Minimum wage laws set the baseline for what employers must pay employees per hour worked. These rates can vary widely across states, cities and counties, depending largely on regional cost of living and local legislative priorities.
At the federal level, the Fair Labor Standards Act (FLSA) has governed minimum wage laws since 1938, when the first federal wage was set at $0.25/hour (equivalent to approximately $5.40 in 2023 dollars). States may adopt their own wage laws, provided they meet or exceed federal requirements.
Currently, five states – Alabama, Louisiana, Mississippi, South Carolina and Tennessee – do not have state-specific minimum wage laws and therefore follow the federal rate of $7.25/hour for covered employees. Employers with contracts at the federal, state or local levels may be subject to additional wage requirements under prevailing wage laws.
Tipped wages and tip credits
Employers in industries such as food service, where employees customarily receive tips, may be permitted to pay a lower hourly base wage as long as tips make up the difference to reach the applicable minimum wage.
Federal law allows a base wage of $2.13/hour for tipped workers, assuming actual tips received bring total earnings to at least $7.25/hour. However, some states disallow the use of tip credits or impose stricter guidelines. Employers must monitor compliance closely to avoid wage violations.
Key takeaways
- Federal minimum wage remains at $7.25/hour as of 2025.
- Tipped wage is $2.13/hour federally, with an allowable tip credit of up to $5.12/hour.
- States and local governments may set higher rates, and many tie annual adjustments to inflation.
- Tip credit laws vary significantly by state – some prohibit or restrict their use entirely.
2025 federal minimum wage overview
| Category | Rate |
| Minimum wage | $7.25/hr |
| Tipped wage | $2.13/hr |
| Maximum tip credit | $5.12/hr |
2025 state-by-state minimum wage chart
Insperity provides an up-to-date breakdown of minimum wage and tip credit rates across all 50 states and Washington, D.C. This helps ensure clients remain compliant no matter where their employees work.
Click here to review the minimum wage by state 👉 State Minimum Wage Laws | U.S. Department of Labor
Note: Some states do not permit employers to pay a reduced tipped wage. All information is current as of July 31, 2025.
2025 minimum wage increases
More than two dozen states and localities implemented minimum wage increases for 2025, reflecting inflationary pressures and cost-of-living adjustments. These include but are not limited to:
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Illinois
- Maine
- Michigan
- Minnesota
- New Jersey
- New York
- Oregon
- Rhode Island
- Vermont
- Virginia
- Washington
Insperity continues to monitor wage changes to help our clients update payroll systems and remain compliant.
Frequently asked questions
Do all states have a minimum wage law?
No. Five states do not have their own minimum wage statutes and instead follow the federal rate for FLSA-covered employees.
Can cities set higher minimum wages than their state?
Yes. Many local jurisdictions, such as Flagstaff, Arizona, and Seattle, Washington, enforce higher wage rates than their states.
Which area has the highest minimum wage?
Washington, D.C., leads with $17.95/hour. Among states, Washington ranks highest at $16.66/hour.
Which states have the lowest wage floor?
Georgia and Wyoming list a state minimum of $5.15/hour – but this only applies to employees not covered by the FLSA. Otherwise, the federal rate of $7.25 applies.
Stay compliant with confidence
Managing wage compliance across multiple jurisdictions can be complex. Insperity’s team of human resources and payroll experts helps ensure your business stays aligned with changing wage laws – so you can focus on what matters most: growing your business and supporting your people.