Minimum Wage by State 2026: Complete Guide with Scheduled Increases
5/27/2026
Minimum wage compliance looks like the simplest thing in payroll and is one of the more error-prone, for a specific reason: the applicable rate is determined by three or four overlapping layers of law, the highest of which governs, and one of those layers changes at a different time of year than the others.
This guide explains how to determine the correct rate for any employee, which figures move on which schedule, and the derived amounts that change with the wage and are routinely forgotten.
The Rule: Highest Applicable Rate Wins
For any employee, the applicable minimum wage is the highest of:
- The federal minimum wage — $7.25 per hour, unchanged since 2009
- The state minimum wage where the work is performed
- Any county minimum wage
- Any city or municipal minimum wage
- Any industry-specific or contract-specific rate — fast food, hotel, healthcare, airport, and public contractor rates in some jurisdictions
The federal figure is the floor and, for a large share of the American workforce, entirely irrelevant — most employees are covered by a higher state or local rate. A national policy set to $7.25 is lawful only in the states that have no higher rate.
Local rates are the most frequently missed layer. A state minimum wage does not preempt a higher city rate in most states, and municipal rates are enacted through ballot measures and council votes without notifying out-of-area employers. An employer with one remote worker in a city with its own wage ordinance is subject to it.
Our Payroll Wage & Hour Training & Certification Program covers the framework, and our sister site maintains HR training by state for the broader state picture.
Four Categories of State Rate
Rather than a table that would be stale within months, here is the structure to check for each state where you have employees.
Category 1 — Federal rate applies. A number of states either have no state minimum wage, set one at or below the federal figure, or default to federal. In these states $7.25 governs unless a local ordinance applies.
Category 2 — A fixed statutory rate above federal. The legislature sets a specific figure that changes only when the legislature acts. These require no annual monitoring but do require watching for legislation.
Category 3 — A scheduled multi-year increase. The state has enacted a series of step increases toward a target, each effective on a set date. These are predictable and should be loaded into your compliance calendar as far out as the statute goes.
Category 4 — Indexed annually. The rate adjusts each year based on a cost-of-living measure, with the new figure announced in the fall for a January 1 effective date. This is the category that catches employers, because there is no legislative event to notice — the number simply changes.
An employer operating in several states will typically have some of each. The practical consequence is that you cannot set minimum wage once; you need a recurring review tied to the announcement calendar.
The Timing Problem
Most state increases take effect January 1, but a meaningful number use other dates — commonly July 1 — and local ordinances frequently use July 1 as well.
This creates two compliance risks:
The mid-year increase is forgotten. An employer that does a thorough January review and nothing else will miss every July 1 increase. Underpayment then runs for six months before the next review.
Indexed rates are announced late. A rate announced in October for a January 1 effective date leaves little time to adjust pay scales, update systems, and communicate changes — especially where the increase compresses differentials against employees just above minimum.
Build two annual reviews, in November and May, rather than one.
What Changes With the Minimum Wage
This is the part that gets missed. Raising the base rate is the obvious step; several derived figures move with it.
Tipped minimum wage and tip credits. Federal law permits a cash wage as low as $2.13 per hour if tips bring the employee to at least the full minimum wage, with the employer making up any shortfall. Many states prohibit tip credits entirely, requiring the full minimum wage in cash; others permit a smaller credit than federal law. Where a tip credit is permitted, the employer must satisfy notice requirements and must monitor whether tips actually close the gap each workweek.
Exempt salary thresholds tied to minimum wage. Several states set the minimum salary for exempt status as a multiple of the state minimum wage. When the wage indexes upward, the exempt threshold rises automatically — and employees can lose exempt status without anyone changing their pay or duties. This is the highest-consequence downstream effect.
Garnishment protections. The federal creditor garnishment cap is the lesser of 25% of disposable earnings or the amount exceeding 30 times the federal minimum hourly wage. Because that formula references the federal figure, it does not move with state increases — but several states compute their garnishment exemptions from the state minimum wage, in which case the protected amount rises with the wage. See our garnishment hub with state-by-state rules.
Deduction limits. Many states prohibit deductions that reduce pay below the applicable minimum wage. A uniform or equipment deduction that was compliant last year may not be after an increase. See Payroll Deductions: Mandatory vs Voluntary.
Youth, training, and learner rates. Where permitted, these are usually expressed relative to the standard minimum and move with it.
Wage compression. Not a legal requirement but a real operational effect: raising the floor compresses the differential against employees just above it, which produces retention and equity pressure that has to be budgeted for.
Special Categories to Check
Tipped employees. Beyond the tip credit itself: tip pooling rules, the prohibition on employers and managers sharing in tips, and the rules governing time spent on non-tipped duties. This area has seen substantial regulatory movement.
Youth and training wages. Federal law permits a lower rate for employees under 20 during a limited initial employment period; state law may prohibit it.
Learners, apprentices, and workers with disabilities. Subminimum wage certificates exist under federal law in narrow circumstances, and this area has been narrowing.
Fast food, hotel, airport, and healthcare rates. Some jurisdictions impose industry-specific minimums well above the general rate. These apply based on the nature of the business, and a company can be surprised to find its operation within the definition.
Public contractors. Federal contractor minimum wage requirements, plus state and local living-wage ordinances applying to entities doing business with the government. These frequently exceed the general minimum substantially.
