When it comes to compensation, the federal minimum wage is the baseline for almost all employers and their hourly employees. On July 24, 2007 the federal minimum wage increased from $5.15 to $5.85. There will be two more increases on July 24, 2008 to $6.55 and on July 24, 2009 to $7.25.
While the federal minimum wage applies to all states, individual states have the right to a higher minimum wage than the federal level. Some states will not be affected by the increase in minimum wage as they already have a minimum wage above $7.25.
Most businesses are covered by the FLSA federal minimum wage and a “covered enterprise” can be defined as a business with at least $500,000 in sales or receipts, hospitals and care facilities for the elderly and disabled, and school and government agencies. Even if a business isn’t covered, its employees are if they engage in interstate commerce, produce products for interstate commerce, or if their work is closely related or directly essential to interstate commerce.
Almost all employers are required, under the Fair Labor Standards Act (FLSA), to pay at least the federal minimum wage to their hourly employees. There are, however, a few exceptions to this. Four types of workers can, with proper documentation and under certain terms, be paid less than federal minimum wage. Those workers include full-time students, those with mental and physical disabilities, workers under age 20 and workers who receive tips.
Full time students who work in retail, agriculture, service stores, or colleges and universities can be paid no less than 85% of the federal minimum wage with a certificate from the Department of Labor. The hours the students work is limited to 20 hours a week when school is in session and 40 hours a week when school is not in session. Mentally or physically disabled employees can be paid less than federal minimum wage when the employer has a certificate from the Secretary of Labor. Employees under age 20 can be paid what is known as the opportunity wage which is no less than $4.25 for the first 90 consecutive days of employment.
Those who receive gratuities when they work in excess of $30 a month do not need to receive minimum wage. Employers can pay tipped employees a reduced wage and take a “tip credit”. Currently the reduced wage for tipped employees is $2.13 with the tip credit for employers being $3.02 an hour, adding up to a total of $5.15 – the current federal minimum wage. As the federal minimum wage increases, so will the reduced wage for tipped employees. On July 24, 2008 the reduced wage will increase to $3.72, and the tip credit will increase by the difference between $2.15 and the new minimum wage amount.
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