Skip to content

Employer’s Guide to the Colorado Minimum Wage

·
9 min read
Colorado minimum wage

As an employer in Colorado, there is a range of labor laws and regulations that you need to enforce in your business to ensure compliance and build a fair and equitable workplace. This is especially true in the case of employee compensation, as neglecting the complexities of the Colorado minimum wage can lead to hefty fines and reputational damage to your business.

Are you up to date with the laws regulating employee compensation? Do you know what the minimum wage is in Colorado? Is the minimum wage going up in Colorado in 2024? What other wage laws do you need to be aware of as an employer in the Centennial State?

Fear not, we’re here to answer all these questions and more. 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.

book your free demo

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, individual states have the authority to establish their own minimum wage rates, provided they meet or exceed the federal standard. This decentralized approach recognizes the variation in the cost of living across different regions of the country.

Many states have opted to set minimum wages above the federal level to better align with local economic conditions. Some states even index their minimum wage to inflation, ensuring that it automatically adjusts to the rising cost of living. Examples of this include states like New York, Massachusetts, and California.

In addition to state minimum wage rates, municipalities can also enact their own minimum wage ordinances. This allows local governments to address specific economic challenges and living costs unique to their communities. Consequently, workers in cities with higher living expenses sometimes receive a higher minimum wage than those in other parts of the state.

Ultimately, the multi-tiered structure of the minimum wage acknowledges the diversity of economic circumstances across the nation. While the federal government establishes a baseline, states and municipalities have the flexibility to tailor minimum wage rates to reflect the economic realities of their respective jurisdictions. This system aims to strike a balance between providing a fair wage to workers and accommodating the varying costs of living experienced throughout the United States.

Colorado Minimum Wage: Historical Timeline

Colorado’s minimum wage journey has been one of gradual ascent, marked by incremental increases and shifts in policy focus.

Here’s a glimpse into the key milestones of the Colorado minimum wage.

Early Beginnings (Pre-1970)

  • 1935: Colorado enacts its first minimum wage law, setting it at $0.35 per hour.
  • 1941: Minimum wage rises to $0.40 per hour.
  • 1951: Another increase bumps the rate to $0.75 per hour.
  • 1967: Following the Federal Fair Labor Standards Act, Colorado adopts a minimum wage of $1.00 per hour.

Gradual Adjustments (1970s-2000s)

  • 1970s: The decade saw several adjustments, with the Colorado minimum wage reaching $2.30 by 1979.
  • 1980s: Colorado minimum wage remains stagnant throughout the decade.
  • 1990s: Incremental increases begin again, reaching $6.08 by 1999.
  • 2000s: Continued modest increases bring the minimum wage to $7.25 by 2008.

Shifting Gears (2010s-Present)

  • 2010: Voters approve Ballot Measure 100, linking future Colorado minimum wage adjustments to the Consumer Price Index (CPI).
  • 2011-2017: CPI-based increases push the minimum wage to $11.10 by 2017.
  • 2018: Colorado passes the “Fair Pay for Working Families Act”, guaranteeing gradual increases until the minimum wage reaches $12 by 2020.
  • 2019-2023: Continued adjustments based on CPI and the Fair Pay Act bring the minimum wage to $13.65 by 2023.

Colorado Minimum Wage: Looking Ahead

As of January 1, 2024, a scheduled CPI-based increase will take the Colorado minimum wage to $14.42. Aside from this upcoming Colorado minimum wage increase, ongoing discussions and ballot initiatives are exploring proposals for further increases and city-specific minimum wage variations. However, these adjustments are yet to be legalized. Nonetheless, as the state navigates issues of affordability and worker’s compensation, its minimum wage journey is likely to continue with further adjustments and policy debates in the years to come.

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.

Colorado Minimum Wage: Exemptions & Special Cases

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.
  • Independent contractors vs. employees. Finally, differentiating between independent contractors and employees is crucial. Independent contractors, who set their own hours and work schedules, are not entitled to the Colorado minimum wage or any other employee benefits. However, misclassifying an employee as a contractor can lead to hefty fines and back-pay liabilities.

payslip template

Additional Colorado Wage Laws

Beyond Colorado’s minimum wage, employers need to be mindful of additional wage laws impacting their practices to ensure legal compliance and workplace fairness.

Here are a few key wage laws to be aware of.

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 regarding wages and compensation. This includes ensuring equal pay for employees doing substantially similar work under similar conditions (pay parity).

Colorado’s Equal Pay for Equal Work Act strengthens these protections, requiring employers to include salary ranges in job postings and prohibiting inquiries about past salary history. 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.

