Let’s Talk Minimum Wage
The minimum wage represents the minimum compensation that employers are legally obligated to pay employees. This threshold is set by the FLSA (Fair Labor Standards Act). While there is a federal minimum wage limit, individual states have the option to establish higher rates; however, they cannot pay employees less than the federal limit. If employees are compensated in piece rate, tips, or other unique forms of payment then their earnings must be adjusted to meet the requirement of the federal minimum wage.
Prepare for 2025 Minimum Wage Updates
Many states are enacting changes to their minimum wage in 2025. Download our chart to see an overview of these updates, helping you identify any adjustments needed to your wage structure if you have employees in those states.
State Mandated Minimum Wage Laws
When it comes to state mandated minimum wage laws, there are several different types, each tailored to address specific needs or employment conditions.
- Tiered Minimum Wage Increase: This type involves scheduled annual increases to gradually raise the minimum wage to a target amount. It ensures that wages rise steadily over time, allowing both workers and employers to adapt to the changes.
- Tipped Minimum Wage: This wage is set specifically for employees who earn a substantial portion of their income through tips, such as restaurant servers and bartenders. Tipped minimum wages often account for tips as part of the employee’s overall earnings, with requirements varying widely by state.
- Minimum Wage for Minors: Some states establish unique minimum wage standards for workers under the age of 18, recognizing the different nature of youth employment and educational commitments. These rates are typically set lower than the standard minimum wage.
- Municipal Minimum Wage: In many states, local jurisdictions are empowered to set their own minimum wage rates, often exceeding the statewide minimum. These municipal rates reflect the cost of living in specific areas, aiming to better meet local economic needs.
- Industry-Specific Minimum Wage: Certain industries, such as agriculture, construction, or hospitality, may have distinct minimum wage standards. These industry-specific rates consider the unique demands and financial frameworks of each sector, ensuring that wages align with industry norms and expectations.
What These Changes Mean for Your Organization
With all the new changes to minimum wage requirements, there are several steps your organization should take to ensure compliance. You may find it beneficial to your organization to consult with legal counsel, try on-demand HR/Employment Legal and Compliance Services MyHRCounsel. The specific steps may vary depending on the jurisdiction and the nature of your organization, however, here is a general outline of what organizations should do:
- Keep Employees Informed: Stay up-to-date on changes to minimum wage laws at the federal, state, and local levels. Make sure changes are communicated not only to your internal team, but to employees as well.
- Review Current Wages: Review your current pay structure to ensure employees are properly compensated based on their skills and job position in comparison to minimum wage.
- Evaluate Budgets: Analyze how the impact of the minimum wage can affect your organization's payroll budget. The increased labor cost may affect your budget for certain projects or departments.
- Update Internal Documentation: Revise employment policies, procedures, and contracts to reflect the new minimum wage rates.
What’s Next?
Ensure that the payroll software you use is up to date to incorporate the adjustments in the minimum wage. Payroll providers such as Greenshades guarantee automatic compliance with the changes for your organization, while outdated systems may require manual updates for meeting the minimum wage requirements. It is crucial for your team to consistently review payroll records and procedures to ensure continual adherence to the updated minimum wage standards.
Want to learn more about how your team can ensure payroll compliance with Greenshades? Contact us today.