Alabama minimum wage in 2026 (and 2027)

Why the federal rate is Alabama's rate

Alabama has no wage floor of its own. The DOL's state table lists it as a state with no minimum wage law, which leaves Alabama employers under the federal Fair Labor Standards Act. So the real question for an Alabama business is whether the FLSA reaches you, and for nearly everyone it does:

• By business size: once your company has two or more workers and does $500,000 a year in sales, every employee is covered. Hospitals, nursing and residential care providers, schools, preschools and public agencies are covered whatever their revenue.
• By the job itself: a worker at a smaller company is still covered if the work regularly crosses state lines, for example taking orders by phone from Georgia or Mississippi customers, keeping books on out-of-state sales, producing goods that ship elsewhere, or driving to jobs in another state.
• In the home: housekeepers, cooks and full-time babysitters are normally covered too.

The gap left over is tiny: a very small, purely local business whose staff never touch interstate trade. Do not plan payroll around that exception. If DOL investigates, you carry the burden of showing it applies.

Tips, teenagers and overtime under federal rules

Every detail Alabama law leaves blank is filled by the FLSA:

• Servers and bartenders: pay at least $2.13 an hour in cash and count up to $5.12 of tips, but only for staff who regularly earn more than $30 a month in tips. Any hour where cash plus tips comes in under $7.25 needs a top-up from you.
• New hires under 20: $4.25 an hour is allowed for the first 90 consecutive calendar days, then the full $7.25.
• Long weeks: time-and-a-half after 40 hours in a workweek.
• Salaried managers: to treat someone as exempt from overtime, pay at least the federal $684 a week ($35,568 a year).

More detail sits on our federal minimum wage page.

Weekly, monthly and annual pay at $7.25

For 40 hours a week over 52 weeks:

• 40 x $7.25 = $290.00 a week
• 2,080 x $7.25 = $15,080.00 a year
• $15,080.00 / 12 = $1,256.67 a month

Neighboring Florida's minimum wage reached $15.00 on September 30, 2026, more than double Alabama's floor. Georgia (for FLSA-covered employers), Mississippi and Tennessee pay the federal $7.25.

Payroll taxes on top of an Alabama wage

On $15,080.00 of annual wages for one employee, a new Alabama employer pays:

• FICA (Social Security 6.2% plus Medicare 1.45%): $1,153.62
• FUTA, 0.6% on the first $7,000: $42.00
• Alabama unemployment tax, new account rate 2.70% on the $8,000 wage base: $216.00

Total: $1,411.62, about 9.4% of wages. Alabama has no state paid leave or disability payroll tax. Some Alabama cities and counties charge occupational license taxes on wages, and we have not verified the full list, so check the city where each employee works. The registration steps and income tax withholding rules are on Alabama payroll taxes.

Running a compliant Alabama payroll

Even at the federal rate, the errors that cost money are tip shortfalls, unpaid overtime and local occupational taxes. A payroll service tracks hours and flags any week where tipped pay falls below $7.25. Gusto, for one, lists its Simple plan at $49 a month plus $6 for each person paid (checked October 16, 2026). Our payroll software rankings compare it with cheaper and fuller options, and payroll pricing by provider shows the fees side by side.