Minimum wage

What It Means

The minimum wage is the lowest hourly rate an employer may legally pay a worker. Under the federal Fair Labor Standards Act it's $7.25 an hour for covered nonexempt employees, the rate that took effect on July 24, 2009. Many states and some cities set their own, higher minimums, and the Department of Labor says the employer has to pay whichever applicable rate is highest.

How People Say It at Work

• "It's minimum wage to start, but it goes up after training."
• "Our state's minimum is higher than the federal one."
• "Servers here get the tipped wage plus whatever they make in tips."

The Breakdown

Worked example at the federal minimum. A worker earns $7.25 an hour, which is an example rate:

These are gross figures, before taxes come out.

Worked example with tips. A server is paid a $2.13 cash wage and averages $4.00 an hour in tips over a 30-hour week (example numbers):

What moves the number

• Where you work. Employers pay the highest applicable minimum, whether it's federal, state or local, according to the Department of Labor.
• Whether you're covered. The $7.25 federal rate applies to covered nonexempt employees under the Fair Labor Standards Act.
• Tips. A tipped worker's cash wage can be as low as $2.13 under federal law, as long as tips bring the hour up to $7.25.

Good to Know

The federal rate of $7.25 an hour took effect on July 24, 2009, according to the Department of Labor. Where a worker is covered by both state and federal law, the Labor Department says the higher minimum applies, and its "State Minimum Wage Laws" page and Consolidated Minimum Wage Table list each state's rate. For tipped workers, DOL's Fact Sheet #15 lets an employer count no more than $5.12 an hour in tips toward the minimum, and many states require a higher cash wage than the federal $2.13; DOL keeps a separate table of state rules for tipped employees. State rates change, so check your state labor department's site for the rate in force today.

Related Terms and Categories

• Take-home pay

  The money that actually reaches you from a paycheck after taxes and other deductions are taken out, also called net pay or net income.

• Gross income

  The full amount you earn before taxes and other deductions come out. For federal taxes, it's all income you receive unless a law exempts it.

• Babysitter rates

  What families pay a babysitter, usually by the hour. Care.com's 2026 Cost of Care Report puts the average posted rate at $19.81 an hour nationally.

• Cost of living

  What it costs to keep a certain standard of living, such as housing, food and transportation, in a given place at a given time.

Pay, rates and costs