- The national hourly minimum is $7.25 for covered, nonexempt workers in 2026.
- Higher state or local rates generally take priority when multiple wage laws apply.
- Special rules exist for tipped workers, younger employees, and certain approved student programs.
- Employers should review current rates, track working hours, and maintain dependable pay records.
The federal minimum wage is the lowest hourly pay most covered employees can legally receive under US labor law. In 2026, the rate remains $7.25 per hour, unchanged since July 24, 2009.
Understanding what is federal minimum wage helps employees know their rights and employers meet legal pay requirements. However, state and local wage laws may require businesses to pay higher hourly rates.
This guide explains how the federal minimum wage works, who qualifies, how it differs from state minimum wage, and what employers should know about wage regulations.
What Is Federal Minimum Wage?
The federal minimum wage is a nationwide pay standard established under the Fair Labor Standards Act (FLSA). It generally requires employers to pay covered, nonexempt workers at least $7.25 for each hour worked. Congress sets this national rate through legislation; it does not increase automatically each year.
The last increase took effect on July 24, 2009, when the hourly amount rose from $6.55 to $7.25.
Importantly, the minimum is a legal floor rather than a recommended salary. Employers can offer more, and many must do so under other applicable laws.
How Does the Federal Minimum Wage Work?
The FLSA establishes pay protections for employees whose work or employers fall within its coverage. For covered, nonexempt workers, employers generally calculate earnings using all compensable hours worked and the applicable hourly rate.
For example, an employee working 30 hours at $7.25 earns $217.50 before taxes and permitted deductions. A business cannot generally reduce required wages through improper deductions for equipment losses or cash shortages.
The law also contains overtime protections. Covered, nonexempt employees usually receive at least one and one half times their regular rate for hours worked beyond 40 in a workweek. Overtime rules are separate from the minimum hourly rate and may differ under state law.
Federal Minimum Wage vs State Minimum Wage: Key Differences
Federal law sets a nationwide baseline, while states and some cities establish their own rates. When more than one minimum wage law applies, employers generally must pay the highest applicable amount.
Comparison | Federal Standard | State or Local Standard |
Coverage | Covered workers nationwide | Workers covered within the jurisdiction |
Rate | $7.25 per hour | Varies by location |
Changes | Requires federal legislative action | May change through laws or scheduled adjustments |
Employer duty | Meet federal requirements | Follow stronger applicable protections |
For example, California’s statewide rate is $16.90 per hour in 2026, compared with the national $7.25 rate. Certain local ordinances or industry rules may require even more.
Who Is Covered Under Minimum Wage Laws?
The FLSA covers many employees through business coverage or the nature of their individual work. Retail, hospitality, manufacturing, office, and service employees may qualify when the legal coverage conditions are satisfied.
Both full time and part time employees can receive minimum wage protection. Working fewer hours does not automatically remove someone from coverage.
However, not every worker is covered in the same way. Certain occupations qualify for specific exemptions, and genuinely independent contractors generally fall outside employee wage protections.
Employers should review actual duties, working arrangements, and applicable legal tests before classifying a worker as exempt or outside coverage.
Exceptions to Minimum Wage Requirements
Several exceptions exist, but businesses should not apply them without checking eligibility and state protections.
- Tipped employees: Under federal rules, qualifying employers may pay at least $2.13 in direct hourly wages and claim a tip credit. Cash wages plus tips must reach at least $7.25 per hour, or the employer must cover the shortfall. Some states require higher cash payments or prohibit tip credits.
- Younger employees: Workers under age 20 may receive $4.25 per hour during their first 90 consecutive calendar days with an employer, subject to conditions. The regular applicable rate becomes necessary when that period ends or the worker turns 20, whichever happens first.
- Students and other authorized programs: Certain full time students and student learners may qualify for special rates under Department of Labor certificates. Specific exemptions also exist for particular jobs or circumstances.
An exemption should never be assumed based only on an employee’s age, title, or workplace.
