The South Dakota minimum wage serves as a critical benchmark for fair compensation, ensuring workers receive a baseline pay that reflects economic conditions. Adjusted annually for inflation, it aims to keep pace with the cost of living, providing necessary income adjustments for employees across various industries. For employers, staying on top of these annual updates is not only a legal requirement but also a step toward maintaining fair workplace practices and avoiding potential fines.
In this article, we’ll cover everything you need to know about the South Dakota minimum wage. We’ll explore the current wage rates, specific rules for tipped workers, exemptions, and best practices for wage law compliance. Whether you’re an employer managing payroll or an employee wanting to know your rights, this guide will provide the essential information to navigate South Dakota’s wage laws with ease.
- How Minimum Wage Works in the U.S.
- What Is the South Dakota Minimum Wage?
- South Dakota Minimum Wage: Exemptions
- Who Enforces the South Dakota Minimum Wage?
- Additional South Dakota Wage Laws
- Best Practices for South Dakota Wage Law Compliance
- How Factorial Can Help
- What can you do with Factorial’s payroll management software?🚀
How Minimum Wage Works in the U.S.
Minimum wage regulations in the U.S. operate under a multi-tiered system, with federal, state, and local governments setting varying minimum wage levels. This structure provides a baseline of protection for workers, while allowing regions to tailor their wage laws based on local economic conditions.
Federal Minimum Wage
At the national level, the federal minimum wage is set by the Fair Labor Standards Act (FLSA), currently fixed at $7.25 per hour. This is the lowest wage that any covered non-exempt worker can be paid across the country, and it acts as a foundation upon which states and localities can build. Some workers, such as tipped employees, are subject to different rules that allow employers to pay less if the workers’ tips bring them up to the required minimum wage.
State-Level Minimum Wage
Many states opt to set their own minimum wage rates, often exceeding the federal standard. 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). South Dakota also has its own state minimum wage, as we will see in the next section.
Municipal Wage Laws
In some cases, cities or counties establish municipal minimum wages that exceed both state and federal levels. These local wage laws are often designed to reflect the higher cost of living in urban centers. For example, large cities like New York and Los Angeles have municipal wages significantly above their respective state rates.
Industry-Specific Wages
Certain industries, such as agriculture or hospitality, have specific minimum wage rules that differ from standard federal, state and municipal wage laws. For example, tipped employees, such as servers, can be paid a lower base wage provided their tips make up the difference to the required minimum. Additionally, apprenticeship programs and workers with disabilities can often be paid less under certain conditions.
What Is the South Dakota Minimum Wage?
As of January 1, 2024, the South Dakota minimum wage is $11.20 per hour for untipped workers, up from $10.80 in 2023. The rate for tipped workers is $5.60 per hour, up from $5.40 in 2023. These increases are tied to the Consumer Price Index (CPI), ensuring that wages keep up with inflation. South Dakota has followed this annual adjustment method since 2015, when voters approved a ballot to link wage increases to the cost of living. This approach helps to ensure that workers maintain their purchasing power as the economy changes.
Looking ahead, the state will continue to adjust the minimum wage annually based on the CPI, with future increases rounded to the nearest five cents. While some states have set clear targets for reaching a $15 minimum wage, South Dakota has no set timeline for such an increase. However, the CPI-based system ensures gradual increases in line with inflation, meaning the minimum wage is likely to rise again in 2025 and beyond.
South Dakota Minimum Wage: Exemptions
Not all workers in the state are entitled to the full South Dakota minimum wage. Several occupations and employment types are exempt from the state’s minimum wage laws, and some workers qualify for lower pay under special conditions.
One key exemption applies to tipped employees, who can be paid a base wage of $5.60 per hour as long as their total earnings (wages plus tips) meet or exceed the full $11.20 per hour (the South Dakota minimum wage). If tips do not bring the employee’s earnings up to that level, employers must make up the difference.
Other exemptions include independent contractors, who are considered self-employed and set their own rates. This classification applies only if the worker meets specific criteria related to independence and control over their work.
Additionally, seasonal and recreational workers employed at establishments that operate for less than seven months in a calendar year are exempt from South Dakota minimum wage requirements. This exception is common in amusement parks, camps, and other tourist-driven industries.
