Updated March 29, 2020.
This blog post reflects the current state and local minimum wages in effect as of January 1, 2021, as well as future enacted increases. Read on to prepare to update your payroll and learn what you need to know.
Annual minimum wage increases are quite common in many parts of the country; many update their wages based on inflation each January 1st on an ongoing basis. But in the past several years, many states have also seen more significant increases due to recent legislation to reflect the modern cost of living. As ordinances slowly raise the minimum wage over the next several years, businesses should keep close attention on the upcoming changes for 2021.
Understanding Minimum Wage
According to a 2017 study by the Bureau of Labor Statistics, 80.4 million workers over 16 years old perform hourly work in the US. With varying minimum wages between federal, state and local levels, how do companies know which one to choose? In short, businesses must pay the highest rate for their area. They must choose the rate that most benefits the employee.
For example, the federal minimum wage is $7.25. If you work in Arkansas, where the minimum wage is $11.00 an hour, a company must side with the state amount. As of 2021, 29 states are above the federal limit, reiterating the importance of paying close attention to state and local laws. Other laws, such as those for tipped employees differ from these numbers as well.
Changes in 2021 Minimum Wages by State
How can you prepare for upcoming pay rate changes? Begin by researching specific rates and changes over the course of 2021 in your state and district. The Department of Labor website includes each state’s individual webpage, many of which offer a business portal to assist in the transition.
Minimum wage primarily increases in two ways: by annual indexing or due to a recent ordinance. Annual indexing uses the Consumer Price Index (CPI) to set the increase for their state’s rate. No matter the reason, all changes aim to better meet the standard of living for the region and the match inflation.
We’ve divided our guide into easy categories so you can determine if your state’s minimum wage is changing within the next calendar year. States either: do not have minimum wage laws (and thus defer to the federal minimums), will see no changes in 2021, will experience annual indexing or have specifically planned changes for the year:
No minimum wage established in 2021 (Federal minimum applies) (U.S. DOL, 2021)
No changes to minimum wage in 2021
Annual Indexing Increases for 2021
District of Columbia
Did you know that the District of Columbia (D.C.) has the highest minimum wage for 2020 and 2021 at $15.00 an hour? Please note that you should also view your state's info to minimum wage increases, as they take precedent over federal in this instance. (U.S. DOL, 2021)
Mandated Hourly Increases on 1/1/2021 (unless otherwise noted)
Increase from $10.19 to $10.34
Increase from $12.00 to $12.15. Additional changes for Flagstaff apply.
Increase from $10.00 to $11.00
Increase from $13.00 to $14.00 for businesses with more than 25 employees, and from $12.00 to $13.00 for those with less than 25. Additional municipality increases apply.
Increase from $11.10 to $12.00
Increase from $8.56 to $8.65
Increase from $12.00 to $12.15
For small employers increase from $8.15 to $8.21. For large employers increase from $10.00 to $10.08.
Increase from $8.65 to $8.75
Rates will rise 7/1/21; companies that offer benefits will increase from $8.00 to $8.75 and those who do not will increase from $9.00 to $9.75.
Increase from $11.00 to $12.00 or to the greater of annual indexing. Companies under 6 employees will increase to the greater of annual indexing or increase from $10.30 to $11.10.
New York State wages (outside of NYC) will increase from $11.80 to $12.50; Long Island and Westchester will increase from $13.00 to $14.00; and all NYC employees, regardless of company size, will increase to $15.00.
Increase from $8.70 to $8.80 for employers with annual gross receipts of $305,000 or more. Basic minimum rate (per hour) of $7.25 for employers with annual gross receipts under $305,000.
Portland metropolitan wages increase on July 1, 2021, from $13.25 to $14.00; Non-Urban Counties, $11.50 to $12.00; All other employees, $12.00 to $12.75.
Increase from $9.30 to $9.45
Increase from $13.50 to $13.69
Best Practices - Understanding State Minimum Wage Increases for 2021
We recommend the following best practices for updating your payroll:
- During any time of transition, HR departments should take the time to re-evaluate their payroll to plan for a smooth transition.
- If you employ hourly workers, verify whether their rate will increase in 2021 for your area. This is especially important if you conduct business across multiple states.
- Work with a professional Payroll Solutions team to simplify all changes to labor and tax laws or seek additional HR support to advise on big decisions along the way.
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