Like many parts of the nation, Maryland has established its own framework of state laws to supplement those set at a federal level. Among the most notable is the Maryland minimum wage. This law sets the standard for the lowest hourly rate that employers can pay so that employees receive fair compensation and can maintain a basic standard of living.
So, what is the minimum wage in Maryland? Are there any other wage laws that Old Line State employers need to understand?
In today’s guide, we will explore everything you need to know about the Maryland minimum wage, including its history, current rates and exemptions. We will also share some handy tips and best practices to help you navigate these regulations and build a fair and compliant workplace.
- U.S. Minimum Wage Tiers
- History of the Maryland Minimum Wage
- What Is the Current Maryland Minimum Wage?
- Maryland Minimum Wage: Exemptions & Special Cases
- Additional Maryland Wage Laws
- Best Practices for Wage Law Compliance
- How Factorial Can Help
- Centralize your payroll management processes and get ahead🚀
U.S. Minimum Wage Tiers
The minimum wage in the United States is a complex system with multiple tiers, each set by a different level of government: federal, state, and municipal. This progressive approach aims to ensure that workers across the country receive a fair wage in line with local economic conditions.
Federal Minimum Wage
As the baseline, the federal minimum wage is the lowest hourly rate that employers are legally allowed to pay their employees. It is set by the Fair Labor Standards Act (FLSA) and was last raised in 2009 to $7.25 per hour. This rate, which ensures that employers comply with a basic level of compensation regardless of their location or industry, is significantly lower than the median hourly wage of all workers in the United States ($35.00 per hour).
State Minimum Wages
Recognizing regional variations in local economies and the cost of living, there are now many state minimum wage laws that set the threshold higher than the federal rate. These state-level mandates ensure that workers in higher-cost areas receive a wage that reflects their cost of living. For example, the minimum wage is $12.30 per hour in Missouri, $12.00 per hour in Hawaii, and $16.28 per hour in Washington State (the highest rate in the country). Maryland also has its own state minimum wage, as we will see in the next section.
Municipal Minimum Wages
To further address regional economic environments, some cities and counties have implemented local minimum wage mandates that are higher than both federal and state rates. This approach ensures that workers in urban centers, where the cost of living is often higher, receive a wage that reflects their specific environment.
Finally, in addition to regional differences, the minimum wage can also vary based on industry. For example, the minimum wage for tipped employees in the service industry is typically lower than the minimum wage for non-tipped employees. This is because many states expect tipped employees to receive a significant portion of their income from tips.
History of the Maryland Minimum Wage
The history of the Maryland minimum wage reflects a gradual evolution in response to economic conditions and the rising cost of living.
Here are the highlights:
- Early Years (1960s-1980s). Maryland introduced its state-specific minimum wage law in 1965, setting a wage slightly above the federal level. Throughout the 1970s and 1980s, the state adjusted the minimum wage periodically. However, these increases were modest and largely aligned with federal changes.
- Renewed Focus (2000s). Maryland began to assert its independence in setting wage standards, raising the minimum wage to $6.15 per hour in 2005. This was higher than the federal rate.
- Major Legislative Changes (2010s). The “Fair Wage Act of 2014” marked a significant shift, scheduling increases to reach $10.10 per hour by 2018. This move was part of a broader trend among states to address income inequality. In 2019, Maryland passed legislation to incrementally raise the minimum wage to $15.00 per hour by 2025.
- Recent Developments (2020s). Maryland has continued to implement the scheduled increases since 2020, reaching $15.00 per hour by 2024 (one year earlier than anticipated). The state law includes provisions for future adjustments. These adjustments will be based on inflation and economic conditions.
What Is the Current Maryland Minimum Wage?
Under the state’s Minimum Wage and Overtime Law, the Maryland minimum wage is currently set at $15.00 per hour. This is almost twice as high as the federal minimum wage of $7.25 per hour.
