single federal rule picks the state for that employee: each state decides how far its own law reaches, so pay the highest rate that could apply. Third, for remote employees, the rate of the state where the employee physically performs the work applies, not the state where the employer is located.

FLSA Minimum Wage Rules for Employers

The Fair Labor Standards Act is the federal law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards. For minimum wage purposes, employers need to understand four FLSA concepts: enterprise coverage, individual coverage, the regular rate of pay (the hourly figure overtime is calculated from), and hours worked.

Enterprise Coverage vs Individual Coverage

The FLSA applies in two ways. Enterprise coverage applies to all employees of a business with annual gross sales of $500,000 or more. Individual coverage applies to employees who are personally engaged in interstate commerce, regardless of the employer's size.

In practice, individual coverage catches almost every business not already covered by enterprise coverage. Interstate commerce includes using email, making phone calls across state lines, handling goods that moved in interstate commerce, or accepting out-of-state credit card payments.

What Counts as "Hours Worked"

Under the Department of Labor's rules at 29 CFR 785.7, "hours worked" include all time an employee is necessarily required to be on the employer’s premises, on duty, or at a prescribed workplace. Those rules draw on Supreme Court decisions. They also count time an employee is "suffered or permitted to work": if you know or should know that an employee is working, that time counts even if you did not explicitly authorize it. For minimum wage compliance, this means:

The onboarding implication is critical: every minute a new hire spends in orientation, training, completing paperwork, or reading required materials during their first days must be compensated at or above the minimum wage. An employer who runs a half-day unpaid orientation before the employee’s "official start" is violating the FLSA.

Exempt vs Non-Exempt Employees

Not all employees are covered by FLSA minimum wage and overtime provisions. The FLSA exempts certain categories of employees, primarily those in executive, administrative, professional, computer, and outside sales roles. The exemption has two tests: the salary basis test and the duties test.

The $684 threshold comes from a 2019 DOL rule, and it is the figure in force today, confirmed by DOL Fact Sheet #17A. A 2024 rule would have raised it to $1,128 per week ($58,656 a year), but a federal court in Texas vacated (struck down) that rule nationwide in November 2024.

The Department then removed the vacated text from the Code of Federal Regulations in a technical amendment effective May 15, 2026. Employers should still watch for new DOL rulemaking on the salary level.

Misclassifying a non-exempt employee as exempt is one of the most expensive minimum wage violations. If an employee who should be non-exempt works 50 hours in a week at an effective rate below the minimum wage (because they receive a flat salary with no overtime), the employer owes back pay for the minimum wage shortfall plus liquidated damages.

Who Is Exempt From Minimum Wage Laws?

A small set of worker categories is exempt from the FLSA minimum wage entirely, not just from overtime. The list is short: executive, administrative, professional, and outside sales employees; workers at seasonal amusement or recreational establishments; employees on small farms; casual babysitters and companions for the elderly or infirm; and newspaper delivery workers.

A few narrower categories round out the list: employees of certain small-circulation newspapers, switchboard operators at small telephone companies, seamen on foreign vessels, and workers in fishing operations. The DOL Handy Reference Guide linked above covers each one. If an employee does not fall squarely into a listed category, minimum wage applies.

Tipped Employee Minimum Wage

The federal tipped minimum wage is $2.13 per hour for employees who regularly receive more than $30 per month in tips. This has not changed since 1991.

Employers can take a "tip credit" of up to $5.12 per hour, which means counting that much of the employee's tips toward the wage. The employee's total compensation (cash wage plus tips) must still equal at least the full federal minimum wage of $7.25 per hour for every hour worked. If tips do not bring the employee to $7.25, the employer must make up the difference.

Seven states prohibit tip credits entirely: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. In these states, tipped employees must receive the full state minimum wage as their cash wage, with tips on top. Several other states allow tip credits but set a higher cash wage floor than the federal $2.13, and the DOL table of minimum wages for tipped employees lists the cash wage and maximum credit for each one.

Tip Credit Requirements for Employers

To lawfully take a tip credit, employers must satisfy all of the following conditions, which come from 29 CFR 531.59. Failure to meet any one condition means the employer must pay the full minimum wage.

Every one of those conditions has to hold in every pay period, so restaurants and hospitality businesses that take a tip credit should audit their compliance on a schedule rather than assume it still holds.

Youth and Training Wages

The FLSA allows a reduced minimum wage of $4.25 per hour for employees under 20 years old during their first 90 consecutive calendar days of employment. This is commonly called the "youth minimum wage" or "opportunity wage." Several important limitations apply:

The full-time student program allows certain employers (retail, service, agriculture, and colleges) to pay full-time students 85% of the minimum wage, but requires a DOL certificate. The student-learner program allows 75% of the applicable minimum for high school students in approved vocational education programs. Both programs are rare in practice and require advance DOL approval.

