State-to-State Variations in Minimum Wage
The federal minimum wage of $7.25 an hour has not changed since 2009. A handful of states do not have a minimum wage for workers, so the federal wage applies in those states. All other states set their own minimum wage, and this can vary widely. In addition, there are 48 municipalities across the country that have set their minimum wage higher than their state's minimum wage, including Chicago, New York City, Minneapolis, Denver, and many cities in California.
Minimum Wage and CPI Indexing
Many states have set targets to increase their minimum wage incrementally until they reach $15 an hour, and then annual increases will be tied to the CPI. For example, Florida's minimum wage will increase to $13 an hour on September 30, 2024; $14 an hour on September 30, 2025; and $15 an hour on September 30, 2026. Each year after that, Florida workers will get an incremental increase tied to adjustments in consumer prices.
Nineteen states and Washington, DC, have already indexed their minimum wage to annual inflation. These states include Alaska, Arizona, Colorado, Connecticut, Florida, Maine, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New York, Ohio, Oregon, South Dakota, Vermont, Virginia, and Washington. What this means, in effect, is that these 19 states, Washington, DC, and many of the 48 localities that have tied their minimum wage to the CPI are almost guaranteed to have minimum wage increases every year, barring new changes to legislation.
Compliance with Labor Law Updates
With minimum wage rates changing so frequently in different states, it's essential to stay up-to-date regarding payroll. The federal minimum wage ($7.25) is set through the Fair Labor Standards Act (FLSA), along with overtime rates, recordkeeping requirements, and other standards. Federal standards are enforced by the US Department of Labor. In addition, each state has its own labor department with an hours and wages division, which enforces minimum wage and other laws at the state level.
Non-compliance with minimum wage laws can result in an investigation of your company by a state's hours and wages division. If your company is found to have not paid the proper minimum wage to an employee -- even if it is accidental -- a suitable recovery process for that worker will be implemented, and you may be subject to civil fines as well. Suitable recovery for an employee can include the following:
- Reimbursement for back pay owed to the employee
- Reimbursement for the employee's attorney fees
- Reimbursement for liquidated damages and shortfalls
If the US Department of Labor gets involved, employers could face steep penalties for underpaying workers. The fine for each underpaid worker, as of January 16, 2023, is $2,374 per violation of the FLSA.
Stay Ahead of Minimum Wage Changes with Exact Payroll
The Bureau of Labor Statistics releases the annual CPI numbers each year at the end of August. States and municipalities with their minimum wage tied to the CPI calculate adjustments starting in September of each year, with most changes being implemented on the following January 1st. If you employ workers in multiple states, it is much easier to streamline your payroll process with services from Exact Payroll.
Rather than trying to keep up with minimum wage changes across multiple states or cities, why not partner with Exact Payroll -- and let us do the heavy lifting for you? Using our online payroll services, you will receive a complete and accurate payroll package for each pay period. This includes processed payroll checks, accurate management reports, and much more. Our services can be tailor-made to suit your business needs.
The upcoming 2024 minimum wage changes won't catch you by surprise with Exact Payroll on your side. We can handle your payroll management needs, keep you compliant with local, state, and federal changes, and let you stay focused on growing your business. Please feel free to contact us at Exact Payroll today for a free consultation.
