Minimum wage and tax facts

Federal Tax Facts

Minimum Wage

  • Effective
    7/24/09
  • Minimum Wage
    $7.25
  • Minimum Cash Wage (Tipped Employee)
    $2.13
  • Maximum Tip Credit
    $5.12
  • Youth Minimum Wage
    $4.25

FICA (Medicare)

  • Maximum Taxable Earnings
    No Limit
  • Employee / Employer Tax Rate (Unchanged from 2023)
    1.45%
  • Additional Medicare Tax Withholding on Wages > $200,000 (No Employer Match)
    0.90%

FICA (Social Security)

  • Maximum Taxable Earnings (Increased from $160,200 in 2023)
    $168,600
  • Employee / Employer Tax Rate (Unchanged from 2023)
    6.20%

FUTA (Employer-Paid)

  • Maximum Taxable Earnings
    $7,000
  • Percent of Taxable Wages
    6.00%
  • Maximum Credit
    5.40%
  • Normal Net Tax
    0.60%

Supplemental Wage / Bonus Rates

  • Flat Rate Withholding Method (Unchanged from 2023)
    22%
  • Pay over $1 Million (Unchanged from 2023)
    37%

Health Savings Accounts

  • Self-Only Contribution Limit (Employee / Employer)(Increased from $3,850 in 2023)
    $4,150
  • Family Contribution Limit (Employee / Employer)(Increased from $7,750 in 2023)
    $8,300
  • Catch-up Contribution Limit (Employee / Employer)(Unchanged from 2023)
    $1,000

Pension Plans

  • Contribution Limit - 401(k) & 403(b) plans (Increased from $22,500 in 2023)
    $23,000
  • Catch-up Contribution Limit - 401(k) & 403(b) plans (age 50 or older) (Unchanged from $7,500 in 2023)
    $7,500

FAST WAGE AND TAX FACTS is distributed with the understanding that the publisher is not rendering legal, accounting, tax or other professional services. If legal advice or other assistance is required, an attorney, CPA or tax adviser should be consulted. Minimum wage rates may vary by industry and may be superseded by Federal minimum wage rules. Contact the proper agency to verify.

For information about cost-effective solutions from ADP, please visit us at www.adp.com, contact your local ADP representative or call 1-800-225-5237.

While our Fast Wage and Tax Facts tool is handy in a pinch, knowing the ins and outs of minimum wage can help support longer-term compliance efforts.

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What is minimum wage?

Minimum wage is the least amount of pay an employer must provide to a person by law for work performed during a specific time frame, such as per hour.

Who qualifies for a minimum wage?

In the United States, people who are not exempt (nonexempt) from the Fair Labor Standards Act (FLSA) minimum wage provisions must be paid at least the federal minimum wage.
Learn about the difference between exempt and nonexempt workers

Federal minimum wage

The FLSA established a federal minimum wage of $0.25 in 1938. Since then, amendments have raised the rate numerous times. When the federal minimum wage differs from a state or local minimum wage rate, employers must use the highest rate applicable to the employee.

Minimum wage by state

Which states and local jurisdictions have the highest minimum wages and which have the lowest? Which states and local jurisdictions are increasing the minimum wage from the previous year? Find out using our state and local minimum wage chart

Frequently asked questions about minimum wage

What legislation established the federal minimum wage?

The Fair Labor Standards Act established a federal minimum wage in 1938. Prior to its passage, several state governments had enacted minimum wages to address concerns about women and children working in sweatshop environments. These laws were challenged in court and declared unconstitutional. In 1941, the Supreme Court reversed course and validated the constitutionality of state minimum wage requirements.

What is the difference between the local, state and federal minimum wage?

State and local jurisdictions may have minimum wage laws that exceed FLSA requirements. In these cases, employees are entitled to the highest applicable rate. If no state or local minimum wage exists, employers use the federal minimum wage.

May an employee agree to work for less than the minimum wage?

Collective bargaining agreements and individual contracts cannot supersede minimum wage laws. However, there are circumstances where certain types of workers may be paid less than the applicable federal, state or local jurisdiction minimum wage. Examples include workers with disabilities, full-time students, tipped employees, student learners and youth workers. Note: State and local laws may differ.

Is the minimum wage the same for both adult and minor employees?

Employees younger than 20 years old may be paid less than the federal minimum wage for the first 90 consecutive calendar days of employment. After this time or when the employee turns 21, whichever comes first, the employee is entitled to the full minimum wage rate. If a state or local law requires payment of a higher minimum wage and makes no exception for workers under age 20, the higher rate applies. Note: Youth workers paid less than minimum wage must not displace other workers.

Does a business have to pay the minimum wage if it only has one employee?

Nonexempt employees who work for an organization with at least two employees, otherwise known as an enterprise, are covered by the FLSA. Even when there is no enterprise coverage, workers are protected by the FLSA if their work regularly involves commerce between states, or interstate commerce. Domestic service workers, such as housekeepers and babysitters, are also normally entitled to minimum wage. Note: State and local laws may differ.

If a worker also gets paid tips, can an employer use the tips as a credit toward the obligation to pay the minimum wage?

Employers who claim a tip credit generally may pay a tipped worker less than minimum wage. However, the worker’s cash wages and total tips must meet or exceed the minimum wage. If not, the employer must pay the employee the difference.

Many states and local jurisdictions limit or prohibit the use of a tip credit in paying tipped workers. For a listing of the state and local jurisdiction minimum cash wages that may be used to pay tipped employees, please refer to our state and local minimum wage chart.

This guide is intended to be used as a starting point in analyzing minimum wage and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.