What Is a Subminimum Wage?

A subminimum wage is any hourly rate below the standard minimum that federal law explicitly permits for a narrow group of workers. The main ones under the FLSA: the tipped cash wage ($2.13), the youth wage ($4.25), student certificate rates, and Section 14(c) certificate rates for workers with disabilities.

Section 14(c) lets employers holding a DOL certificate pay workers whose disability limits their productive capacity a commensurate wage (one scaled to their productivity) below the minimum. On July 7, 2025, the Department withdrew its December 2024 proposal to phase the program out, so certificates remain valid federally. Some states, including California, prohibit them under state law, so verify both layers before relying on a certificate.

Local (City and County) Minimum Wage Rates

Sixty-seven cities and counties in the United States have their own minimum wage rates, typically higher than their state rate, according to the UC Berkeley Labor Center inventory of local minimum wage ordinances. Those ordinances are concentrated in California, Washington, Colorado, and a handful of other states. Some states (including Texas, Georgia, and most Southern states) have preemption laws that prohibit local governments from setting minimum wages above the state level.

For three cities in the table, the January 1, 2027 rate is already published: Denver ($19.84), Flagstaff ($18.95) and Minneapolis ($17.02). Those rows lead with the new rate and show the 2026 figure in parentheses; the other rows compare 2026 local and state rates.

For employers, local rates add complexity to payroll, especially for businesses with multiple locations or mobile workforces within the same metro area. A landscaping company in the Denver metro area might need to pay different rates depending on which municipality a crew works in on a given day.

Industry Minimum Wages: The $20 and $25 Rates

The $20 minimum wage and $25 minimum wage that come up in headlines are industry-specific California rates, not federal proposals. The federal bill aims lower: the Raise the Wage Act of 2025 would take the general federal rate to $17.00 by 2030, and it has not moved past committee.

California's fast food minimum wage has been $20.00 per hour since April 1, 2024, for limited-service restaurants that are part of a chain of more than 60 establishments nationally. The California Department of Industrial Relations (DIR) explains the rule in its fast food minimum wage FAQ, and the chain-size count comes from Labor Code Section 1474.

The $25 figure is California's health care worker minimum wage under SB 525. The largest health systems and dialysis clinics reached $25.00 per hour on July 1, 2026, and the remaining facility tiers phase up to $25.00 over the following years (California DIR). Neither rate applies outside its covered industry.

Minimum Wage Compliance Checklist

Minimum wage compliance is not a one-time setup. It requires ongoing attention because rates change, employees move, and new hires need correct documentation from Day 1. The following checklist covers the essential compliance tasks for small business employers.

The most overlooked compliance task is the twice-yearly rate check. Many small business owners set the rate when they first hire and never update it. In most indexed states the rate changes every January, while Alaska, Oregon, and DC move on July 1. An employer who does not update payroll is underpaying every employee from the effective date forward.

The fix is simple. Set calendar reminders for the second week of December and the last week of June to check for upcoming changes. You do not need a paid minimum wage tracker for this. The DOL Consolidated Table plus your state labor department's rate page, checked on those two dates, does the same job for free.

Posting Requirements

Every employer covered by the FLSA must display the official federal minimum wage poster (WH Publication 1088) in a conspicuous place where employees can readily see it. The requirement itself sits at 29 CFR 516.4. The poster is a free download from the Department of Labor. Employers do not need to buy posters from commercial vendors, though those vendors often consolidate federal, state, and local posters into a single display for convenience.

For remote employees, an electronic poster (email or company intranet) can stand in for the paper one, but only under the conditions in WHD Field Assistance Bulletin 2020-7: the whole workforce works remotely, employees customarily receive information from you electronically, and all of them have ready access to the posting at all times.

If some employees still report to a physical site, the paper poster stays on the wall there. Electronic posting then works only as a supplement for the remote staff.

Recordkeeping Requirements

The FLSA requires employers to keep specific payroll records for every non-exempt employee. There is no required format (paper, electronic, or cloud-based systems all qualify), but the information must be accurate and accessible for inspection by the DOL Wage and Hour Division.

The 3-year retention period is the FLSA minimum. Keeping payroll records longer is a sensible precaution, because state statutes of limitations for wage claims can extend beyond 3 years, and 29 U.S.C. 255 gives the FLSA a 3-year lookback for willful violations (versus 2 years for non-willful).

For small businesses, the simplest approach is to let a payroll provider generate and retain the pay records, since the hours, earnings and deductions already run through it. An HR platform can hold the rest of each employee's file: the offer letter or wage notice showing the agreed rate, signed acknowledgments, and the employee profile.

