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Minimum Wage: What It Means for Employers

Minimum wage is the lowest hourly rate an employer may legally pay a covered employee, set at the federal level by the Fair Labor Standards Act and often set higher by state law.

Quick facts

  • Federal minimum wage: $7.25 per hour, effective July 24, 2009 (U.S. Department of Labor; check the source for the current figure).
  • Many states set a higher minimum wage; employers must comply with both federal and state requirements.
  • Some states have no state minimum wage; there, the federal rate applies to employers subject to the FLSA.

What it means in practice

The federal minimum wage is set by the Fair Labor Standards Act (FLSA). According to the U.S. Department of Labor, the federal minimum wage is $7.25 per hour, effective July 24, 2009. It applies to covered nonexempt employees. Employees who qualify for a minimum wage exemption are treated differently; see our guide to exempt vs. non-exempt employees.

The federal rate is only part of the picture. The Department of Labor states that some state laws provide greater employee protections and that employers must comply with both. Its state minimum wage page lists the state rates and shows that many states set a rate above $7.25. Where a state rate is higher than the federal rate, a business with covered employees there needs to pay at least the higher rate. The same page notes that, for states with no state minimum wage, employers subject to the FLSA must pay the current federal minimum wage.

State and local rules change often, and the Department of Labor's state page carries its own "last updated" date. Treat any state figure you read elsewhere, including on this page, as a starting point and confirm it against the state's labor department or the Department of Labor listing before you set pay rates. The Department of Labor's state page notes that some states have special provisions for particular situations, which is another reason to read the note for your state, not just the headline rate.

Example. A small business with employees in two states checks the Department of Labor state listing. In the first state the listed rate is higher than $7.25, so that rate is the floor there. In the second the state has no minimum wage law, so the federal $7.25 is the floor. The same employer therefore has two different minimum rates, and payroll must apply the right one to each location.

This entry covers the general hourly minimum only. Special rules exist for tipped employees, young workers and certain other groups, and they vary by state. The Department of Labor's minimum wage questions-and-answers page and its state listing are the places to start; check the source for the current figures.

Why it matters and common mistakes

The most common error is applying the federal rate by default. If your state sets a higher rate, paying only $7.25 would fall short of the requirement. Another is forgetting to update pay rates when a state rate changes.

Because back-pay and penalty exposure depend on the facts and on the law that applies, confirm the details with the Department of Labor, your state labor department, or a qualified professional rather than relying on a general summary.

How Remindax helps

Remindax helps you track the dates and deadlines tied to minimum wage rate changes and pay-rate reviews and sends reminders before they're due. Remindax does not provide legal, tax, or HR advisory services, and this page is for general informational purposes only - consult a qualified attorney, accountant, or HR professional for guidance specific to your situation.

Related terms

See all terms in Employment Law & Compliance.

Sources & References

Last reviewed: October 2026. Figures are reviewed annually - see Sources & References for current figures.