Minimum Wage Requirements and Changes for 2023

Which States Are Increasing in 2023?

Eighteen states are raising their minimum wage in 2023, or that rate is increasing based on previously established annual increases. In some of these states, these rate changes do not take effect on January 1st; instead, they become law later in the year. 

Is the Federal Minimum Wage Increasing in 2023?

No, the Government last raised the federal minimum wage in 2009 from $6.55 per hour to $7.25 per hour. This base wage set by the federal government sets the standard for individual states to build upon, allowing each state to decide the minimum wage for its own citizens according to its own cost of living.

Some states have chosen to set their minimum wage higher than the federal minimum wage, while others have not. However, no state can set its minimum wage lower than the federal minimum wage of $7.25 per hour.

Who Has the Highest and Lowest for 2023?

In 2023, Connecticut, Massachusetts, and California will tie for the highest rate at $15 per hour for all employers. Georgia and Wyoming have the lowest rates - in both states, employers only have to pay $5.15 per hour unless the employer is subject to the Fair Labor Standards Act (FLSA), in which case they default to the federal minimum wage. FLSA only applies to employers who make more than $500,000 per year or engage in interstate commerce.

What Are the Exemptions From Minimum Wages?

Some employees are exempt federally from minimum wage requirements, including:

• White-collar employees (Exempt workers)
• Companions for the elderly
• Farm workers on small farms
• Seasonal recreational employees

Additionally, some worker classifications have special rules federally. For example:

• Employees with disabilities. With a certificate from the Department of Labor, employers can pay lower wages to employees with disabilities that significantly limit their ability to perform work comparable to someone else doing that job.
• Full-time students. With approval, employers can pay a full-time student 85% of the minimum wage.
• People under 20: Employers can pay $4.25/hr. for the first 90 days.
• Tipped employees: The federal base rate is $2.13/hr. You are still required to ensure they make at least the minimum wage. However, some states will require that tips plus base pay equal more than minimum wage. Additionally, some states, such as Alaska, California, Minnesota, and Montana, will not allow the tip to count toward the compensation when considering if the employee makes minimum wage.
• Student learners: Employers can pay a student 16 or older who is learning a trade through the employer 75% of the minimum wage.
• 2% S corporation shareholders who receive fringe benefits are taxed on those as part of their compensation. Qualified transportation fringe benefits, working condition fringe benefits, and meals and lodging may be part of their taxable income.

What New Labor Laws Will Affect Minimum Wage?

California's Pay Transparency Law will require employers to notify job applicants and employees about the pay scale for their job if requested, and they must provide it automatically in the job listing if they have more than 14 employees.

In Colorado, employers must prepare for Paid Medical and Family Leave (PFML). Employees who qualify for FMLA will get 12 weeks of paid leave funded through payroll taxes, which employees and employers share.

In New York, paid FMLA already exists. But in 2021, sick siblings will now be included as those individuals for which someone may qualify for FMLA in the state.

Regarding remote workforces, it is important to note that minimum wage requirements follow the employee, so if, for example, the employee works remotely in Rhode Island, then Rhode Island determines the minimum wage even if the employer is in California. In the days of hybrid workforces, employers must keep track of where employees actually work.

In some states, including California, Maine, New York and Washington, the minimum salary required to be classified as exempt from overtime is tied to the minimum wage and therefore will also increase on January 1, 2023.

While it certainly is not mandatory, evaluating all employees' pay rates when the minimum wage increases to retain good employees is important. It would be unjust for those earning more than minimum wage to suddenly receive only minimum wage; this should be addressed when evaluating pay.

All Current State Minimum Wages

Information from minimum-wage.org

How Exact Payroll Can Help

Don't be caught unaware; stay compliant and ensure correct payroll every time with a payroll partner who keeps track of all of this for you. It allows you to make decisions confidently regarding employee compensation. Contact us today to schedule a brief consultation with our highly trained professionals.