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(Editor’s Note: Today’s article is brought to you by our friends at Poster Guard® Poster Compliance Service, the leading labor law poster service that gets your business up to date with all required federal, state, and local labor law postings, and then keeps it that way — for an entire year. Enjoy the article!)

In the United States, the federal minimum wage has been $7.25/hour since July 2009. Since then, there have been a lot of changes to the minimum wage on a state and local level. Currently, 34 states, territories, and districts have a minimum wage higher than federal law. 

Honestly, I don’t expect this trend to change anytime soon. For example, in my state (Florida), the minimum wage is scheduled to increase incrementally until it reaches $15/hour in September 2026. So, changes are regularly happening.

Organizations need to understand what’s going on with minimum wage because if there’s a difference in minimum wage laws, employers are required to pay the most generous rate to non-exempt workers. For example, if I’m a non-exempt employee working in Denver, Colorado, how much should I get paid per hour?

Federal minimum wage $7.25/hour

Colorado minimum wage $14.81/hour

Denver minimum wage $18.81/hour

Alright, this was an easy one, the correct answer is $18.81/hour. And remember that this applies to overtime pay as well.

I want to believe that organizations know when they’re required to pay more than federal minimum wage. But with all the changes going on, organizations need to ask themselves if they have a process in place to make sure they stay current with all these wage changes. Especially if the organization has employees who work in other cities / states. 

Keep in mind, if an employee relocates, their rate of pay might change. If we use the non-exempt Colorado employee example above, let’s say the employee has been living in Telluride and relocates to Denver. Organizations could be certain they’re paying someone more than $7.25/hour. But if the employee is making $15/hour, did the organization know they should be making $18.81/hour?

That’s why it is valuable to conduct a minimum wage audit. This audit would be focused exclusively on minimum wage. Organizations might be doing other compensation related audits for reasons like evaluating pay equity or verifying exempt / non-exempt status under the Fair Labor Standards Act (FLSA). Those are valid reasons to audit compensation and while they might factor into this conversation, let’s just focus on minimum wage for now. 

Here are three steps to consider when conducting an effective audit:

Identify a reliable source for minimum wage information. Our friends at Poster Guard have developed a Minimum Wage MonitorTM Premium Service. This online tool provides organizations with a color-coded map that displays minimum wage data, in addition to past and future wage rates. This could be very helpful for future workforce planning and budgeting purposes. The tool sends email notifications whenever minimum wage laws are passed or changed so organizations can start preparing for the new rates to take effect.

Examine employee wages in relation to the law and your internal compensation practices. Once an organization has partnered with a reliable information source, you can start conducting their wage analysis. This isn’t simply a question of “are we or aren’t we” paying more than minimum wage. Employees know what the minimum wage is, and they don’t have to talk to someone in the breakroom to figure out if they’re not being paid fairly. Oh, and I don’t want to get off-track, but if your state/territory/district requires pay transparency in recruitment marketing, then you’ll want to ensure that you’re disclosing the correct pay rate. 

Determine if there are “pay gaps” that need to be addressed. Organizations must remember that they’re not just evaluating new employee pay. Wage changes can create other challenges, like wage compression. As a quick refresher, wage compression happens when a new employee is paid nearly the same amount as another employee with longer tenure. An example would be if an employer hires a new customer service representative at $15/hour, but a customer service rep with 5 years of service is making $15.50/hour. The organization will need to find the budget dollars, put together a wage adjustment schedule, and plan to speak with employees about getting their pay on track. 

As I mentioned earlier, it’s possible that the results of a minimum wage audit need to be considered with other compensation related audits. Of course, if organizations have any questions along the way, they shouldn’t hesitate to consult with legal counsel. 

One more thing. We spent our time today talking about minimum wage changes from the perspective of employee pay. This is a good reminder that most – but not all – of these changes require new labor law posters. Don’t forget that Poster Guard’s Poster Compliance Service keeps you in compliance by providing automatic replacements (at no additional cost) every time a mandatory change occurs.

The last thing any organization wants is to be considered “out of touch” because they don’t know what the current minimum wage is for employees. Beyond appearing to be clueless, companies can’t afford to risk the potential wage and hour or FLSA lawsuits from their employees. Get reliable information so you can pay employees properly. 
The post The Best Way to Conduct a Minimum Wage Audit appeared first on hr bartender.
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25/02/2025 – 12:03 /Sharlyn Lauby
Twitter: @hoffeldtcom