Finally, workers with developmental disabilities can be paid less than the South Dakota minimum wage if the employer has obtained a permit from the South Dakota Department of Labor. Employers who pay a subminimum wage to apprentices, learners, or those with disabilities must comply with specific FLSA legal guidelines to avoid penalties.
Who Enforces the South Dakota Minimum Wage?
The South Dakota Department of Labor and Regulation (DLR) is responsible for enforcing the state’s wage laws through its Wage and Hour Division. This division makes sure that employers follow state rules about paying the correct minimum wage, overtime, and handling tipped workers’ pay properly. If an employee believes they are not being paid fairly, they can file a complaint with the DLR. The department will investigate, and if the employer is found to be breaking wage laws, they may be required to pay back wages or face other penalties. This helps protect workers and ensures businesses follow state wage regulations.
On a national level, the U.S. Department of Labor (DOL) enforces wage laws through the Fair Labor Standards Act (FLSA). The DOL’s Wage and Hour Division investigates cases where federal wage laws are not followed. Even though South Dakota has a higher minimum wage than the federal rate, federal law still applies, especially for overtime or certain recordkeeping rules. If state and federal wage laws differ, the law that offers the most protection to the employee is used. This dual enforcement—at both the state and federal levels—ensures that workers’ rights are protected across the board.
Additional South Dakota Wage Laws
Aside from the South Dakota 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 South Dakota wage laws in a bit more detail so you can make sure your employee handbook meets all requirements.
Employee Classification
Proper employee classification is crucial for determining wage and overtime eligibility. In South Dakota, like in the rest of the country, workers are classified as either exempt or non-exempt under the Fair Labor Standards Act (FLSA). Exempt employees are generally salaried and not entitled to overtime, while non-exempt employees are hourly and must receive overtime pay for any hours worked beyond 40 in a workweek. Misclassifying employees as exempt when they should be non-exempt can lead to costly penalties and back pay claims.
Overtime
The Fair Labor Standards Act includes provisions relating to employee overtime. To determine whether or not you need to pay your employees overtime, you first need to determine their FLSA status, as we saw above.
If your employees are categorized as exempt, then you have no obligation to pay them overtime. However, if your employees are non-exempt then you must pay following the FLSA’s overtime rules. Essentially this means that you must pay employees covered by the FLSA overtime pay for any hours worked over 40 in a workweek at a rate not less than time and a half.
Pay Frequency
In South Dakota, employers are required to pay employees at least once per month, though many businesses opt for more frequent pay periods, such as weekly or biweekly. The law also allows employers to set up different pay periods for different categories of employees (e.g., hourly versus salaried). If an employer fails to pay wages on time, employees have the right to file a claim with the South Dakota Department of Labor and Regulation.
Final Paychecks
When an employee is terminated or leaves a job, South Dakota law requires that they receive their final paycheck by the next regular payday or within a reasonable timeframe. This final payment must include all wages earned, including any accrued vacation or paid time off, depending on the employer’s policies. Failure to provide timely final pay may result in penalties and interest owed to the employee.
Wage Deductions
Employers in South Dakota may make deductions from an employee’s paycheck for certain items, but only if the deduction is authorized by law or agreed upon in writing by the employee.
Common lawful deductions include:
- Taxes and Social Security contributions.
- Court-ordered garnishments such as child support.
- Voluntary deductions like health insurance or retirement plan contributions.
Employers cannot deduct wages for things like damaged property or uniforms without the employee’s written consent. Unauthorized deductions are prohibited and can lead to legal action.
Tip Pooling and Tipped Wages
South Dakota allows employers to pay tipped employees a base wage of $5.60 per hour, as long as their total earnings (wages plus tips) meet the state minimum wage of $11.20 per hour. If tips do not bring the employee’s earnings up to the minimum wage, the employer must make up the difference. The state does not have specific rules about tip pooling, but employers must ensure that tip pooling does not reduce employees’ earnings below the minimum wage. Federal regulations prohibit employers, managers, and supervisors from participating in tip pools.
