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Minimum wage rising to $7.25; Obama calls for $9.50 by 2011

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in Compensation and Benefits,Human Resources,Leaders & Managers,Management Training

In 2007, Congress passed a three-step boost in the federal minimum wage. On July 24, 2009, the last of those increases takes effect, rising another 70 cents to $7.25 per hour.

That may not be the end. President Obama has advocated increasing the federal wage floor to $9.50 per hour by the end of 2011 and linking future increases in the minimum wage to the inflation rate.

Many cities, counties and states set their own minimum wage rates. Find an interactive map of state minimum wage laws at www.dol.gov/esa/minwage/america.htm.

Editor's note: Learn more at To Pay or Not to Pay: Solving Your Complex FLSA Issues

Difficult calculations

Some situations make it difficult for employers to calculate whether they're meeting the minimum-wage requirements. Here are some key examples:

1. Employees working at two or more rates. If an employee does two or more jobs for you with different hourly rates, you would normally calculate the regular rate by taking his total earnings from all rates for the week and dividing that by the total hours he worked at all jobs.

2. Commissions. Employees paid on a commission basis must receive at least the minimum wage for each hour worked in a week. If you pay an employee a salary plus commissions and the salary is high enough to cover the minimum each week, this requirement poses no problem. But if you pay him solely on commission, you must make up the difference for any week in which commission earnings fall short of the minimum wage. Also, the payment must be made free and clear: You can’t recover any part of the minimum-wage payment from earnings in weeks when his commissions exceed the minimum wage.

3. Tipped employees. Workers who regularly receive more than $30 a month in tips are considered “tipped employees.” Under the FLSA, employers who claim a tip credit against their minimum-wage obligation must pay tipped employees a cash wage of at least $2.13 an hour. If an employee’s tips and cash wages don’t equal the minimum wage, the employer must make up the difference. The tip credit doesn’t apply unless the employee has been made aware of the credit provisions and has been allowed to retain all the tips he or she received.

4. Piece rates. An employee working on a piece-rate basis (paid her rate of production rather than a set hourly wage) must earn at least the minimum wage. To determine that, you should divide her total earnings for the workweek by her hours that week. If the rate is less than the legal minimum, you must make up the difference. In other words, in each pay period you must pay her either actual piece-rate earnings or the minimum wage, whichever is greater. Also, you can’t withhold pay in a second week to make up the difference between her earnings in the first week and the legal minimum.

Editor's note: Learn more at To Pay or Not to Pay: Solving Your Complex FLSA Issues

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