Sep 8, 2025
A Founder's Guide to Employer-Friendly Minimum Wage States
Upeka Bee
For a growing business, reviewing minimum wages by state is a smart first step in finding cost-effective hiring locations. It gives you a baseline for one of your largest expenses—payroll.
However, seasoned leaders understand that the hourly rate is only part of the picture. The most employer-friendly states combine fair wages with a favorable overall cost environment.
Think low taxes, lighter regulations, and manageable insurance costs! This guide goes beyond wage rates, offering a snapshot of the broader business climate to help you make informed, strategic hiring decisions.
State-Specific Wages: Baseline and Beyond
The foundation of wage laws in the U.S. is the Fair Labor Standards Act (FLSA), which establishes the federal minimum wage for most private and public sector employees.
As of 2025, the federal rate remains $7.25 per hour, but many states have their own minimum wage laws. When an employee is subject to both, the employer must pay the higher of the two rates. Adjusted for inflation, today’s federal minimum wage is roughly 40% lower in value than it was in 1970.
States adhering to the federal minimum ($7.25)
Many states follow the federal minimum wage, meaning they have not passed a state law to set a higher rate.
Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming.
Additionally, there are states with no minimum wage law at all.
Alabama, Louisiana, Mississippi, South Carolina, and Tennessee.
In these locations, the federal minimum wage rate of $7.25 applies to most FLSA-covered businesses by default.
In addition, a special consideration is the server's minimum wage by state. Federal law allows employers to pay a tipped minimum wage of $2.13 per hour, provided that the employee's tips bring their total earnings up to the full minimum wage. However, the rules for tipped workers vary dramatically.
In 2024, 80.3 million workers aged 16 and older in the United States were paid hourly rates, representing 55.6% of all wage and salary workers.
States with rates above $7.25 but below $12.00
This group includes states that have raised their minimum wage above the federal floor but have taken a more cautious approach, with rates that are modestly higher.
Alaska, Arkansas, Michigan, Minnesota, Montana, Nevada, Ohio, South Dakota, and West Virginia.
The mid-tier states ($12.00 - $14.99)
This group comprises states that are progressively increasing their minimum wage toward the $15.00 mark or have established a rate significantly above the federal level.
Arizona, Colorado, Delaware, Florida, Hawaii, Illinois, Maine, Missouri, Nebraska, New Mexico, Oregon, Rhode Island, Virginia, and Vermont.
The higher-wage states ($15.00 and above)
A growing number of states have passed laws to reach or exceed a minimum wage of $15.00 per hour, often with planned annual increases tied to inflation. These locations represent the highest wage floors in the country.
California, Connecticut, Maryland, Massachusetts, New Jersey, New York, and Washington.
Strategic HR Expertise for Smart Growth
You need to be aware of evolving state and federal laws to maximize your wage rates. Making hiring decisions based on incomplete data can lead to unexpected costs and compliance risks. DianaHR can be your reliable partner here.
Total cost analysis: Our experts go beyond the current minimum wage by state, helping you analyze the total payroll management, including SUI taxes and workers' compensation costs. Then you can make truly informed decisions.
Compliant payroll setup: When you hire in a new state, our experts manage the entire state registration and payroll setup, ensuring HR compliance.
Wage benchmarking: DianaHR also provides data to help you set a wage that is not only compliant but also competitive enough to attract and retain talent, reducing the high cost of turnover.
Fetch the best talent at competitive rates. Chat with DianaHR today.
FAQs
1. Which states in the US have the lowest minimum wage?
The lowest possible minimum wage in the United States is the federal rate of $7.25 per hour, as established by the Fair Labor Standards Act (FLSA).
Some states match the federal minimum wage, such as Texas and Pennsylvania. Others, like Alabama and Louisiana, have no state minimum wage law, and the federal rate automatically applies to most businesses.
2. What is the tip credit for servers?
The tip credit is a provision in the Fair Labor Standards Act (FLSA) that allows employers of tipped employees to pay a lower direct cash wage than the full minimum wage.
The federal cash wage for tipped workers is $2.13 per hour. However, the employer can only take a tip credit if the employee's direct wages combined with their tips equal at least the full minimum wage. The specific rules for server minimum wage by state can vary.
3. Why is minimum wage not the only factor in determining if a state is employer-friendly?
Minimum wage is only one factor in making smart hiring decisions. Employer-friendly states keep the total cost of doing business low by offering favorable corporate and property tax rates, affordable utilities, and lighter regulatory requirements.
A state with a very low minimum wage may suffer from higher employee turnover and lower productivity, which are significant hidden costs. Thus, a state with a slightly higher minimum wage but a stronger overall tax and business climate may be more cost-effective long term.
