Employer’s Guide to the Colorado Minimum Wage

Employees these days have certain expectations when it comes to compensation. Gone are the days when employees would silently accept whatever salary you offered them. Not only that, but with the soaring cost of living that states across the nation are now experiencing, it’s more important than ever for employees to receive a fair wage for their hard work. This is where the concept of a minimum wage steps in, and Colorado is no exception. In fact, the evolution of the Colorado minimum wage is a tangible reflection of the state’s awareness of the economic reality that we are all now living in.

So, what is the Colorado minimum wage now? Can we expect to see any further adjustments in the coming years? Ane are there any other significant wage laws in The Centennial State that you need to be aware of as an employer?

Read on to find out everything you need to know about the Colorado minimum wage including rates, exemptions, upcoming increases, and best practices to ensure wage law compliance.

• Minimum Wage in the US: How It Works
• Colorado Minimum Wage: Key Milestones
• Breakdown of Colorado Minimum Wage Rates
• Are There Any Exemptions to the Colorado Minimum Wage?
• What About Other Colorado Wage Laws?
• Best Practices For Wage Law Compliance
• How Factorial Can Help Your Business
• The Payroll Management Software that gets you

Minimum Wage in the US: How It Works

The minimum wage in the United States operates within a multi-tiered structure, subject to regulations at the federal, state, and municipal levels. At the federal level, the Fair Labor Standards Act (FLSA) sets the baseline minimum wage (currently $7.25 per hour), which applies to most employees across the country. However, each state can also establish its own minimum wage rate, provided it meets or exceeds the federal standard. In fact, many states in the U.S. have set minimum wages above the federal level to better align with local economic conditions. Some states, including New York, Massachusetts, and California, even index their minimum wage to inflation. That way, the minimum threshhold automatically adjusts in line with the rising cost of living. 

But what about within the states themselves. It’s all good and well recognizing that different states have varying economic conditions, but are there any provisions that account for varying costs of living from city to city?

Yes, you’ve guessed it! There are many examples where local authorities have defined their own municipal rules for the minimum wage. These localized rates are often significantly higher than both the federal and state minimum wage requirements, particularly in cities with a high cost of living, such as Denver which has made a commitment to increase its municipal minimum wage every year so that it keeps in line with the rising cost of living. There are murmurs in other cities in Colorado about creating additional municipal rates, but so far Denver is the only trailblazer.

Colorado Minimum Wage: Key Milestones

Colorado’s minimum wage started from humble beginnings almost 90 years ago. Since its inception, citizens have seen incremental increases as state policies adjust to keep up with inflation.

So, what are the key milestones of the Colorado minimum wage? How much did employees make when the first minimum wage law was released in the state? And where can we expect this journey to continue on to?

Here’s everything you need to know!

The Humble Launch of the Colorado Minimum Wage (Pre-1970)

• 1935. Colorado dips its toe into the sea of basic thresholds and introduces its first minimum wage law, pleasing citizens across the four corners of The Centennial State. The minimum rate that employers in the “Dirty Thirties” must meet is pegged at $0.35 per hour.
• 1941. Just 6 years later, legislators recognize that the Colorado minimum wage is falling behind and raise the rate to $0.40 per hour.
• 1951. Things are quiet for a decade until the state eventually bumps the rate to $0.75 per hour in 1951.
• 1967. An important year for workers across the nation as the Federal Fair Labor Standards Act is introduced, impacting workers at every level. In response to the federal standard set by this law, Colorado jumps its minimum wage to $1.00 per hour.

Keeping Up With Rising Costs (1970s-2000s)

• 1970s. As a direct result of the unique economic situation of the 1970s, where prices soared but the economy became stagnant due to inflation, oil crises and recessions (a concept often referred to as stagflation), legislators decided to raise the Colorado minimum wage a number of times throughout the decade, reaching $2.30 by 1979. The aim here was to provide workers with more disposable income so that they could inject some much-needed cash into local economies.
• 1980s. Despite the good intentions of legislators during the previous decade, everything came to a standstill during The Age of Reagan and there were no adjustments to the Colorado minimum wage.
• 1990s. The cogs started turning again in the ‘90s thanks to much-needed economic growth and there were a number of Incremental increases to the Colorado minimum wage during this decade, reaching $6.08 per hour by 1999.
• 2000s. These increases continued on into the new Millenium, taking the Colorado minimum wage up to $7.25 by 2008.

Shifting into Fifth Gear (2010s-Present)

• 2010. A groundbreaking initiative was voted in during the new Millenium’s “Teens” known as Ballot Measure 100. One of the key provisions of this law was a commitment to align future Colorado minimum wage adjustments with the Consumer Price Index (CPI). This was a huge step forward that helped to cement the fight for a decent living wage in Colorado.
• 2011-2017. Adjustments aligned with the CPI pushed the minimum wage to $11.10 by 2017.
• 2018. Another groundbreaking law is passed in the state, known as the “Fair Pay for Working Families Act”. This Act guaranteed gradual increases to the Colorado minimum wage with an ultimate target of $12 per hour by 2020. This goal was achieved by the state.
• 2019-2023. Thanks to subsequent adjustments based on CPI and the Fair Pay Act, the Colorado minimum wage reached $13.65 by 2023.