This latest increase took effect on Jan. 1, 2024, after the General Assembly’s Fair Wage Act of 2023 increased the rate from $13.25 per hour. Maryland achieved this increase one year earlier than previously scheduled (the original schedule aimed to increase the minimum wage to $15.00 per hour by January 1, 2025).
The most notable change to the Maryland minimum wage in recent years is that, prior to this latest update, the enforceable minimum wage rate in the state depended on the size of the employer. For example, in 2023, employers with 15 or more employees (large employers) had to pay a minimum wage rate of $13.25 per hour. Employers with 14 or fewer employees, in turn, could pay their employees a reduced rate of $12.80 per hour. But all this changed in January 2024 when the state combined both rates and set a universal rate of $15.00 per hour for all employees, regardless of company size. As a result, all employers in the state must now pay their employees at least $15.00 per hour, ensuring a uniform wage standard across the state.
This change underscores Maryland’s commitment to fair compensation and reflects the state’s efforts to address living costs more effectively through wage adjustments. Maryland now stands out as one of the leading states in the U.S. for progressive wage policies, particularly in the broader context of ongoing discussions about the adequacy of the federal minimum wage.
Municipal Maryland Minimum Wage Ordinances
Maryland allows municipalities to set their own local wage rates, provided that these local rates are higher than the state-mandated minimum wage. As a result, certain jurisdictions within the state have taken advantage of this flexibility to establish higher local minimum wage standards that better reflect the cost of living in their areas.
In fact, there are currently two Maryland municipalities with higher rates than the universal Maryland minimum wage: Montgomery County and Howard County.
Here’s everything you need to know.
Montgomery County
Montgomery County has the most notable and progressive minimum wage ordinance in Maryland and, unlike the state’s schedule for minimum wage increases, the rate in Montgomery County is adjusted annually based on the Consumer Price Index (CPI)
The most recent adjustments took effect on July 1, 2024:
- Large employers (51 or more employees). The minimum wage increased to $17.15 per hour.
- Mid-sized employers (11-50 employees). The minimum wage is now $15.50 per hour.
- Small employers (10 or fewer employees). The minimum wage remains at $15.00 per hour.
These rates reflect the county’s efforts to keep pace with local inflation and the cost of living. Additionally, the county mandates that tipped employees must earn at least the minimum wage when their tips are combined with their base pay.
Howard County
As of January 1, 2024, the minimum wage in Howard County is $15 per hour for employers with 15 or more employees and $15.50 per hour for employers with fewer than 15 employees. However, following Maryland’s state-wide approach, the minimum wage in Howard County will soon be unified, increasing to $16 per hour for all employees, regardless of company size, on January 1, 2025.
Maryland Minimum Wage: Exemptions & Special Cases
While the Maryland minimum wage applies to most workers, there are certain exemptions that you need to be aware of.
Here’s an overview of these exemptions.
Employees Under 18
Employers in Maryland can pay employees under the age of 18 a minimum wage rate of 85% of the state minimum wage. For example, with the Maryland minimum wage set at $15.00 per hour as of January 2024, employers can now legally pay minors a minimum wage of $12.75 per hour. This lower rate applies only to employees under 18 and is intended to provide more employment opportunities for young workers while still ensuring they receive fair compensation.
Tipped Employees
Maryland defines a tipped employee as someone who earns more than $30 per month in tips. Employers can pay these tipped employees a lower wage of $3.63 per hour. This is known as a tip credit system. However, the cash wage plus the tip credit must equal at least the state minimum wage rate. In other words, an employer can only pay this reduced tipped minimum wage rate if the employee earns enough in tips to bring their average hourly wage up to the Maryland minimum wage. If tipped employees do not earn enough tips to bring their hourly rate to this threshold, then the employer must supplement any deficiencies.