For a growing business, reviewing minimum wages by state is a smart first step in finding cost-effective hiring locations. It gives you a baseline for one of your largest expenses—payroll.
However, seasoned leaders understand that the hourly rate is only part of the picture. The most employer-friendly states combine fair wages with a favorable overall cost environment.
Think low taxes, lighter regulations, and manageable insurance costs! This guide goes beyond wage rates, offering a snapshot of the broader business climate to help you make informed, strategic hiring decisions.
State-Specific Wages: Baseline and Beyond
The foundation of wage laws in the U.S. is the Fair Labor Standards Act (FLSA), which establishes the federal minimum wage for most private and public sector employees.
As of 2025, the federal rate remains $7.25 per hour, but many states have their own minimum wage laws. When an employee is subject to both, the employer must pay the higher of the two rates. Adjusted for inflation, today’s federal minimum wage is roughly 40% lower in value than it was in 1970.
States adhering to the federal minimum ($7.25)
Many states follow the federal minimum wage, meaning they have not passed a state law to set a higher rate.
Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming.
Additionally, there are states with no minimum wage law at all.
Alabama, Louisiana, Mississippi, South Carolina, and Tennessee.
In these locations, the federal minimum wage rate of $7.25 applies to most FLSA-covered businesses by default.
In addition, a special consideration is the server's minimum wage by state. Federal law allows employers to pay a tipped minimum wage of $2.13 per hour, provided that the employee's tips bring their total earnings up to the full minimum wage. However, the rules for tipped workers vary dramatically.
In 2024, 80.3 million workers aged 16 and older in the United States were paid hourly rates, representing 55.6% of all wage and salary workers.
States with rates above $7.25 but below $12.00
This group includes states that have raised their minimum wage above the federal floor but have taken a more cautious approach, with rates that are modestly higher.
Alaska, Arkansas, Michigan, Minnesota, Montana, Nevada, Ohio, South Dakota, and West Virginia.
The mid-tier states ($12.00 - $14.99)
This group comprises states that are progressively increasing their minimum wage toward the $15.00 mark or have established a rate significantly above the federal level.
Arizona, Colorado, Delaware, Florida, Hawaii, Illinois, Maine, Missouri, Nebraska, New Mexico, Oregon, Rhode Island, Virginia, and Vermont.
The higher-wage states ($15.00 and above)
A growing number of states have passed laws to reach or exceed a minimum wage of $15.00 per hour, often with planned annual increases tied to inflation. These locations represent the highest wage floors in the country.
California, Connecticut, Maryland, Massachusetts, New Jersey, New York, and Washington.
Strategic HR Expertise for Smart Growth
You need to be aware of evolving state and federal laws to maximize your wage rates. Making hiring decisions based on incomplete data can lead to unexpected costs and compliance risks. DianaHR can be your reliable partner here.
Total cost analysis: Our experts go beyond the current minimum wage by state, helping you analyze the total payroll management, including SUI taxes and workers' compensation costs. Then you can make truly informed decisions.
Compliant payroll setup: When you hire in a new state, our experts manage the entire state registration and payroll setup, ensuring HR compliance.
Wage benchmarking: DianaHR also provides data to help you set a wage that is not only compliant but also competitive enough to attract and retain talent, reducing the high cost of turnover.
Fetch the best talent at competitive rates. Chat with DianaHR today.
FAQs
1. Which states in the US have the lowest minimum wage?
The lowest possible minimum wage in the United States is the federal rate of $7.25 per hour, as established by the Fair Labor Standards Act (FLSA).
Some states match the federal minimum wage, such as Texas and Pennsylvania. Others, like Alabama and Louisiana, have no state minimum wage law, and the federal rate automatically applies to most businesses.
2. What is the tip credit for servers?
The tip credit is a provision in the Fair Labor Standards Act (FLSA) that allows employers of tipped employees to pay a lower direct cash wage than the full minimum wage.
The federal cash wage for tipped workers is $2.13 per hour. However, the employer can only take a tip credit if the employee's direct wages combined with their tips equal at least the full minimum wage. The specific rules for server minimum wage by state can vary.
3. Why is minimum wage not the only factor in determining if a state is employer-friendly?
Minimum wage is only one factor in making smart hiring decisions. Employer-friendly states keep the total cost of doing business low by offering favorable corporate and property tax rates, affordable utilities, and lighter regulatory requirements.
A state with a very low minimum wage may suffer from higher employee turnover and lower productivity, which are significant hidden costs. Thus, a state with a slightly higher minimum wage but a stronger overall tax and business climate may be more cost-effective long term.
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