Federal Minimum Wage

What is Federal Minimum Wage?

The minimum wage is the minimum pay received by a nonexempt employee in exchange for time or services provided. It is purely financial and is expressed as an hourly rate. The Federal Minimum Wage is a federally mandated rate established by the Department of Labor and part of the Fair Labor Standards Act (FLSA). States and municipalities can set their minimum wage rates. However, the state rate must generally be above the federal rate.

Advantages of Federal Minimum Wage? 

A minimum legal wage for employees means employees are guaranteed a certain hourly rate which can help reduce relative poverty and protects them against unduly low pay. It ensures a just and equitable share of progress for all by providing social stability within communities and reducing income inequality and labor turnover. It also ensures a decent living for employees, helps sustain domestic demand, and strengthens incentives to work.

Disadvantages of a Federal Minimum Wage

One of the disadvantages of the Federal Minimum Wage is unemployment. If labor markets are competitive, companies will demand less labor, and higher wages could encourage more workers to supply their labor.

In other instances, companies may become uncompetitive where the minimum wage rate could push up costs causing companies to go out of business as they cannot afford the wage costs. It may also cause an increase in the total number of workers on the black market as a way for companies to avoid paying the legal minimum wage required.

How to utilize the Federal Minimum Wage

An employer who is subject to Federal and State minimum wage requirements must pay the higher of the two.

An employee’s wage rate is typically determined at the time of hire and as agreed upon in the employment contract. The wage rate will remain consistent on each pay (aside from pay increases & promotions).

For some organizations, the minimum wage can be determined by labor laws and labor unions and, once again, must be equal to or higher than the Federal Minimum Wage.

Conclusion

The minimum wage does not make up the entire compensation package; benefits are a key element and appeal to employees and are taken into consideration when joining a company. It is, therefore, important to keep this in mind in order to stay competitive, be fair, and attract new talent. 

Any task that’s related to an employee’s compensation should be handled with care and acted upon quickly. When dealing with employees’ wage rate pay, it is important to keep accurate data, calculate carefully, and communicate regularly with the employee.