Rates and the Minimum Wage
The federal minimum wage is now $5.15 per hour. This is the
minimum rate that must be paid to all nonexempt
employees for each hour worked up to and including 40 in a
calendar workweek. In some
states, a higher minimum rate applies and you must pay your
employee at least that higher rate.
The law doesn't require you to pay an employee on an hourly
basis — it merely requires you to pay a covered employee for a
workweek an amount at least equal to the minimum. Wages may be
paid on an hourly, salary, monthly, piecework, or any other
basis as long as the statutory minimum requirement is satisfied.
However, if you don't pay at a fixed hourly rate, you open
yourself up to having to do all sorts of complicated
calculations to determine the employee's "regular
rate." For that reason, we recommend that you pay all
your nonexempt employees at a fixed hourly rate.
What if the regular rate falls below the minimum wage?
If an employee's regular rate is less than the minimum rate,
then the employee's straight-time earnings will have to be
adjusted to conform with the minimum wage requirement and the
employee must be paid overtime on the basis of one and one-half
times the minimum.
So, if the employee's regular rate falls below $5.15 per
hour, you will have to adjust the employee's pay upward so that
the regular rate is at least $5.15 per hour, and you will have
to pay the employee time and a half based on the minimum wage
rate of $5.15 (in other words, at least $7.725 per overtime
Counting time-off pay toward the minimum wage. Can you
credit holiday and vacation pay towards meeting the minimum-wage
obligation? In other words, when you're adding up the hours an
employee worked in a week, can you include a paid day off? No.
The reason is that the federal law requires you to use
compensation for "hours worked" and holiday or
vacation pay is not paid as compensation for hours worked.
Suppose you're trying to figure out whether
you met the minimum-wage obligations for the
week that included Labor Day, which you gave as
a holiday. Even though you might have paid your
employees for that day, you can still use only
the pay and hours from Tuesday through Friday of
that week to determine whether you met your
Counting wage credits toward minimum wage. The federal
law allows you to count board, lodging, and other facilities as
part of wages for purposes of meeting the minimum wage
requirements. A common example is meals provided by a restaurant
to its employees. To take advantage of the rule, however, you
have to meet several criteria:
- You can count only the reasonable or fair value of the
facilities (as opposed to the retail value).
- The facilities must be furnished for the benefit of the
employees, not just your own convenience.
- The employees must be aware that the value of the
facilities are being deducted from their cash wages. The
employees must voluntarily accept the items. For example, in
the case of free meals provided by a restaurant, employees
must be allowed to opt out of the meal plan.
- The facilities must be of a type customarily furnished by
the employer or by other employers engaged in similar
State laws. Some states also make provisions for wage
credits in their minimum wage laws. Be sure to check your state
laws to see if wage credits are covered by your state's
minimum wage law.