Finally, as of 2019, according to the Maryland Department of Labor, Division of Labor and Industry, restaurants that use tip credits must provide employees with written or electronic wage statements so that tipped employees can see the effective hourly tip rate. That should include employer-paid cash wages plus all reported tips, for all tip credit hours worked for each workweek in the pay period.
Additional Exemptions and Special Cases
Finally, there are a few other scenarios where an employee might be exempt from the Maryland minimum wage law.
Specifically, according to the Maryland Dept. of Labor, minimum wage exemptions apply to the following workers:
- Immediate family members of employers
- Certain agricultural employees
- Executive, administrative and professional employees
- Volunteers for educational, charitable, religious and nonprofit organizations
- Employees under 16 working fewer than 20 hours per week
- Outside salespeople
- Employees paid on commission
- Employees enrolled as trainees as part of a public school special education program
- Non-administrative employees of organized camps
In addition, employers in certain industries are exempt from the Maryland minimum wage law.
They are:
- Establishments that sell food and drink for consumption on the premises grossing less than $400,000 annually.
- Drive-in theaters.
- Establishments engaged in the first canning, packing or freezing of fruits, vegetables, poultry or seafood.
Additional Maryland Wage Laws
Aside from the Maryland minimum wage, the state has a number of additional wage laws that employers need to understand as these can have an impact on an employee’s wages.
Let’s explore these additional Maryland wage laws in a bit more detail so you can make sure your employee handbook meets all requirements.
Overtime
Employees who are paid by the hour should generally be paid “time and a half” for each hour they work over 40 hours per week. This is known as overtime pay. For example, if you pay an employee $15/hour, you must offer $22.50/hour for every hour of overtime.
However, there are a few exceptions to these Maryland overtime provisions.
Specifically, under Maryland law, an employee is usually not entitled to overtime pay if they:
- Are exempt from state minimum wage laws.
- Work at certain amusement parks or swimming pools.
- Work for a not-for-profit concert promoter, legitimate theater, music festival, music pavilion, or theatrical show.
- Are a driver for an employer engaged in the business of operating taxicabs.
- Have been hired by a rail or motor carrier regulated by the federal government.
- Are a mechanic, parts-person, or salesperson primarily selling automobiles, trucks or farm equipment.
In addition, some agricultural workers get overtime pay only after working 60 hours in a week. Certain employees (for example, those working in bowling establishments or who are engaged primarily in the care of individuals and who are aged, sick, or disabled and reside in places other than hospitals) receive overtime pay only after working 48 hours in a week.
Wage Payments
Employers in Maryland must comply with the following wage payment requirements:
- Frequency of payment. Maryland law requires employers to pay employees at least once every two weeks or twice per month (for example, biweekly pay) unless the employer and employee agree to a different frequency.
- Final paychecks. Upon termination, employers must provide the final paycheck by the next scheduled payday or within two weeks (whichever is sooner).
- Wage disputes. Employees can file a complaint with the Maryland Department of Labor if they believe they have been unfairly denied wages. The state allows for claims to be made up to three years from the date the wages were due.
Equal Pay for Equal Work
Maryland law prohibits wage discrimination based on sex or gender identity. Employers must pay employees equally for comparable work regardless of gender, with exceptions only for factors such as seniority, merit, or productivity. This aligns with the provisions of the federal Equal Pay Act.
Wage Deductions
Employers in Maryland cannot deduct wages from an employee’s paycheck without their written consent unless required by law (e.g., taxes, Social Security) or to recover overpayments or cash shortages.
Pay Stubs
Employers must provide employees with a statement of earnings and deductions for each pay period. This can be provided electronically or in paper form.
Posting Requirements
Finally, employers in Maryland must display certain information about labor laws in their place of business.
This includes displaying the following posters and notices:
- Minimum wage (you can download the minimum wage poster here)
- Child labor
- Equal pay for equal work
- Fair employment
- Health insurance coverage
- Occupational safety and health law (MOSH)
- Pregnant & working
- Earned sick and safe leave
- Unemployment insurance
- Workers’ compensation
Best Practices for Wage Law Compliance
And that’s pretty much everything you need to know about the Maryland minimum wage and the Old Line state’s additional wage laws. All that remains is to ensure that your business meets the legal requirements of these regulations.
