2020 has certainly been a year filled with change. One thing that has not changed this year is the federal minimum wage. The last time the federal minimum wage changed was on July 24, 2009, when the wage increased from $6.55 to $7.25. Regardless of the federal minimum wage remaining at $7.25, states can choose which minimum wage they want to implement for workers.
As we explained in our previous blog, minimum wage increases by state and can vary per city or county, but some states still adhere to the federal standard of $7.25 an hour. The DOL explains, “Federal minimum wage law supersedes state minimum wage laws where the federal minimum wage is greater than the state minimum wage. In those states where the state minimum wage is greater than the federal minimum wage, the state minimum wage prevails.” Therefore, if a state, city, or county has a minimum wage greater than $7.25, employers are required to pay that higher rate to employees.
With that being said, here are some highlights from 2020, and anticipated state-by-state minimum wage increases to be aware of for 2021.
Highlights from 2020.
According to the National Conference of State Legislatures, 21 states implemented higher minimum wages in 2020.
As of Oct. 1, 2020, The Department of Labor (DOL) shows 17 states with the federal standard of $7.25 an hour. Those states are the following:
- North Carolina
- North Dakota
- New Hampshire
- Ohio (A higher minimum wage applies to employers with annual gross receipts of $319,000 or more.)
- Oklahoma (adheres to the federal minimum standard of $7.25 for “Employers of ten or more full time employees at any one location and employers with annual gross sales over $100,000 irrespective of number of full time employees.”)
The DOL shows five states that do not have a minimum wage requirement as of Oct. 1, 2020. Those states are the following:
- South Carolina
For states that do not have a state minimum wage law, “Employers subject to the Fair Labor Standards Act must pay the current Federal minimum wage of $7.25 per hour.”
As explained by the National Conference of State Legislatures, “States increase their minimum wages for a few different reasons. Some are based on the cost of living, while others are based on previously approved legislation or ballot initiatives.”
What’s to come in 2021.
In 2021, it is forecasted that the list of states with increased minimum wage requirements will not change. Note: Ohio adheres to the federal standard of $7.25 for employers with annual gross receipts less than $323,000 in 2021.
2021 minimum wage updates are available across 21 states and most become effective Jan. 1, 2021. However, some state minimum wage increases may become effective later in the year. The 22 states expected to increase are the following, with the anticipated new state minimum wage noted:
- Alaska - $10.34
- Arizona - $12.15
- Arkansas - $11.00
- California* - $14.00
- Colorado - $12.32
- Florida - $8.65
- Illinois -$11.00
- Maine - $12.15
- Maryland* - $11.75
- Massachusetts - $13.50
- Minnesota* - $10.08
- Missouri - $10.30
- Montana - $8.75
- Nevada - $10.75
- New Jersey - $12.00
- New Mexico - $10.50
- New York* - $12.50
- Ohio - $8.80
- South Dakota - $9.45
- Vermont - $11.75
- Washington - $13.69
2020 & 2021 comparison.
Please see the following chart showing side by side anticipated increases from 2020 to 2021 below:
*The following states’ increase rate have special circumstances as follows:
The increased rate of $14.00 per hour will be applied to employers with 26 or more employees. Businesses in California will have a minimum wage of $13.00 an hour for 25 or fewer employees.
The increased rate of $11.75 per hour will be applied to employers with 15 or more employees. Businesses in Maryland will have a minimum wage of $11.60 an hour for employers with 14 or fewer employees in 2021.
The Dec. 4, 2020, version of this blog included Michigan's minimum wage increase, subsequently, The Michigan Bureau of Employment Relations, Wage and Hour Division “announced the state’s scheduled minimum wage increase is not expected to go into effect on Jan. 1, 2021.” Therefore, the anticipated increase of $9.87 will not go into effect, and Michigan’s minimum wage will remain at $9.65.
The increased rate applies to large businesses. There will be a minimum wage of $8.21 an hour for small employers. There will also be $8.21 an hour for the 90-day learning pay for employees under 20 years of age) and youth salary (for employees under 18 years of age).
The increased rate applies to most employers in New York State. New York City's minimum wage is $15.00 for all businesses. The minimum wage will be $14.00 for Long Island and Westchester.
Final word for 2021.
As mentioned earlier in this article, as of Oct. 1, 2020, five states, Alabama, Louisiana, Mississippi, South Carolina, and Tennessee, do not have a minimum wage requirement and therefore adhere to the federal standard. Minimum wage updates are currently unavailable for Delaware and the District of Columbia. See below for more information on the District of Columbia.
Be sure to check your state’s Department of Labor for rates specific to your location, as well as minimum wages for tipped employees.
Minimum wage fast facts provided by the DOL.
Below is additional information provided by the DOL regarding minimum wage:
- The requirements of the state minimum wage rate are typically governed by legislative activities within the individual states.
- The Commonwealth of the Northern Mariana Islands (CNMI) “has a minimum wage set lower than the federal minimum wage. There are 29 states plus the District of Columbia, Guam, and the Virgin Islands with minimum wage rates set higher than the federal minimum wage. There are 16 states plus Puerto Rico that has a minimum wage requirement that is the same as the federal minimum wage requirement. The remaining 5 states do not have an established minimum wage requirement.”
- “The District of Columbia has the highest minimum wage at $15.00/hour.”
Stay tuned for our updated Quick Wage & Tax guide!
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Disclaimer: Please note that this is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan.