Minnesota Minimum Wage Guide for Employers

In today’s complex labor landscape, employers in Minnesota need to stay informed and compliant with the ever-changing wage laws. One critical aspect of this compliance is understanding and adhering to the Minnesota minimum wage laws. The Minnesota minimum wage is a pivotal factor that impacts both employers and employees throughout the state.

In this comprehensive guide, we will delve into the intricacies of Minnesota’s minimum wage laws and provide employers with the knowledge they need to navigate these regulations successfully.

Whether you’re a new business owner in Minnesota or a seasoned employer looking to update your knowledge, this guide is an essential resource for staying compliant with the state’s complex and evolving wage laws.

• US Minimum Wage Tiers: Federal, State, and Municipal Laws
• History of the Minnesota Minimum Wage
• Current Minnesota Minimum Wage Rates
• Minnesota Minimum Wage Exemptions
• Compliance and Enforcement
• Additional Minnesota Wage Laws
• How to Ensure Compliance with Minnesota Wage Laws
• The Role of Technology in Minnesota Wage Law Compliance
• How Factorial Can Help You Comply with Minnesota Wage Laws
• A Payroll Solution That Centralizes All Your Processes

US Minimum Wage Tiers: Federal, State, and Municipal Laws

Before delving into the specifics of the Minnesota minimum wage laws, it’s essential to grasp the broader context of minimum wage regulations in the United States.

Here’s everything you need to know…

At the federal level, the Fair Labor Standards Act (FLSA) establishes a baseline minimum wage that applies nationwide. However, individual states have the authority to set their minimum wage rates, provided they meet or exceed the federal minimum wage. Additionally, some municipalities within certain states can set their own local minimum wage rates, further complicating the wage landscape for employers.

Minnesota, like many other states, has its own minimum wage laws that employers must adhere to. Let’s explore how these tiers work together:

• Federal Minimum Wage. The current federal minimum wage is $7.25 per hour. This rate serves as the baseline that all employers in the United States must meet. Employers in Minnesota must pay their employees at least this amount unless state or local laws mandate a higher rate.
• State Minimum Wage in Minnesota. Minnesota has a state minimum wage that surpasses the federal rate. More on this below.
• Municipal Minimum Wage Laws. Some cities in Minnesota, such as Saint Paul, have enacted their own minimum wage laws that set wage rates higher than both the federal and state levels. Employers within these municipalities must adhere to these local wage regulations.

History of the Minnesota Minimum Wage

Minnesota, like many states, has periodically adjusted its minimum wage to keep pace with economic changes and the cost of living.

Here is a brief overview:

• 1937. Minnesota introduced its first minimum wage, setting it at 25 cents per hour during the height of the Great Depression. This initial wage was a response to nationwide efforts to address low wages and improve the standard of living for workers.
• 1945. The Minnesota minimum wage remained at 25 cents per hour, reflecting the economic challenges of the post-World War II era.
• 1955. Minnesota minimum wage increased to 75 cents per hour, responding to rising inflation and the changing economic landscape.
• 1961. The state further raised the Minnesota hourly wage to $1 per hour, continuing its efforts to keep pace with the cost of living.
• 1967. Minnesota adopted a policy to index the minimum wage to the cost of living, becoming one of the first states to do so. This ensured that the minimum wage in Minnesota would automatically adjust to inflation, providing workers with a more stable and reliable income.
• 1973. The state implemented a new minimum wage structure that included different rates for various categories of employees, such as minors and apprentices.
• 2005. Minnesota began an incremental series of minimum wage increases, raising the rate from $5.15 per hour to $6.15 per hour over several years.
• 2014. Minnesota passed legislation that established a further series of minimum wage increases. This new law aimed to boost the MN minimum wage for most employees to $9.50 per hour by 2016, with further adjustments tied to inflation.
• 2022. The Minnesota minimum wage was increased to $10.08.
• 2023. Minneapolis and Saint Paul implemented their own minimum wage ordinances, gradually raising the city-specific rates above the state minimum.

Current Minnesota Minimum Wage Rates

So, what is the current minimum wage in Minnesota? Does the rate apply to all employees in the state?

Here’s everything you need to know.

Untipped Workers

• Large Employers (gross annual sales over $500,000): $10.85 per hour
• Small Employers (gross annual sales under $500,000): $8.85 per hour
• Youth (under 18): $8.85 per hour
• Training Wage (under 20, first 90 days): $8.85 per hour

Tipped Workers

Minnesota doesn’t allow tip credits, meaning employers must pay the full state minimum wage regardless of tips earned.

Municipal Minimum Wage Rates

Some municipalities in Minnesota have enacted their own minimum wage ordinances that exceed the state minimum wage. These local ordinances are designed to address the specific economic conditions and living expenses within local jurisdictions.

This includes:

• Minneapolis. Minneapolis has a tiered minimum wage system. For large businesses with more than 100 employees, the minimum wage is $15.00 per hour. Small businesses with 100 or fewer employees must pay a minimum wage of $14.50 per hour, with plans to increase to $15.00 by July 2024.
• St. Paul. St. Paul also follows a tiered system. From July 2024, the rate for large businesses (those with more than 100 employees) will be $15.57 per hour. Smaller businesses in Saint Paul will have a minimum wage of $14 per hour. These rates are specific to the city, and they are part of St. Paul’s progressive adjustments to the minimum wage.

Employers operating in these cities must comply with these local ordinances, as they may have to pay higher wage rates than the state minimum. Additionally, these rates are subject to change, and employers should stay updated with the latest information from the respective city government or labor departments.

Minnesota Minimum Wage Exemptions

While most employees in Minnesota are entitled to minimum wage protections, certain exemptions exist. Employers should be aware of these exemptions to ensure they comply with the law.

Here are some common categories of exempt employees:

• Federal Work-Study Program Participants. Individuals participating in the Federal Work-Study Program have different wage rates and exemptions that apply to their employment. Employers should refer to program guidelines for specific details.
• Agricultural and Seasonal Workers. Some agricultural and seasonal employees may be subject to different minimum wage regulations. Employers in these industries should consult both state and federal guidelines for precise information regarding exemptions.
• Disabled Workers. Some individuals with disabilities may be employed at wages less than the standard minimum wage if they have obtained special certificates authorizing their employment at subminimum wages.

Compliance and Enforcement

Ensuring compliance with Minnesota minimum wage laws is crucial to avoid penalties and protect the rights of employees. The Minnesota Department of Labor and Industry (DLI) is responsible for enforcing wage laws in the state. Employers should be aware of their responsibilities to maintain compliance.

These responsibilities include:

• Recordkeeping. Employers must maintain accurate records of employees’ wages, hours worked, and other relevant employment information. These records should be readily accessible for inspection by the DLI.
• Posters. Employers must display the state’s official minimum wage poster in a common area where all employees can easily see it.
• Non-Retaliation. Employers cannot retaliate against employees who assert their rights under Minnesota minimum wage laws.
• Reporting Violations. Employees who believe their employer is not complying with wage laws can report violations to the DLI. The DLI investigates complaints and takes appropriate action when necessary.
• Penalties for Non-Compliance. Employers who violate Minnesota minimum wage laws may face penalties, fines, and orders to pay back wages owed to employees.

Additional Minnesota Wage Laws

In addition to the Minnesota minimum wage, the North Star State has various additional wage laws that employers must adhere to. These laws cover various aspects of employee compensation, working conditions, and employee rights.

Here’s an overview of additional Minnesota wage laws that employers need to consider. By understanding and complying with these laws, employers can ensure fair treatment of their employees, protect themselves from legal claims, and maintain a positive reputation in the workplace.

Overtime

Minnesota’s overtime laws require employers to offer employees one and a half times their regular rate of pay for all hours worked beyond 48 in a workweek (time and a half). This provision ensures that employees are adequately compensated for their extra efforts and encourages employers to maintain reasonable work hours.

Overtime pay is a vital component of wage laws, helping to prevent excessive workloads and promote a healthy work-life balance for employees. Employers must diligently track employees’ work hours and calculate overtime accurately to avoid violations of this important labor law.

Pay Parity & Transparency

Employers must provide employees with information about their wages, including details about the basis for compensation, pay scales, and opportunities for advancement.

Furthermore, Minnesota’s equal pay laws, aligned with the federal Equal Pay Act, prohibit wage discrimination based on gender. This ensures that all employees are paid equally for substantially similar work, regardless of gender (pay parity).

Employers must demonstrate transparency in their compensation practices and eliminate any gender-based pay disparities. Compliance with these requirements fosters a more equitable work environment and helps reduce wage disparities among employees.

Timekeeping and Recordkeeping

Minnesota employers must adhere to strict timekeeping and recordkeeping requirements to ensure compliance with state wage and hour laws. They must maintain accurate records of employee hours worked, wages paid, and other employment-related data. These records must be readily accessible for inspection by the Minnesota Department of Labor and Industry (DLI) during audits or investigations.

Moreover, accurate timekeeping is vital to determine overtime eligibility and ensure proper wage payment. Employers must meticulously track and document employee work hours, breaks, and overtime, ensuring full compliance with Minnesota’s timekeeping and recordkeeping requirements.

Meal and Rest Breaks

Minnesota employers must provide meal and rest breaks to employees, depending on their work shifts. For example, workers are entitled to a 30-minute unpaid meal break for shifts exceeding eight consecutive hours. Employers must also offer paid rest breaks of at least 15 minutes for shifts lasting four or more consecutive hours.

Wage Theft

Minnesota’s Wage Theft Prevention Act requires employers to provide employees with written notice of various wage-related information, including rates of pay, deductions, and employment status. Employers must maintain accurate records and address wage-related concerns promptly. Failure to comply can result in penalties and fines.

Additional Wage Laws

• Prevailing Wage Laws. Prevailing wage rates are established for public construction projects, with contractors and subcontractors required to pay employees working on these projects at the prevailing wage rates determined by the Commissioner of Labor and Industry.
• Youth Employment Laws. Regulations govern the employment of minors, including restrictions on working hours and types of work permitted.
• Wage Payment Timing. Under state law, employers must pay employees their wages at regular intervals.
• Sick and Safe Time. Certain employers in Minnesota must provide employees with paid or unpaid sick and safe time, allowing employees to take time off for specific reasons without loss of pay.

How to Ensure Compliance with Minnesota Wage Laws

Ensuring compliance with Minnesota wage laws is not only essential for avoiding legal troubles but also for maintaining a fair and equitable work environment for employees.

Here are some best practices for employers to ensure compliance with Minnesota’s wage laws:

• Regularly review and update policies. Keep your company’s wage policies up to date with the latest state and federal regulations. Ensure that employees are aware of these policies and have access to them at all times.
• Stay informed. Monitor changes to Minnesota minimum wage rates, exemptions, and other wage-related laws.
• Accurate recordkeeping. Maintain precise records of employee hours worked, paid wages, and any deductions. Ensure that payroll records are easily accessible for potential audits or employee inquiries.
• Display required posters. Display the official Minnesota minimum wage poster in a place where all employees can see it. This poster provides employees with essential information about their wage rights.
• Educate managers and supervisors. Train your managerial staff to understand wage laws thoroughly and how they apply to their teams. They play a crucial role in enforcing compliance at the workplace.
• Monitor overtime. Keep track of employee work hours to ensure that overtime pay is accurately calculated and distributed when applicable.
• Audit payroll practices. Regularly review payroll practices to confirm that all employees are paid in compliance with state wage laws, including Minnesota minimum wage and overtime requirements.
• Address employee concerns. Encourage open communication with employees regarding wage-related issues. Promptly investigate and resolve any concerns or complaints to prevent potential disputes.
• Seek legal counsel. If in doubt, consult legal experts experienced in employment law to ensure your practices align with current regulations.

The Role of Technology in Minnesota Wage Law Compliance

Technology plays a pivotal role in simplifying and enhancing wage law compliance for businesses in Minnesota. For example, digital tools and software solutions can streamline processes, reduce errors, and ensure accurate adherence to wage laws.

Here’s how technology can assist businesses in achieving full compliance with Minnesota wage laws:

• Payroll Software. Payroll software automates the calculation of wages, deductions, and taxes, eliminating manual errors in wage calculations. These systems are frequently updated to reflect changes in minimum wage rates, overtime rules, and tax laws, ensuring accurate and up-to-date payroll processing.
• Employee Record Management Software. Digital employee record management software helps employers maintain comprehensive and organized records of employee hours worked, wages paid, and employment contracts. These systems make it easy to retrieve and present records during audits or disputes, ensuring compliance with recordkeeping requirements.
• Electronic Time Clocks. Electronic timekeeping devices, such as electronic time clocks or biometric scanners, accurately record employee work hours. These systems can integrate with payroll software, reducing the risk of time theft or miscalculations and ensuring accurate payment for hours worked.
• Compliance Alerts. Many payroll and HR software solutions include compliance alert features that notify employers of changes in wage laws and upcoming compliance deadlines. This proactive approach helps businesses stay ahead of regulatory changes.
• Reporting and Documentation. Technology allows for the efficient generation of wage-related reports and documents required for tax filings, wage audits, and employee communications. It ensures that the necessary paperwork is always complete and up to date.
• Automatic Updates. Technology solutions receive automatic updates to reflect changes in Minnesota wage laws and federal regulations, minimizing the risk of non-compliance due to outdated software or practices.

How Factorial Can Help You Comply with Minnesota Wage Laws

Factorial, an innovative HR software solution, can be a valuable ally for businesses striving to comply with Minnesota wage laws. With its comprehensive features and user-friendly interface, Factorial streamlines various aspects of HR and payroll management, ensuring your business adheres to state regulations seamlessly.

• Payroll Software. Firstly, Factorial’s advanced payroll software simplifies the complex task of managing payroll while keeping you in compliance with Minnesota minimum wage laws. It automates calculations, tracks pay periods and handles deductions accurately.
• Electronic Time Clock. Secondly, Factorial offers electronic time clock capabilities, helping businesses accurately record employee work hours. This feature ensures you meet time-tracking legal requirements and minimizes the risk of wage law violations.
• Employee Record Management Software. Thirdly, Factorial allows you to efficiently manage and organize your employee records, including wage-related data, contracts, and documentation. Easy access to these records simplifies compliance during audits or disputes.
• Employee Handbook. In addition, Factorial helps you create and maintain an up-to-date employee handbook that includes information on wage laws, minimum wage rates, and other compliance-related details. This ensures that employees are informed about their rights and responsibilities.
• Holiday Pay. Moreover, Factorial’s payroll software can handle holiday pay calculations and ensure that employees receive the compensation they are entitled to during holidays.
• Compliance Alerts. Finally, Factorial provides compliance alerts and updates, notifying you of changes in Minnesota minimum wage laws and other labor regulations.

Ultimately, Factorial’s all-in-one HR software simplifies HR and payroll management, enhancing your ability to comply with Minnesota wage laws. By using Factorial, your business can reduce administrative burdens, minimize errors, and stay up to date with the latest wage regulations, ensuring fair and legal compensation for your employees while maintaining compliance with the state’s wage laws.