So, how can you make sure you don’t inadvertently sidestep the law in Maryland?
Simple. Just implement the following essential tips and best practices to protect your business from potential non-compliance fines and penalties and build a positive and compliant work environment.
Stay Informed and Up to Date
Firstly, keep up to date with federal and state minimum wage laws, as these can change. The Maryland Department of Labor (MDOL) and the U.S. Department of Labor websites are good resources for this.
Maintain Accurate Records and Conduct Regular Audits
Secondly, it’s important to maintain accurate and up-to-date records of all employee work hours and wages. Keeping precise records helps ensure employees are paid correctly and on time. Regular audits, both internal and external, can spot and fix mistakes, making sure everything is legal and helping you avoid hefty fines.
Using employee record management software can make this easier. These systems automate time tracking, payroll processing and compliance checks, which cuts down on errors and saves time. By using this technology, you can maintain accurate and reliable records and focus on other important parts of your business while staying compliant with the law.
Classify Employees Correctly
Thirdly, make sure you properly classify your employees as either exempt or non-exempt under the minimum wage regulations. This classification determines whether you must offer overtime pay. Carefully review the duties and responsibilities of each employee to determine their exempt or non-exempt status.
Implement Accurate Payroll Practices
It’s important to maintain accurate and up-to-date payroll records that include employee names, hours worked, wages paid and any deductions that you have made. Maryland law requires you to keep these records for at least three years.
You should also regularly review your payroll records to identify any inconsistencies or errors. And don’t forget to create a payroll checklist to make sure that you complete all necessary steps during each payroll cycle, including verifying employee hours, ensuring correct pay rates, calculating payroll tax deductions accurately, and issuing pay stubs.
Track Overtime Hours
In addition, make sure you accurately track overtime hours worked by non-exempt employees. Implement a system for employees to report overtime hours, such as using timesheets or electronic timekeeping systems. Ensure that overtime pay is calculated and paid correctly at the appropriate rate (time and a half).
Use the Right Payroll Software
Finally, choosing the right payroll software is essential. The right software helps you stay compliant by automatically adjusting for changes in minimum wage rates and managing tax withholdings. It also helps you track employee work hours, calculate overtime and holiday pay, and produce accurate pay stubs at the end of each pay period. This reduces the risk of errors, streamlines administrative tasks, and ensures that employees are paid correctly and on time, helping your business comply with all Mayland wage laws and time-tracking legal requirements.
How Factorial Can Help
Factorial can help you navigate the complexities of Maryland’s wage laws and streamline your payroll processes to maintain compliance.
- Automated payroll calculations. Factorial’s automated payroll system eliminates manual calculations, reducing the risk of errors and ensuring accurate compensation for all employees. It automatically factors in Maryland minimum wage rates and requirements. It also takes into account overtime pay, holiday pay and other relevant regulations to ensure compliance with Maryland wage laws.
- Real-time overtime tracking. Factorial’s time tracking feature and electronic time clock enable real-time monitoring of overtime hours. This allows you to maintain and generate accurate records and reports to identify and address any overtime issues promptly, ensuring compliance with Maryland’s overtime pay regulations.
- Secure payroll processing. Factorial employs robust payroll security measures to safeguard sensitive employee data.
- Comprehensive payroll reporting. Factorial generates detailed payroll reports, providing valuable insights into employee compensation, overtime trends and overall payroll expenses.
By leveraging Factorial’s comprehensive payroll solution, you can effectively manage each stage of your payroll process, ensuring accuracy and compliance with all Maryland wage laws (including the Maryland minimum wage). That way, you can foster a positive and compliant work environment for all and enhance overall efficiency and transparency in your payroll operations.