Earned Wage Access

Colorado allows employees to request early access to their earned wages before the regular payday without incurring fees. This concept, known as on-demand pay, helps workers address financial emergencies and promotes financial well-being.

Paid Sick Leave

The Healthy Families and Workplaces Act (HFWA) requires employers to offer paid sick leave to most employees in Colorado. Employers must provide employees with one hour of paid sick leave for every 30 hours worked, up to a certain maximum.

Meal and Rest Breaks

According to Colorado law, employers must provide employees with unpaid meal breaks for shifts exceeding 5 hours. They must also offer unpaid rest breaks for shifts exceeding 6 hours.

Specific rules regarding timing and length of breaks apply, along with exemptions for certain industries. For example, construction workers can opt for shorter, more frequent breaks instead of a single 30-minute break, as permitted by industry regulations.

Wage Statements

Employers must regularly provide employees with accurate and detailed wage statements. These statements must detail the employee’s pay rate, hours worked, deductions, and net pay.

Wage Theft

Withholding earned wages from employees is illegal in Colorado. This includes failing to pay overtime, misclassifying employees as exempt, or making unauthorized deductions. Violations can result in penalties and backpay liability.

Recordkeeping

Finally, employers in Colorado must maintain accurate and complete employee records. These records must include essential documents like timecards, W-2 forms, and performance evaluations. Maintaining these records is not just vital for compliance; they can also protect you from claims of wage theft, discrimination, or wrongful termination by documenting salary changes, promotions, disciplinary actions, and other key workplace events.

Keeping records organized and accessible is also vital for internal purposes, streamlining administrative tasks like payroll calculation and employee benefits management. Moreover, investing in a clear and compliant recordkeeping system can also help you foster transparency, trust, and a fair work environment.

Wage Law Compliance Best Practices for Employers

Navigating the complexities of wage laws can feel like a tightrope walk for employers. However, by adopting the following best practices, you can ensure compliance with these laws and nurture a happy workforce.

  • Clear policies. Establish and communicate clear written policies on overtime eligibility, calculation, and reporting procedures.
  • Accurate timekeeping. Implement a reliable timekeeping system to minimize errors.
  • Regular audits. Conduct periodic audits to verify overtime calculations and time record accuracy.
  • Recordkeeping. Maintain a well-organized digital filing system for all employee records, including timecards, payroll records, and leave requests. Implement robust security measures and ensure records are readily accessible to authorized personnel for audits, investigations, or employee inquiries. In addition, implement a clear retention policy that adheres to federal and state regulations, and consistently dispose of outdated records securely.
  • Wage theft. Conduct periodic reviews of job roles and compensation to ensure pay aligns with job duties, responsibilities, updates to the Colorado minimum wage, and industry-specific market rates. In addition, proactively audit your payroll records to identify and rectify any potential gender, racial, or other protected class pay disparities. Moreover, be transparent with employees about their pay rates, earnings statements, and deductions to foster trust and prevent claims of wage theft.
  • Leave policies. Communicate clear and accessible leave policies outlining PTO accrual, vacation requests, and sick leave procedures.
  • Break compliance. Finally, track employee hours worked to ensure compliance with state and local break laws regarding meal breaks and rest breaks.

payroll software

How Factorial Can Help You Comply with Colorado’s Wage Laws

Navigating overtime rules, timekeeping nuances, and minimum wage rates for different categories of employees can be a headache. But worry not, Colorado employers – Factorial comes to the rescue, simplifying compliance and streamlining every step of your payroll management process.

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.
  • On-demand pay. Give your employees control with Factorial’s on-demand pay feature. They can access earned wages before the next pay period, boosting employee well-being and reducing stress.
  • 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. Keep your team informed and compliant.
  • Secure and transparent paystubs. Employees receive detailed and easily understandable paystubs with every paycheck, fostering trust and transparency about their compensation.
  • Data security and protection. Finally, Factorial prioritizes payroll security with multi-factor authentication, role-based access controls, and data encryption.
Cat Symonds is a freelance writer, editor, and translator. Originally from Wales, she studied Spanish and French at the University of Swansea before moving to Barcelona where she lived and worked for 12 years. She has since relocated back to Wales where she continues to build her business, working with clients in Spain and the UK.  Cat is the founder of The Content CAT: Content And Translation, providing content development and translation services to her clients. She specializes in corporate blogs, articles of interest, ghostwriting, and translation (SP/FR/CA into EN), collaborating with a range of companies from a variety of business sectors. She also offers services to a number of NGOs including Oxfam Intermón, UNICEF, and Corporate Excellence - Centre for Reputation Leadership.  For more information or to contact Cat visit her website (thecontentcat.com) or send her a message through LinkedIn.

Related posts