Twenty-three states and dozens of localities have increased their minimum wage rates for 2026. If you run payroll for employees in multiple states, ensuring compliance with the correct rate is essential to avoiding wage violations and penalties.
Federal Minimum Wage
The federal minimum wage remains at $7.25 per hour, unchanged since 2009. However, most states and many cities have set higher minimums that override the federal rate. Employers must pay the higher of federal, state, or local minimum wage.
States with Increases for 2026
Notable rates include: California (at least $16.50/hr, CPI-adjusted), New York ($16.50/hr for NYC, $15.50 rest of state), Washington (at least $16.66/hr, CPI-adjusted), Colorado (approximately $15.00/hr), Connecticut ($16.35/hr), Massachusetts ($15.00/hr), and Arizona (approximately $15.00/hr). Exact 2026 rates for CPI-indexed states are finalized in late 2025.
Several states now have automatic annual adjustments tied to CPI inflation, including Alaska, Arizona, California, Colorado, Maine, Minnesota, Montana, Ohio, South Dakota, Vermont, and Washington.
Local Minimum Wages
Don't forget local rates. Cities like Seattle (at least $20.76/hr), San Francisco (at least $18.97/hr), Denver (at least $18.29/hr), and New York City ($16.50/hr) have minimums significantly above their state levels. CPI-indexed city rates may increase further for 2026.
For businesses with employees in multiple localities, tracking the correct rate for each work location is critical. A single employee working at two different company locations might even be subject to different minimums.
Tipped Employee Minimums
The federal tipped minimum remains at $2.13/hr, but many states require a higher tipped wage or don't allow a tip credit at all. California, Oregon, Washington, Montana, Minnesota, Nevada, and Alaska require employers to pay the full state minimum before tips.
Ensure your payroll system correctly applies the tip credit rules for each state where you have tipped employees.
How Payrollix Helps
Payrollix maintains an up-to-date database of federal, state, and local minimum wage rates. The system will flag any payroll run where an employee's effective hourly rate falls below the applicable minimum wage for their work location.
This proactive compliance check prevents wage violations before they happen — protecting your clients from costly DOL investigations and employee lawsuits.
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