The Compliance Calendar
Two reviews per year, each covering the same checklist:
- [ ] For every state where an employee performs work, confirm the current rate and any scheduled increase
- [ ] For every city and county where an employee performs work, confirm whether a local ordinance applies and its rate
- [ ] Identify which of your states index annually, and note when the new figure is announced
- [ ] Check for industry-specific rates applicable to your operations
- [ ] Confirm any tip credit taken is permitted in that state, at the permitted amount, with required notice given
- [ ] Verify tips actually bring tipped employees to the full minimum wage each workweek, with employer make-up where they do not
- [ ] Re-check exempt salary thresholds in states where they are a multiple of the minimum wage
- [ ] Re-check whether any deduction now reduces pay below the applicable minimum
- [ ] Re-check garnishment exemption amounts in states computing them from the state minimum wage
- [ ] Confirm required minimum wage posters are current, including local ordinance postings
- [ ] Confirm the pay statement reflects the correct rate
The address-level point deserves emphasis: local wage ordinances follow jurisdiction boundaries, not postal city names. An employee whose mailing address shows a city name may work outside that city's limits, or inside a county with its own rate. Validate at the address level.
See our Multi-State Taxation training for the jurisdictional framework and multi-state payroll tax compliance for operational controls.
Where Minimum Wage Violations Actually Come From
Almost nobody sets a base rate below the applicable minimum deliberately. Violations arise from four mechanisms, none of which involve a decision to underpay.
A missed increase. The most common cause. An indexed state rate changed on January 1, or a local ordinance changed on July 1, and the payroll system was never updated. The violation then runs until the next review.
A deduction that pushes pay below the floor. The base rate is compliant; a uniform charge, equipment deduction, or cash-shortage recovery brings the effective rate below minimum. Many states prohibit this regardless of the employee's written consent, and an increase in the minimum wage can make a previously lawful deduction unlawful without anything else changing.
Unpaid compensable time. The rate is correct but hours are understated — an auto-deducted meal break that was worked through, unrecorded pre-shift setup, or travel between job sites treated as commuting. Dividing correct pay by actual hours yields a rate below minimum, which is a minimum wage violation in addition to an unpaid-wages violation.
A tip credit that did not close the gap. Where a tip credit is taken, the employer must verify each workweek that tips actually brought the employee to the full minimum wage, and make up any shortfall. A slow week for a tipped employee creates an employer obligation, and employers who take the credit as a standing configuration rather than a weekly test miss it.
The pattern is worth noting: three of the four are really failures of a different control — rate maintenance, deduction review, and timekeeping — that surface as minimum wage exposure. Auditing the base rate alone will not find any of them.
If You Discover an Underpayment
Minimum wage violations are strict liability — intent is irrelevant. Exposure includes back wages, liquidated damages effectively doubling the award, mandatory attorney fees for a prevailing plaintiff under federal law, and state penalties that in some jurisdictions are more severe than the federal ones.
Correct promptly and completely. A brief, documented correction with full back pay is substantially better than an incomplete one, and voluntary correction supports a reasonable-cause position where penalties are discretionary. See How To Minimize And Eliminate Payroll Penalties.
Frequently Asked Questions
What is the federal minimum wage in 2026?
$7.25 per hour, unchanged since 2009. For most of the American workforce it is not the operative figure, because a higher state, county, or city rate applies. The rule is that the highest applicable rate governs, so a national policy set to $7.25 is lawful only in states with no higher rate and no local ordinance.
How do you determine the correct minimum wage for an employee?
Take the highest of the federal rate, the state rate where the work is performed, any county rate, any city rate, and any industry-specific or public-contract rate that applies. Validate at the street-address level rather than by postal city name, because local wage ordinance boundaries do not follow mailing designations — an employee may work outside the city named in their address or inside a county with its own rate.
Which states increase their minimum wage automatically?
A number of states index their minimum wage annually to a cost-of-living measure, with the new figure typically announced in the fall for a January 1 effective date. These are the states that catch employers out, because there is no legislative event to notice — the rate simply changes. Other states use fixed statutory rates, multi-year scheduled step increases, or default to the federal figure.
When do minimum wage increases take effect?
Most state increases take effect January 1, but a meaningful number use other dates, commonly July 1, and local ordinances frequently use July 1 as well. An employer that reviews rates only in January will miss every mid-year increase and underpay for six months. Two annual reviews, in November and May, cover both cycles.
Does a minimum wage increase affect anything besides hourly pay?
Yes, several derived figures move with it. In states that set the exempt salary threshold as a multiple of the minimum wage, employees can lose exempt status without any change to their pay or duties. Deductions that previously left pay above the minimum may become unlawful. Garnishment exemptions computed from the state minimum wage rise. Tipped minimum wages and youth or training rates expressed relative to the standard rate also move.
Can employers still take a tip credit in 2026?
It depends on the state. Federal law permits a cash wage as low as $2.13 per hour where tips bring the employee to the full minimum wage, with the employer making up any shortfall. Many states prohibit tip credits entirely and require the full minimum in cash; others permit a smaller credit than federal law. Where a credit is permitted, the employer must satisfy notice requirements and verify each workweek that tips actually closed the gap.
Going Deeper
State and local minimum wages change on multiple schedules, several index annually, and municipal ordinances are enacted without broad notice. Verify the current rate for every state, county, and city where employees perform work, twice a year, directly with the issuing agency.