Colorado Minimum Wage: Looking Ahead

At the start of this year, the state will see another scheduled CPI-based increase that will bump the Colorado minimum wage to $14.42 per hour. The state has also made a commitment to hold ongoing discussions and explore potential further increases to the minimum wage. Although these adjustments have not been legalized yet, citizens are hopeful that the Colorado minimum wage will continue on its journey, with further adjustments and policy debates anticipated in the years to come.

Breakdown of Colorado Minimum Wage Rates

The Colorado state minimum wage rate is currently set at $13.65 per hour. However, there is a distinction between the minimum wage for tipped and untipped workers. This recognizes the additional income that tipped workers typically receive from customers. There are also city-specific variations that employers need to be aware of.

Let’s explore these variations to the Colorado minimum wage threshold.

Untipped Workers

As of 2023, the statewide minimum wage for untipped workers sits at a straightforward $13.65 per hour. This means that employers must pay their untipped staff this base rate, regardless of any additional bonuses or commissions they may earn.

The Colorado minimum wage rate for untipped workers is due to increase to $14.42 per hour on January 1, 2024.

Tipped Workers

While the statewide minimum wage for regular employees sits at $13.65 per hour in 2023, tipped employees operate under a different system. Employers start with a lower base pay of $10.63 per hour, but the key lies in the tips. If an employee’s tips, combined with their base pay, do not reach the full minimum wage of $13.65 per hour, the employer is responsible for making up the difference. This “tip credit” system aims to balance the affordability concerns of businesses with the need for fair compensation for workers who rely heavily on gratuities.

As a result of this tip credit system, employers must accurately track employees’ hours and tips to ensure they are meeting their minimum wage obligations. Additionally, they should be aware of upcoming changes to the minimum wage. Specifically, on January 1, 2024, the tipped minimum wage in Colorado will increase to $11.40 per hour, further raising the bar for employers.

City-Specific Variations

Aside from the above, some cities and municipalities in Colorado have implemented their own higher minimum wage ordinances. For example, Denver takes the lead with a hefty $17.29 per hour, making it almost 25% higher than the state average. This “Mile High minimum” ensures its workers earn a fairer share of the city’s vibrant economy.

Other municipalities join the chorus of higher wages. Boulder, for example, stands tall with a $15.80 minimum, followed by Edgewater with a $15.02 per hour minimum. These variations underline the diverse economic realities within Colorado, with larger cities and tourist hotspots demanding a higher living wage.

And the upward climb doesn’t stop there. 2024 promises a statewide bump to $14.42, while Denver pushes the bar even further with a $18.23 minimum wage. These city-specific variations are likely to widen in the future, with local initiatives and ballot measures potentially shaping their own wage trajectories.

For employers, navigating this patchwork of minimum wages requires vigilance. Being aware of local regulations and employee locations is crucial to avoid non-compliance penalties and foster fair compensation practices.

Are There Any Exemptions to the Colorado Minimum Wage?

While the Colorado minimum wage rate for most untipped employees is $13.65 per hour, there are a few exceptions and special cases that employers need to be aware of:

• Exempt employees. Certain categories of employees are exempt from the Colorado minimum wage. These include administrative, executive, and professional employees whose duties involve managing others, making critical decisions, or exercising independent judgment. Outside sales employees whose primary duty is selling away from the employer’s premises also fall under this umbrella.
• Special cases. Some occupations have unique wage regulations. For example, tipped employees, as mentioned previously, earn a lower base pay ($10.63 in 2023) with tips making up the difference to the full minimum wage. In addition, casual babysitters, domestic workers in private homes, and volunteers fall outside the minimum wage regulations altogether.
• Students and interns. College students working for college organizations, such as fraternities or clubs, are exempt from the Colorado minimum wage. Additionally, students in work-study programs and volunteers at charitable institutions with no paid workers usually aren’t covered. However, internships paid through regular company payroll usually qualify for the minimum wage.

What About Other Colorado Wage Laws?

Ok, so far so good. That’s pretty much everything that you need to know about the Colorado minimum wage. But we’re sorry to say that the work doesn’t end there. There are a number of other wage laws that you need to be mindful of when you design your compensation strategies.

Let’s jump in and find out what these additional Florida wage laws are!

Equal Pay for Equal Work

In line with the federal Equal Pay Act, employers in Colorado cannot discriminate based on sex, race, ethnicity, religion, age, or any other protected characteristic when it comes to wages and compensation. In other words, you must offer equal pay to all employees who perform substantially equal duties (pay parity).

Perhaps the best thing about Colorado’s Equal Pay Act is that it strengthens the protections offered by its federal “big brother”. For one thing, employers in the state now have to include salary ranges in all job postings. Plus, recruiters and interviewers can no longer probe into a candidate’s past salary history before making a job offer. This is known as pay transparency.

