Minimum wage: everything you need to know

  • The federal minimum wage rate is currently $7.25 an hour for most employers in the US.
  • There are also state laws that require a higher standard wage, and while the federal rate has not increased since 2009, state and local rates often increase annually.
  • Homebase HR Pro will send you alerts on new minimum wage laws, and our experts will answer any questions you may have around what you are required to pay your employees.

What is minimum wage?

Minimum wage is a base pay rate that employers are required by law to pay certain team members under the United States Fair Labor Standards Act (FLSA). The federal labor law was established in 1938 as part of the FLSA. The new act provided rules for minimum wage rates, overtime pay, recordkeeping rules, and child labor laws.

The minimum wage rate law was created to stabilize the economy after the depression and ensure workers earned enough to live on. The FLSA covers both full-time and part-time employees who work in the public and private sectors.

The US Department of Labor, specifically the Wage and Hour Division, enforces the FLSA and US minimum wage laws. If you employ covered workers and do not pay them at least the required rate, you could face serious fines and penalties.

If you have questions about these rules or any other labor law compliance issues like wage and hour laws, blue laws, employee rights, and more, Homebase HR Pro provides access to certified human resources experts who can help you navigate the laws and stay compliant.

What is the federal minimum wage 2021?

Currently, the federal minimum wage rate is $7.25 per hour. There have not been any minimum wage increases on the federal level since 2009. Congress has considered raising the minimum wage and introduced the Raise the Wage Act in January 2021. If enacted, the law would require that the federal minimum wage increase to $15.

Instead of consistently doing your research to learn if Congress has made a decision on raising the federal minimum wage, our HR Pro experts will keep an eye on it for you and ensure you are informed as quickly as possible if any new legislation is implemented.


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Who is covered under minimum wage laws?

Under the FLSA, the minimum wage laws cover “employees” who work for businesses that have annual gross sales or business done of at least $500,000. Additionally, if your employees operate in “interstate commerce,” meaning they do business between states, you must pay minimum wage.

Interstate commerce includes making phone calls to another state, handling products that go to or come from another state, or sending mail out of state. However, there are a few exceptions recognized by the federal government:

  • Independent contractors
  • Outside sales workers
  • Small farm workers
  • Switchboard operators who work for phone companies 750 or fewer stations
  • Seasonal amusement or recreational business workers
  • Local newspaper employees who work for a business with a circulation of less than 4,000 deliverers
  • Apprentices, students, and learners

Additionally, there are laws in states, cities, and counties around minimum wage that may require employers to pay minimum wage even if the federal law does not. Be sure to take a look at your state labor law guide to learn more about the rules in your area.

If you need help determining if your business and workers are covered under federal and state laws, Homebase HR Pro will answer any questions you may have around wage rates and more. When you sign up for an account, you will also receive emails and notifications about any federal or state minimum wage rate law changes so you can ensure you are always up to date.

What are the minimum wages by state?

In addition to federal laws, there are also state and local laws that require employers to pay a certain standard of wages.

There are four different classifications for state rates:

  • States that have higher rates than the federal government
  • States that explicitly match the federal rate
  • States that do not have any statute in place, meaning their rate automatically matches the federal rate
  • States that explicitly set forth a lower rate than the federal government, which only applies to certain jobs

The California minimum wage, for instance, was increased in 2021. Effective January 1, 2021, the rate is $14 an hour for employers with 26 or more employees is. For small employers, or employers with 25 or fewer workers, the rate is $13 an hour. Increases in the minimum wage rate will take place for the state until 2023, when the rate for all employers will be $15 an hour.

In addition to state laws with higher rates than the national law, there are also cities that require a larger minimum wage than their states. The rate in New York City is $15 an hour, despite the required New York State rate of $12.50 an hour.

State and local wage laws change often, with some states increasing their rates annually based on increases in the Consumer Price Index. HR Pro will help you stay compliant with increasing wage standards and any other changing laws on both the state and federal level by sending you alerts. This way you can ensure your employee handbook is always up to date and you are following the correct laws.