If using a manual system (spreadsheets, paper timesheets), establish a folder structure by year and employee, and back up digital records to a second location.

Penalties for Minimum Wage Violations

Minimum wage violations carry financial penalties designed to be punitive, not just compensatory. Under 29 U.S.C. 216(b), an employer who underpays owes the unpaid wages plus an equal amount in liquidated damages plus a reasonable attorney fee for the employee, which makes every dollar of underpaid back pay cost two dollars before anyone bills an hour.

The civil money penalties that sit alongside those damages are published on the DOL Wage and Hour Division penalties page. They did not move for 2026, because the Office of Management and Budget told agencies to skip the annual inflation adjustment.

The FLSA also lets employees sue you directly for unpaid wages. Successful plaintiffs can recover back pay, an equal amount in liquidated damages, and reasonable attorney fees. Class action lawsuits for minimum wage violations are common, particularly in industries with high concentrations of minimum wage workers (restaurants, retail, hospitality, janitorial services).

State enforcement comes on top of all that. Many states run their own wage theft laws with penalties that exceed the federal ones: California adds per-pay-period civil penalties, and New York can prosecute nonpayment as a crime with fines up to $20,000.

Federal enforcement is not quiet either. According to the DOL Wage and Hour Division, the agency recovered more than $259 million in back wages for 176,957 workers in fiscal year 2025, an average of $1,465 per worker.

Minimum Wage and the Onboarding Process

Minimum wage compliance starts at onboarding, not at the first paycheck. Three onboarding tasks directly affect minimum wage compliance, and skipping any of them creates risk.

1. Written Wage Notice at Hire

Several states, including California, New York, and Illinois, require employers to provide a written wage notice at hire that specifies the hourly rate, overtime rate, pay schedule, and employer information. Even in states without a formal notice requirement, including the hourly rate in the offer letter or employment agreement is a best practice that prevents disputes later.

2. Correct FLSA Classification on Day 1

Every new hire must be classified as exempt or non-exempt before they start working. This classification determines whether the employee is entitled to minimum wage and overtime protections. Misclassification at onboarding means every paycheck from Day 1 forward is potentially wrong.

3. Time Tracking from Hour One

Time tracking for non-exempt employees must begin on their first hour of work, which includes orientation and onboarding activities. If a new hire spends four hours on Day 1 in orientation (watching videos, reading the handbook, completing paperwork, touring the facility), those four hours must be tracked and compensated at or above the minimum wage. Setting up the time tracking system before the employee arrives is a pre-boarding task that prevents compliance gaps on Day 1.

Multi-State Employers

If you have employees in more than one state, minimum wage compliance becomes a per-employee calculation rather than a single company-wide rate. Each employee must be paid according to the laws of the state (and city, if applicable) where they physically perform their work.

The administrative burden of multi-state compliance is a strong argument against tracking wage rates by hand. When you have employees in 5 states with 5 different rates changing on 5 different dates, manual tracking becomes error-prone. Hold each employee's rate by work location in your payroll software, and still check every change against the state and city sources.

What I built is an HR platform with built-in document management for the paperwork around those rates, not the rates themselves. Offer letters, pay-rate acknowledgments and policy documents sit in one place, signed with built-in e-signature, and onboarding task workflows show which new hire still owes which document. It does not run payroll or look up wage rates.

Federal Contractors

Federal contractors face additional minimum wage requirements beyond the standard FLSA rules. The order that still applies is Executive Order (EO) 13658, and the Department of Labor set the rate at $13.65 per hour effective May 11, 2026 for non-tipped employees, with $9.55 per hour for tipped employees on covered contracts.

Executive Order 14026 (2021), which had raised the contractor minimum wage to $15.00 per hour, was revoked by Executive Order 14236 in March 2025. EO 13658 still covers contracts entered into, renewed, or extended between January 1, 2015 and January 29, 2022, as long as they have not been renewed or extended since.

Most contracts covered by the Davis-Bacon Act or Service Contract Act will already meet or exceed the $13.65 rate, because the prevailing wages those laws require are typically higher. Small businesses with federal contracts should check when each contract was entered into, renewed, or extended to confirm whether the surviving executive order and its rate apply.

Common Minimum Wage Mistakes at Small Businesses

The single most common pattern behind these mistakes is assumption. Business owners assume one rate applies everywhere, assume orientation is not compensable, assume salaried means exempt, assume the rate they set last year is still correct. Every one of these assumptions is a potential violation.

The antidote is a simple verification routine: check the rate, check the classification, check the poster, check the records. Five minutes of verification prevents thousands of dollars in penalties.

Frequently Asked Questions