Federal minimum wage in 2026: $7.25 an hour

Who the $7.25 rate covers

The FLSA covers any business with at least two employees and annual sales of at least $500,000, plus hospitals, care homes, schools and government agencies of any size. Workers at smaller firms are still covered individually when their jobs regularly involve interstate commerce, such as calls to other states or goods shipped out of state, and domestic workers such as housekeepers and full-time babysitters are normally covered too (DOL Fact Sheet #14).

So most businesses that run payroll owe at least $7.25. The rare small, purely local firm outside the FLSA falls back on state law. That is why Georgia and Wyoming can keep a $5.15 state rate on the books and Oklahoma a $2.00 rate for some small employers: those figures bind only employers the FLSA does not reach. The table below shows every state rate for 2026.

Minimum wage by state in 2026

Tipped employees and the youth wage

A tipped employee is someone who customarily and regularly receives more than $30 a month in tips. Federal law lets you pay that person a cash wage of $2.13 an hour and count up to $5.12 an hour of tips toward the minimum ($2.13 + $5.12 = $7.25). If tips fall short in a workweek, you make up the gap. Many states are stricter: California, Washington, Nevada, Minnesota, Montana, Oregon and Alaska allow no tip credit at all, so tipped staff get the full state minimum before tips. Restaurants can see how this plays out on our restaurant payroll page.

The youth minimum wage is $4.25 an hour for workers under 20, and only for their first 90 days with you. After that, or once they turn 20, the regular federal or state minimum applies.

Who is exempt from minimum wage and overtime

Section 13(a)(1) of the FLSA exempts executive, administrative, professional, computer and outside sales employees from both minimum wage and overtime, but only when the job passes the tests. Most must earn a salary of at least $684 a week ($35,568 a year), and their main duties must fit the category: managing a unit and supervising at least two full-time employees, office work that uses discretion on significant matters, advanced learned or creative work, or skilled computer systems work. Computer employees paid by the hour need at least $27.63 an hour. Outside sales staff must regularly work away from your place of business. Highly compensated employees with total pay of at least $107,432 face a lighter duties test.

DOL states plainly that job titles do not determine exempt status. The 2024 rule that would have raised the salary level was vacated by two federal district courts in Texas in late 2024, and DOL restored the $684 level in a rule published and effective May 15, 2026. Some states set higher salary floors; see our exempt vs non-exempt guide.

Overtime under federal law

Nonexempt employees earn at least 1.5 times their regular rate for every hour over 40 in a workweek. At the federal minimum that is $7.25 x 1.5 = $10.875 an hour. The federal rule is weekly, so check state law for any daily overtime rule.

Federal contractor minimum wage in 2026

Two executive orders have set higher pay floors on federal contracts. Executive Order 14026 is gone: Executive Order 14236 revoked it on March 14, 2025, and DOL says it is no longer enforcing EO 14026 or its rule at 29 CFR part 23, which it plans to rescind. The older Executive Order 13658 still runs, and its rate rose to $13.65 an hour, or $9.55 for tipped employees, beginning May 11, 2026 (DOL notice at 91 FR 5783).

According to DOL, EO 13658 now reaches covered contracts, such as Davis-Bacon Act and Service Contract Act contracts, entered into, renewed or extended between January 1, 2015 and January 29, 2022 that have not been renewed or extended since January 30, 2022. Newer contracts fall back on the FLSA, state and local minimums and any prevailing wage determination. Prevailing wage work also means weekly reports, covered in our certified payroll guide.

The 20 states that still pay $7.25

In our 2026 state data, built from state labor department and U.S. Department of Labor pages, $7.25 is the working minimum in Alabama, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Wisconsin and Wyoming. Five of them, Alabama, Louisiana, Mississippi, South Carolina and Tennessee, have no state minimum wage law. None of the 20 had announced a 2027 increase as of October 2026. At the other end, Washington pays $17.13 and DC $18.40. See the Texas minimum wage, Pennsylvania's rate or how Georgia's $5.15 law works.

What a $7.25 worker costs and how to pay it

A full-time year at the federal minimum is 40 hours x 52 weeks x $7.25 = $15,080, or $1,256.67 a month. On top of that wage the employer pays:

• FICA: 7.65% (6.2% Social Security plus 1.45% Medicare) x $15,080 = $1,153.62.
• FUTA: 0.6% net on the first $7,000 = $42.00, assuming the full state credit.
• State unemployment tax at your state's new-employer rate, listed in our 2026 SUTA table.

That is $1,195.62 a year before SUTA and workers' compensation. Model a full hire in the employee cost calculator.

Mistakes to watch for at this pay level: overtime past 40 hours left unpaid, a tip credit kept when tips fall short of $7.25, or a worker moved to a city with a higher minimum. Payroll software that applies the rate for each work location helps; compare options in our payroll software rankings and check every 2026 state rate before each January and July.