The minimum hourly wage is regulated on both a state and federal level. Some larger cities have local regulations that raise the figure even higher. When the rules conflict, workers are entitled to the highest amount.
Minimum Wage Requirements
Across the country, employers are required to pay their workers at least $7.25 per hour. Some states have higher limits that override the federal standard. Others have lower minimums that are negated by the nationwide figure. States often base their standards on cost of living statistics, and some have not adjusted old laws to reflect newer national policy. Municipalities with extremely high cost-of-living figures, such as San Francisco, sometimes enact their own regulations, which must be heeded by employers within the city.
Exceptions to the Minimum
There are several instances when companies are actually allowed to pay less than the standard wage, though they are usually regulated by separate industry-specific rules. For younger workers under 20 years of age, federal law allows for a training wage of $4.25 per hour. This “youth minimum wage” is only applicable during the first 90 days of employment, at which time the worker must be raised to the $7.25 per hour standard. Companies must also be aware that displacing or dismissing higher-wage employees to make room for a younger, lower-paid worker is strictly forbidden by this policy.
Another instance in which businesses may pay their employees less than the minimum wage is for workers who earn tips. These personnel are entitled to a $2.13 per-hour minimum wage on top of the tips they earn. In order to adhere to the guidelines, employers must allow workers to keep all their own tips and the individual must regularly earn over $30 per month in gratuities. The combined wages and tips must also equal or exceed the national minimum wage of $7.25 per hour. If there is a shortfall, the employer must pay the individual the difference.
Several classes of workers are simply exempt from minimum wage standards, including executives, administrators, professionals and outside salespeople. Federal guidelines also excuse full-time college students, independent contractors and certain farm or fishing laborers.
Nearly all employers are required by both federal and state regulations to pay overtime under certain circumstances. The overtime hourly wage is 150 percent of a worker’s normal wage and is usually referred to as “time and a half,” because the earner is taking home an additional 50 percent of their normal salary. According to national laws, overtime is calculated by the week, rather than the day. Any time over the standard 40 hours is eligible for overtime pay. In states where a daily maximum has been established, an employee is eligible for overtime for any time they work over the eight-hour-per-day standard.
Not all employers are required by law to pay out additional wages for overtime, although exceptions are rare. The Fair Labor Standards Act requires companies with over $500,000 in annual sales and those that participate in interstate commerce, or business between states, to pay their workers an overtime wage. States have their own laws detailing overtime requirements, and these are often more stringent than their national counterparts. The state labor department can provide guidelines and details regarding these policies.
Several classes of employees are exempt from overtime pay:
- Independent contractors
- Salaried administrative, executive or professional workers
- Criminal investigators
- Small farm workers
- Newspaper delivery people and certain newspaper employees
- Select computer specialists who earn at least $27.63
- Some seasonal employees or staff of cyclical businesses
- Informal babysitters or caregivers
- Switchboard operators
Again, state laws may dictate additional exemptions or changes to the federal policy. Keeping up on federal and state guidelines as well as industry-specific rules ensures a smooth payday and helps to avoid legal problems.
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