What New Employers Need to Know about Minimum Wage

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What New Employers Need to Know about Minimum
Wage We try to publish blog posts from time to
time intended to help new business owners and
first-time employers. This is one such post. It
deals with minimum wage. Whether you are just
starting a business or you're transitioning from
sole proprietor to employer, you need to
understand how minimum wage laws affect you.
Our job as a payroll processing provider is to
make sure your employees get paid as directed by
you. And while we do our best to assist clients
with compliance issues, the law ultimately holds
you responsible for making sure your employees
are paid what they are owed. The term 'minimum
wage' is pretty self-explanatory. It is the
minimum amount employees must be paid according
to law. What complicates the matter is
jurisdiction. In other words, there are federal,
state, and local minimum wage laws to
consider. The Federal Minimum Wage The minimum
wage set by the Fair Labor Standards Act (FSLA)
of 1938 is the absolute minimum employers can pay
their hourly employees. The last time this wage
was adjusted was in 2009. Under the FSLA,
non-tipped workers must earn a minimum of 7.25
per hour. Non-tipped workers are paid a straight
hourly wage and collect no tips. Tipped workers,
like restaurant servers and bartenders, are
required to earn a minimum of 2.13 per hour plus
tips. Tips and hourly wages must add up to a
minimum of 7.25. If they do not, the employer
must make up the difference with extra hourly
wages. One of the oddities of the federal
minimum wage law is that it allows employers to
pay workers under the age of 20 as little as
4.25 for the first 90 days of work. This law was
put in place mainly to address minors working
summer jobs, though it is not limited to such
circumstances.
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State and Local Minimum Wage Minimum wage laws at
the state and local level are what make minimum
wage tricky. If no state or local laws exist in a
particular jurisdiction, employers must follow
the federal rules. If state and local laws
require a higher minimum wage, they supersede
the federal minimum wage. As an example, the
minimum wage in Massachusetts is 11.00.
Employers must pay that rather than depending on
the federal minimum wage of 7.25. But what if
local minimum wage laws demand a higher pay rate
than either the state or federal mandate? Those
local laws take precedent. If you were a minimum
wage earner in San Francisco, for example, you
would be earning 14 per hour. This is how the
law works. In essence, employers are required to
pay the highest minimum wage mandated by law,
whether that be at the federal, state, or local
level. Minimum Wage and Overtime Pay The last
thing to know is how overtime affects minimum
wage. In a nutshell, any hours a nonexempt
employee works in excess of 40, in a single work
week, must be compensated at one-and-a-half times
the employee's hourly rate. So if your company
were paying workers based on the federal minimum
wage, overtime would have to be paid at a rate of
10.88 per hour. All of this may seem a bit
complicated to you as a new employer. Don't
worry, this is normal. Payroll is a complicated
beast that can take time to get used to. We are
here to help. As a nationwide provider of payroll
processing and benefits administration, we have
helped countless numbers of clients make sense of
their payroll through customized solutions. We
have a payroll solution for you too.