Pay and Benefits

In general, you must pay your employees at least the federal minimum wage ($7.25) for all hours worked regardless of whether they are paid by the hour, the day, or at a piece rate. Some state laws and local laws provide greater employee protections; employees are entitled to the highest of the local, state, or federal minimum wage that applies to them. For work performed on or in connection with federal contracts, you must pay employees a higher minimum wage.

You may pay tipped employees a cash wage of no less than $2.13 per hour under federal law provided you meet certain requirements before claiming a credit against your minimum wage obligations. If your employee’s tips combined with cash wages do not equal at least the federal minimum wage ($7.25), you must make up the difference. Note that many states require higher direct wage amounts for tipped employees.

You may pay new hires the youth minimum wage ($4.25) during the first 90 days of employment if they are under age 20; but after 90 days of employment or upon reaching age 20 (whichever comes first), you must pay them the minimum wage. Employers who obtain a Section 14(c) certificate from the U.S. Department of Labor may also pay employees below the minimum wage if they are a student-learner enrolled in vocational education, a full-time student in certain workplaces, or a person whose earning or productive capacity is impaired by a disability.

You must pay employees for all hours they work in a workweek. In general, “hours worked” includes all time an employee must be on duty, or at the place of work. Normally, time spent in training, traveling from site to site during the day, and doing repair work must be paid. Unless exempt, you must pay your employees overtime pay of at least 1.5 times their regular rate of pay after 40 hours of work in a seven-day workweek regardless of their immigration status. There is no limit on the number of hours employees aged 16 and older may work in any workweek. Federal law doesn’t require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days.

A different, higher minimum wage may apply for work performed on or in connection with certain federal construction and service contracts. If your employees perform work on or in connection with certain federal contracts entered into before January 30, 2022, you must pay your employees working under the contract at least a minimum wage of $11.25 per hour. For tipped employees who perform work on or in connection with such a federal contract, you must pay them a minimum of $7.90 per hour. If your employees perform work on or in connection with certain federal contracts that are entered into, renewed, or extended on or after January 30, 2022, you generally must pay your employees at least a $15.00 minimum wage.

You must pay a service employee performing federal government contract work under a service contract at least the prevailing wage in the local area for the classification in which the employee is working. The prevailing wage is the minimum hourly wage to be paid based on what is prevailing in the locality where the work is performed, plus fringe benefits. If an employee performed work under such a contract, the employee must be paid at least the prevailing wage for the work performed. Please visit Sam.gov to find the applicable prevailing wage rate(s) for a federal service contract.

A construction worker performing work on a federal or federally funded construction project subject to Davis-Bacon requirements must be paid at least the prevailing wage in the local area for the labor classification in which the employee is working. The prevailing wage is the minimum hourly wage and fringe benefits to be paid based on what is prevailing in the locality where the work is performed.