Overtime Pay

In Colorado, non-exempt employees must be paid 1.5 times their regular rate for work beyond 40 hours in a workweek, 12 hours in a workday, or 12 consecutive hours regardless of start and end times (excluding meal breaks). This overtime rate is known as time and a half.

Employers also need to be aware of exemptions for certain professions and the potential increased overtime rates in some cities. For example, Denver boasts an even higher overtime rate of double time (twice the regular rate) for some city employees after exceeding 40 hours a week.

Paid Sick Leave

According to the Healthy Families and Workplaces Act (HFWA), you must offer paid sick leave to all eligible employees. To calculate how much sick leave an employee is entitled to, follow this simple rule: employees accrue one hour of paid sick leave for every 30 hours worked. Employees can accrue up to 48 hours of paid sick leave per year. They can carry over any unused sick leave from one year to the next.

Meal and Rest Breaks

According to Colorado law, employers must make sure that any employees who work for 5 hours straight are given an unpaid meal break. And if employees work for at least 6 hours, employers must also make sure they are given unpaid rest breaks.

So, how long can an employee take for these breaks? Are there any guidelines about this?

Yes, but there’s no single clear-cut answer. Generally speaking, meal breaks should be at least half an hour and employees must be relieved of all work duties during this time. Breaks, in turn, must be at least 10 minutes and they should be provided in the middle of the work period whenever possible.

Finally, it’s always best to check if there are any industry regulations that might change this rule. For instance, if you work in construction, you can choose to allow your workers to take shorter, more frequent breaks instead one long break.

Wage Statements

Employers must regularly provide employees with accurate and detailed wage statements on a defined regular basis. There are no specifics as to when these must be issued, but once you have defined a schedule, you must stick to it. Also, make sure your wage statements detail the employee’s pay rate, the hours they have worked during the pay period, any deductions that you have made, and the final take-home pay that each employee will receive.

Recordkeeping

Finally, you must maintain accurate and detailed employee records for your entire workforce. These records must include all essential documents including timecards, W-2 forms, and performance evaluations. They must also include a paper trail of any and all salary changes, promotions, and disciplinary actions. This isn’t just a legal requirement though; keeping a record of all these documents means that you will have the proof you need at your fingertips in the unfortunate event that an employee reports you for wage theft, discrimination, or wrongful termination.

Best Practices For Wage Law Compliance

Walking the fine line of legal compliance can be a huge headache for employers, especially when it comes to wage laws and keeping up with changes to the Colorado minimum wage. We want to help you with this challenge, so we have put together a short list of essential best practices to set you off on the right foot:

• Establish and communicate clear written policies on overtime eligibility, calculations, and reporting procedures.
• Implement a reliable timekeeping system to enhance the quality of your data and minimize the risk of errors in your employee pay checks.
• Conduct regular audits to make sure that you are calculating overtime correctly and that your employee timecard records are accurate.
• Maintain accurate records of all employee documents. Make sure these digital files include a record of all employee timecards, payroll transactions, and leave requests. Finally, make sure you use a reliable system so that you can easily access these records at the click of a button if you are audited or investigated.
• Regularly review your job roles and compensation strategies so that you can rest assured that the pay you offer aligns with individual job duties, responsibilities, updates to the Colorado minimum wage, and industry-specific market rates. Also, keep an eye out for any potential pay disparities relating to gender, race, or other protected classes.
• Finally, use software to track the hours that each employee works, how many breaks they take, and how long these breaks last. This will help you comply with state meal and rest break laws.

How Factorial Can Help Your Business

And there you have it! Now all you need to do is make sure that your internal policies reflect the rights and obligations set by the state’s wage laws and the Colorado minimum wage. Pay special attention to your payroll management process.

Thankfully, if you use the right tools and technology, sticking to the rules defined by the state is a walk in the park. With solutions like Factorial, you can streamline your processes and procedures and save a heap of time for your HR administrators.

Here are some of the specific benefits of using Factorial’s software in your business:

• Payroll software. Ditch manual calculations and paper trails. Factorial’s payroll software automatically accounts for the latest Colorado minimum wage updates, Colorado state holidays like Martin Luther King Jr. Day and Labor Day, and additional holiday pay rules in the state. You’ll always be confident your employees are paid accurately and on time.
• Effortless time tracking. Forget clunky timesheets and attendance spreadsheets. Factorial’s integrated electronic time clock lets employees clock in and out easily, ensuring every minute is precisely recorded. That way, you can rest assured that you are complying with all time-tracking legal requirements.
• Employee record management. Keep all employee information, from timecards and leave requests to performance reviews, securely organized on one central platform. With Factorial’s employee record management software, you can easily generate reports, track historical data, and access records for audits or inquiries.
• Employee handbook & policy creation tools. Easily build and communicate a comprehensive employee handbook, including clear policies on overtime, holidays, breaks, and other wage-related regulations.
• Secure and transparent paystubs. Finally, make sure your employees receive detailed and clear paychecks at the end of each period. This will help them understand how you have calculated their total pay, taking into account all relevant deductions.