The Federal government and U.S. have set a minimum wage for nonexempt workers. If the state minimum wage exceeds the federal, employers are required to follow state minimum wage laws, and visa versa. The minimum wage applies to workers' hourly compensation, not to their net pay. Thus, after deductions, a worker's take-home pay may legally fall below the required minimum wage.

State Minimum Wage

Many states have set their own minimum wage. If the employer is covered by both state and federal law and the two are not the same, then the employer is required to pay the higher minimum wage based on the state in which the employee works.

Tip Credit

Based on the tip credit, an employee may be paid a rate that is below the federal minimum wage. This sub-minimum wage applies to wait staff, bartenders, and other workers who typically earn tips in addition to their wages. In such cases, the employer may reduce these employees' hourly rate to $2.13 per hour. The tip credit can be used only if the employee regularly earns more than $30 per month in tips.