Federal rules are largely unchanged, but state and local minimum wages have increased in many places. Here are the 2026 numbers employers need: federal subminimums by age and tip status, sample payroll-cost math, required postings and records, and how local rules can raise costs well above the federal baseline.

Key figures at a glance

  • Federal minimum wage: $7.25 per hour (effective July 24, 2009).
  • Youth (under 20) subminimum for first 90 days: $4.25 per hour.
  • Federal tipped minimum: $2.13 per hour; maximum tip credit allowed: $5.12 (so total must reach $7.25).
  • Standard full-time year used for calculations: 40 hours/week × 52 weeks = 2,080 hours.
  • Annual earnings at common hourly rates (40 hrs/week): $7.25 → $15,080; $10 → $20,800; $12 → $24,960; $15 → $31,200; $20 → $41,600; $25 → $52,000.
  • Overtime premium under FLSA: 1.5× the regular hourly rate for hours over 40 in a workweek.
  • Employer payroll taxes (employer share): Social Security 6.2% + Medicare 1.45% = 7.65% of wages.
  • Typical employer benefits load used for planning: roughly 20%–35% of wages (varies by industry).
  • Federal recordkeeping: payroll records retained for 3 years; basic time-and-wage records retained for 2 years under FLSA.
  • Oregon employers: new hire pay-disclosure requirements effective January 1, 2026 (see Detailed breakdown).

Detailed breakdown — federal rules employers must know

The federal minimum wage still sits at $7.25/hour. That hasn't changed since July 24, 2009. So lots of employers follow a federal baseline, while many states and cities require higher pay.

Thing is, but federal law also allows special lower rates in two common cases:

  • Youth training wage: Employers may legally pay workers under age 20 as little as $4.25/hour for the first 90 consecutive calendar days of employment. After the 90 days, the worker must be paid at least the applicable minimum wage (federal or state).
  • Tipped employees: The federal tipped cash wage is $2.13/hour. Employers can take a tip credit of up to $5.12/hour so that, combined with tips, the worker reaches $7.25/hour.

Put simply, here's the practical math. If an employee works 40 hours at $7.25, annual pay is $15,080. At $15/hour, full-time annual pay is $31,200. Overtime adds 50% per hour: a $15/hr worker earns $22.50 for overtime hours.

Remember: employers pay payroll taxes on employee wages, too. The employer share of Social Security is 6.2% and Medicare is 1.45%, a combined 7.65% of wages. For a $31,200 annual wage (that $15/hr example), employer FICA alone is $2,386.80.

Add benefits — a common planning assumption is about 30% of wages, which would push that worker's total cost up to roughly $43,000 a year.

Recordkeeping and posters: Federal law requires employers to keep payroll records for three years and basic time-and-wage records for two years. Employers must display the federal minimum wage poster where employees can read it. Many states require posting of state-specific posters too.

What employers must pay — beyond the hourly rate

Wages are only one part of the bill. Employers should budget for several predictable add-ons:

  • Employer payroll taxes: 7.65% (FICA) on wages. Example: on $20/hour (2,080 hours → $41,600), employer FICA = $3,182.40.
  • Federal and state unemployment insurance: rates vary, but typical initial employer FUTA net cost is about 0.6% on the first portion of wages — employers should plan for hundreds to thousands per employee annually depending on state rates and experience rating.
  • Workers’ compensation insurance: varies widely; plan 1%–5% of payroll depending on job risk. On a $31,200 payroll, that’s $312–$1,560.
  • Benefits: health insurance, retirement matching, paid leave — often 20%–35% of wages. On $31,200, that’s $6,240–$10,920.
  • Overtime cost: any overtime hour costs 1.5× the base rate — on a $25/hour worker overtime pays $37.50/hour.

Oregon example: new hire pay-disclosure rule starting Jan. 1, 2026

Some states have added new requirements in 2026. Oregon passed SB 906, effective January 1, 2026. It forces employers to provide new hires a written explanation of earnings and deductions at the time of hire. The notice must include:

  • The employer’s regular pay period.
  • All types of pay rates the employee may be eligible for — hourly, salary, shift differentials, piece-rate, commission.
  • All benefit deductions and all other types of deductions and their purposes.
  • Any allowances claimed as part of minimum wage, and payroll codes used for pay rates and deductions, with definitions.

Employers must update that information annually. So Oregon shows how 2026 is shaping up: employers have to be transparent on pay components, not just the headline wage.

How to apply and stay compliant

Start with this short checklist — it's practical and quick:

  • Post required federal and state posters in a place employees can read. The federal poster covers the $7.25 rate and overtime rules.
  • Calculate total labor cost per hire: wages + 7.65% FICA + expected UI + workers’ comp + benefits. Example: $15/hr → $31,200 wages; add $2,387 FICA and a 30% benefits load ($9,360) → about $42,947 total annual cost.
  • Make sure you confirm age and tip rules before using any subminimum wage. If using the $4.25 youth rate or $2.13 tipped rate, document the 90-day period and tip records carefully.
  • Keep accurate payroll and time records to defend against wage claims; check the exact retention periods that apply to your business and jurisdiction.
  • Monitor local laws. Many cities and states set higher minimums, require different break rules, or mandate pay-disclosure like Oregon’s SB 906 (effective Jan 1, 2026).

Tips for small employers and HR teams

Keep it simple. Use payroll software that calculates: gross pay, overtime, tip credits, employer FICA, and tax withholdings. Audit payroll at least quarterly.

Plan for raises and step increases. If a city raises its minimum from $12 to $15, that ripples through overtime, salaried-exempt calculations, and benefits. Model scenarios: a 10-25% bump in base wages can mean a 12-40% increase in total labor costs once taxes and benefits are added.

Document notes on training wages and tip credits in personnel files. If a worker claims tips didn't bring them up to the legal minimum, the employer can be liable for the shortfall plus liquidated damages — often equal to the back pay owed.

Regional differences — how state and local rules change the math

Federal is a floor. States and many cities set higher minimums. That means employers in some places must pay $12, $15, or more per hour — not $7.25. Employers should build local minimum wage levels into hiring budgets.

Two practical takeaways:

  • If your business operates in multiple jurisdictions, set a site-by-site pay scale. Use the highest applicable local rate plus the employer cost figures above to set prices or staffing plans.
  • Review local disclosure rules. Oregon’s new hire notice (effective Jan 1, 2026) is one example. Other jurisdictions require pay transparency, scheduling notices, or specific wage statements showing deductions and pay rates.

So payroll teams have to do two things: track the highest local pay obligation for each workplace and treat payroll taxes and benefits as real, recurring costs when pricing labor or setting headcount.

Related Articles

The federal floor in 2026 remains $7.25/hr, with $4.25 for under-20 first 90 days and $2.13 for tipped employees — but employer costs and legal obligations often push pay far higher once payroll taxes, benefits, overtime, and state or city minimums are added. Plan costs per worker (wages + 7.65% FICA + benefits), post required notices, keep records for 2–3 years, and watch local laws like Oregon’s Jan. 1, 2026 pay-disclosure rule.