As of January 1, 2020, the minimum wage in Michigan has increased by 20 cents, from $9.45 an hour to $9.65. Michigan’s minimum wage is greater than that of the federal minimum wage of $7.25, but only by a couple of dollars.
The recent minimum wage increase also came with new sick leave laws, and further increases may take effect in the future. Let’s explore the current minimum wage requirements for Michigan, as well as what the future may hold for this state.
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2020 Minimum Wage in Michigan: $9.65 per hour
Prior to January 1, 2020, the minimum wage in Michigan was $9.45. However, with the most recent ballot measure that passed, the minimum wage has increased by 20 cents every year since 2019 and will continue to increase until 2030, when it will reach $12 an hour.
The recent (and continued) increase is thanks to The Improved Workforce Opportunity Wage Act. This law also changed the minimum pay rate for minors, students, and tipped employees. These standards are applied to businesses with two or more employees (over the age of 16).
Like many other states, and as stated by the Fair Labor Standards Act (FLSA), Michigan also has some exemptions to these minimum wage laws. FLSA and Michigan law explain those exemptions as follows:
- Salaried employees: According to the federal FLSA, employees earning a salary of at least $684 a week are exempt from minimum wage laws.
- Minors, aged 16-17: In the state of Michigan, minors between the ages of 16 and 17 may be paid only 85% of the minimum wage rate by their employer. With the recent wage increase, this new rate for minors is set at $8.03 per hour.
- New hire employees, aged 16-19: Additionally, Michigan state laws allow employers to pay a “training wage” for new hires between the ages of 16 and 19. This training wage only applies to the first 90 days of employment, and is at a rate of $4.25 an hour.
- Tipped employees: Employees who earn tips must be paid an average of $9.65 an hour by combining tips and hourly pay. More on this in the next section.
Tipped: $3.67 per hour
The FLSA defines tipped employees as those who regularly make at least $30 a month in tips. The state of Michigan does not have a set requirement for defining tipped employees, but because of their higher minimum wage laws, tipped employees are required to be paid more than the federal average of $2.13 an hour (plus tip credit).
In Michigan, employees that earn tips may be paid a cash wage of $3.67 an hour, as long as the tips they make average their hourly pay at $9.65 (the state minimum). The way this works is that employers apply what is called a “tip credit” towards the tips their employees earn, and are allowed to pay their employees less per hour. However, employers can only take out a maximum tip credit of $5.98 an hour.
Tipped employees are not exempt from the state’s overtime laws (see below), and employers may not take out a higher tip credit for overtime hours.
Those earning minimum wage in the state of Michigan should make $386 per 40-hour workweek. For an 8-hour workday, that’s about $77.20 per day.
As mentioned above, federal minimum wage laws exclude salaried employees that are making at least $684 per week.
Employees earning the minimum wage in Michigan and working a full-time (40 hours per week) job should earn about $20,072 per year, before taxes.
The minimum wage, both on a federal and state level, is typically adjusted in accordance with the Consumer Price Index (CPI) and federal poverty guidelines. According to the 2019 federal poverty guidelines, a family of two people should be making about $17,240 per year. For a single person, the guidelines place the poverty level at $12,760 per year.
Poverty is a major concern with lawmakers in Michigan, which is why the state minimum wage is set to increase in the coming years. Hopefully, as the minimum wage reaches $12 an hour, the higher rate will help elevate many working families out of poverty.
Overtime: $14.48 per hour
As stated by the FLSA, most minimum-wage employees that work longer than 40 hours every week are allowed to collect overtime wages. The overtime rate is time and a half of typical pay, or about $14.48 an hour for minimum wage workers in the state of Michigan.
This law does exclude the exemptions mentioned above, as detailed by the FLSA. Additionally, they may not apply to some workers in emergency services, as they may have their own set of overtime provisions.
Michigan Minimum Wage Increase News
As mentioned earlier, the minimum wage is set to increase incrementally until 2030. Originally, the minimum wage increase proposal was intended to reach $12 an hour by 2022, but changes to the law extended that window until 2030. This means that over the next few years, the minimum wage will increase by about 20 cents per year.
As reported on by local news WSBT22, the biggest problem for employers in Michigan isn’t affording to pay employees the new minimum wage; the biggest concern is finding employees in the first place. Many employers spoke with WSBT22 stating that they already pay above the state’s minimum wage, but employees are simply hard to find.
Luckily, as it stands, the minimum wage in Michigan is well over $2 more than the federal standard of $7.25 an hour. Hopefully, as the minimum wage continues to increase, employees from out of state will be enticed to possibly move to and work in Michigan.
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