Minimum Wage Definition, Current Rate and Eligibility
Minimum wage is the least dollar amount that employers must pay to nonexempt employees per hour, as mandated by local, state or Federal law.
Employers may pay employees by some other method than hourly, such as by piecework or commission. But, in any case, the dollar amount that eligible employees earn, divided by the hours that they worked, must equal at least the current minimum wage rate.
Generally, the current minimum wage rate for eligible employees under Federal law is $7.25 per hour (effective July 24, 2009). Special eligibility rules for the Federal minimum wage regarding age, tips and commissions are briefly explained below.
Age: Minimum wage for the first 90 consecutive days of employment for eligible employees who are under 20 years of age is $4.25 per hour. It increases to $7.25 per hour after the first 90 days or when eligible employees turn 20 years old, whichever occurs first.
Tips: Minimum wage is $2.13 per hour for eligible employees who routinely earn at least $30 per month in tips, get to keep all of their tips, and also earn at least $7.25 per hour at $2.13 plus tips. (The $5.12 difference is called a tip credit for employers.) Employers may require employees to pool their tips, but each employee still must have earned at least $7.25 per hour after tip pools are divvied. If eligible tipped employees do not earn at least $7.25 per hour, then their employers must pay the difference to them.
Commissions: Minimum wage for eligible commissioned employees is $7.25 per hour, including commissions. If earned commissions plus fixed wages, if any, do not add up to at least $7.25 per hour, then employers must pay the difference.
President Obama signed an executive order to raise the Federal minimum wage to $10.10 per hour for eligible workers employed through Federal contracts. The order became effective on January 1, 2015 and applies only to new contracts. The same workers will see a 5-cent increase to $10.15 per hour on January 1, 2016.
Employees who work for the types of for-profit or non-profit organizations listed below are generally eligible for the minimum wage.
- Any engaged in interstate commerce
- Any that gross $500,000 or more annually
- Federal, state and local government agencies
- Educational institutions
- Hospitals and other institutions engaged in the care of sick, aged or mentally-ill people
Domestic workers (e.g., housekeepers, chauffeurs, cooks and babysitters) are also eligible for the minimum wage, if they receive at least a certain amount annually in cash wages from one employer or work more than eight hours a week for one or more employers. The Social Security Administration sets the annual cash wage amount.
Update: The U.S. Department of Labor (DOL) has announced a final rule that extends Federal minimum wage and overtime protections to most direct care workers who provide essential home care assistance. The final rule becomes effective on January 1, 2015. For more information, see We Count on Home Care at the DOL's site. To find out if your work state has approved similar protections with an earlier effective date, start at the Web site of your work state's labor department.
To generally sum up eligibility requirements, most hourly nonexempt employees are entitled to earn at least the current minimum wage rate of $7.25 for each hour worked.
This is only an overview of minimum wage eligibility at the Federal level. Other special rules as well as exemptions might apply. For example, under specific circumstances and with the permission of the U.S. Department of Labor, employers may pay certain full-time students, student learners and disabled persons less than the current minimum wage rate. Child labor rules also apply.
The next section provides information about municipal and state minimum wage laws, which might be different or more generous than the Federal equivalent. It also provides information about obtaining relief for employer minimum wage violations.
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