New Year, New Rates: Minimum Wage Increases Across the U.S. in 2025

This article is from The National Law Review: https://ow.ly/H4sT50UBuIf

As we welcomed 2025, employers across the country also welcomed a wave of state and local minimum wage increases. For businesses with hourly or tipped employees, staying compliant with these updated wage laws is critical. Effective January 1, 2025, 23 states—along with numerous counties and cities—raised their standard and tipped minimum wage rates. These updates reflect the continued push in many jurisdictions to keep wages in step with the rising cost of living.

What Employers Need to Know

If your business employs minimum wage or tipped workers, now is the time to review your pay practices to ensure they align with updated laws. This applies to businesses operating in multiple jurisdictions or with remote workers, as minimum wage laws are highly localized.

Some key reminders:

• Standard minimum wage increases went into effect in most jurisdictions on January 1, 2025

• Tipped minimum wage rates also increased in many states and localities

• Employers must ensure that tipped employees’ total earnings (cash wage + tips) equal at least the full minimum wage in their jurisdiction

Failing to adhere to the new minimums could result in penalties, back pay liabilities, and potential litigation.

Tipped Minimum Wages: What Changed?

In many areas, tipped workers—such as restaurant servers and bartenders—saw changes to the cash wage portion of their pay. While employers can still pay less than the full minimum wage in cash, the total compensation (wage + tips) must meet or exceed the new minimum wage threshold.

This is often referred to as the tip credit system, and the rules governing it vary widely by state and municipality. For example:

• Some states eliminate the tip credit altogether and require tipped workers to earn the full minimum wage in cash

• Others adjust both the standard and tipped minimum wages each year based on inflation or cost-of-living calculations

  
  

Next Steps for Employers

To remain compliant:

1. Review all jurisdictions where your employees work, including cities and counties—not just the state minimum wage.

2. Update payroll systems to reflect new wage rates.

3. Notify employees of any changes, as some jurisdictions require posting updated wage notices.

4. Consult legal counsel or HR experts to address unique wage scenarios (e.g., remote workers, multistate operations, or service charges).

   
   

Final Thought

With wage laws constantly evolving, January is the perfect time to audit your pay practices. Staying current not only protects your business but also ensures your workforce is compensated fairly.

If you need help navigating the 2025 minimum wage changes or updating your employee handbooks and pay policies, our team is here to help.