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.
California has approved legislation to gradually increase its minimum wage to $15 per hour by 2022. Small businesses will have until 2023 to pay $15. New York too is gradually raising its minimum wage to $15 per hour. New York City will raise it to $15 by December 2018 and the suburbs will do the same by December 2021. Upstate New York will raise its wage to $12.50 by December 2020 and will increase it to $15 during a period to be determined by the state budget director.
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.
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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