How to Calculate Minimum Wage Earnings
At $7.25 per hour, earnings depend on the number of hours worked. For a standard 40 hour workweek, the calculation is straightforward:
Period | Calculation | Gross Earnings |
Hourly | One hour | $7.25 |
Weekly | 40 × $7.25 | $290 |
Monthly average | $15,080 ÷ 12 | $1,256.67 |
Annual | 40 × 52 × $7.25 | $15,080 |
These examples assume 52 paid working weeks at the same hourly rate, without overtime. Monthly earnings are averages, not guaranteed identical payments.
Gross pay is different from take home pay, which reflects taxes and lawful deductions. Employees working irregular schedules should calculate actual compensable hours rather than rely on a fixed weekly estimate.
How Has the Federal Minimum Wage Changed Over Time?
The national wage floor began in 1938 with the FLSA, initially at 25 cents per hour. Congress subsequently increased it through amendments intended to revise basic pay protections.
Notable milestones include:
$1.00 in 1956
$3.35 in 1981
$5.15 in 1997
A series of later increases brought the rate to $7.25 in 2009.
Since then, changes to living costs have reduced the purchasing power of that amount. Meanwhile, many state governments have adopted higher rates and scheduled adjustments.
How Can Employers Follow Minimum Wage Requirements?
Businesses should build wage reviews into regular HR and payroll processes rather than checking rates only when hiring someone.
- Check location rules: Confirm federal, state, city, and industry specific requirements for every workplace.
- Review worker classifications: Identify covered employees and verify any claimed exemption.
- Record working hours: Capture compensable time, overtime, and approved adjustments accurately.
- Audit deductions: Review deductions and tip credits against applicable restrictions.
- Monitor changes: Watch state labor department updates and scheduled wage increases.
- Keep records: Preserve payroll documents and supporting time records for the periods required by law.
Under federal recordkeeping guidance, employers generally retain payroll records for three years and underlying wage calculation records for two years. State retention requirements may be longer.
Regular checks can reveal incorrect rates early, support employee questions, and reduce the risk of back pay disputes. Managers should also document who approved rate changes and when those updates became effective for each employee and work location.
How Can HR Software Support Employee Wage Management?
Managing employee wages requires accurate records, updated compensation details, and coordination between HR and payroll teams. HR software helps organizations organize employee information and manage related HR activities.
HR365 HRMS supports employee information management within Microsoft 365 in the following ways:
- Centralized Employee Records: Maintain employee profiles, job roles, departments, and employment details in one place for easier access.
- Compensation Information: Organize salary-related employee details to support compensation reviews and HR decisions.
- Employee Data Management: Keep employee information updated when job roles, departments, or employment details change.
- HR Workflow Management: Manage HR requests and approval processes to improve coordination between HR teams and managers.
- Payroll Coordination: Provide HR teams with organized employee information that can support payroll preparation and communication with payroll administrators.
HR365 HRMS helps businesses manage employee records and HR processes. However, employers must still review applicable wage laws and use appropriate payroll systems to meet legal requirements.
Conclusion
Understanding what is federal minimum wage means knowing the national hourly baseline, recognizing when higher state or local rates apply, and identifying which employees receive protection. The $7.25 federal rate remains an important starting point, but it is not the correct amount for every workplace.
Employers benefit from reviewing wage laws regularly and keeping clear employee information. Explore how HR365 HRMS can help organize HR records, or request a product demo to discuss your organization’s needs.
Frequently Asked Questions
What Is the Current Federal Minimum Wage in 2026?
It is $7.25 per hour for covered, nonexempt employees. Some workers qualify for special rules, while many states and cities require higher hourly pay.
When Was the Federal Rate Last Increased?
The last change took effect July 24, 2009. The rate increased from $6.55 to $7.25 per hour and has not changed since.
Can a State Require Higher Pay?
Yes. States and local governments may adopt higher minimum wages. When multiple applicable wage laws cover an employee, the highest relevant rate generally controls.
Does the Law Protect Part Time Employees?
Yes. Covered, nonexempt part time workers receive minimum wage protection regardless of whether they work a full standard schedule.
What Should Employees Do If They Are Underpaid?
Employees can review their pay records, ask their employer about discrepancies, and contact the Department of Labor’s Wage and Hour Division or their state labor agency for assistance.