Equal Pay
Finally, South Dakota complies with federal Equal Pay Act requirements, prohibiting wage discrimination based on gender. Employers must pay men and women equally for jobs that require substantially similar skills, effort, and responsibility and are performed under similar working conditions. Violations can result in lawsuits, back pay, and penalties.
Best Practices for South Dakota Wage Law Compliance
And that’s pretty much everything you need to know about the South Dakota minimum wage and the state’s additional wage laws. All that remains is to ensure that your business complies with these requirements.
To help you out, we have put together a series of best practices for South Dakota employer wage law compliance. That way, you can protect your business and foster a positive and compliant work environment for your employees.
Regularly Review Wage Laws
The South Dakota minimum wage is adjusted annually based on inflation, and federal laws governing overtime and employee classifications can also change. Employers should make it a habit to review wage laws each year to stay informed of updates. Additionally, consulting with legal counsel or an HR expert can help identify potential compliance issues before they arise.
Classify Employees Correctly
Secondly, make sure you properly classify your employees as either exempt or non-exempt under the FLSA. This classification determines whether you must offer overtime pay. Carefully review the duties and responsibilities of each employee to determine their employment status.
Provide Proper Training to Management
To ensure wage law compliance, it’s important that managers and supervisors understand the basics of South Dakota’s wage laws. Training should include how to handle tip pooling, overtime, wage deductions, and exempt/non-exempt employee classifications. With proper knowledge, management can better assist in keeping the company compliant and avoiding costly mistakes.
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. Make sure you calculate and pay overtime at the correct rate.
Maintain Accurate Employee Records
It’s important to maintain accurate and up-to-date employee records in order to comply with recordkeeping requirements. Using employee record management software can make this easier. These systems help you maintain accurate and reliable records so that you can focus on other important parts of your business while staying compliant with South Dakota’s wage law.
Invest in Payroll Software
Finally, maintaining detailed and accurate payroll records of employee hours worked, wages paid, and any deductions is crucial. Under both state and federal law, employers must retain this data for at least 3 years. These records can protect employers in case of disputes or audits.
The best way to ensure that your payroll records are accurate and compliant is to invest in reliable payroll software. This software can automatically track employee hours, wages, and deductions. This reduces the risk of errors and ensures that all required information is documented and stored properly. Payroll software often also includes automated features that help businesses meet legal requirements, such as maintaining records for the mandated 3-year retention period. In addition, these systems can generate reports and offer insights that can protect employers during disputes or audits.
Essentially, by implementing payroll software, you can streamline your processes, minimize manual errors, and ensure your business stays compliant with South Dakota wage and hour laws—saving time and reducing the likelihood of legal issues down the line.
How Factorial Can Help
Navigating the state’s wage laws, especially with regular changes to the South Dakota minimum wage, can be challenging for business owners. Factorial’s payroll software provides an all-in-one solution that helps streamline payroll management while ensuring compliance with state and federal wage laws.
Key features include:
- Automated payroll calculations. Factorial’s software automatically adjusts payroll calculations based on changes in state and federal laws. This includes minimum wage increases and changes to overtime rules. This ensures your payroll is always accurate, saving you time and reducing the risk of costly errors.
- Time and attendance tracking. Factorial’s payroll system integrates timekeeping features (including a time card app) that allow businesses to track employee work hours accurately. This ensures compliance with wage and hour laws, such as calculating overtime, and reduces the risk of potential disputes.
- Customizable wage reports. Factorial generates detailed wage reports that allow you to track employee hours, overtime, and wages. This is particularly useful during audits or when addressing wage disputes.
- Tipped employee management. Factorial’s tools can track both base wages and tips for tipped workers. If employees’ tips fall short, the software can flag discrepancies. That way, employers can make up the difference as required by law.
- Compliance reminders and alerts. Stay ahead of compliance deadlines with automatic alerts for wage changes, reporting requirements, and more. This feature helps businesses avoid penalties by ensuring timely action on wage-related compliance issues.
With Factorial, you can rest easy knowing your business is compliant with all wage laws, including South Dakota minimum wage adjustments. That way, you can focus instead on growing your business, boosting employee satisfaction, and optimizing productivity.
