Minimum Wage in Ohio: 2024-2028
Potential Increase to Ohio Minimum Wage: 2025-2028
Ohio Senate Bill 256, introduced in the 135th General Assembly, proposes significant changes to the state’s minimum wage laws and earned income tax credit (EITC) provisions. Sponsored by Senator Blessing, this bill outlines a gradual increase in the state’s minimum wage and modifies the EITC to provide additional financial relief to lower-income taxpayers. Below is a detailed analysis of the key provisions and potential impacts of the bill.
Ohio Historical Minimum Wage: 1968-2028*
| Date | Ohio Minimum Wage |
|---|---|
| 1968-01-01 | $1.25 |
| 1969-01-01 | $1.25 |
| 1970-01-01 | $1.25 |
| 1971-01-01 | $1.25 |
| 1972-01-01 | $1.25 |
| 1973-01-01 | $1.25 |
| 1974-01-01 | $1.25 |
| 1975-01-01 | $1.25 |
| 1976-01-01 | $1.60 |
| 1977-01-01 | $1.60 |
| 1978-01-01 | $1.60 |
| 1979-01-01 | $2.30 |
| 1980-01-01 | $2.30 |
| 1981-01-01 | $2.30 |
| 1982-01-01 | $2.30 |
| 1983-01-01 | $2.30 |
| 1984-01-01 | $2.30 |
| 1985-01-01 | $2.30 |
| 1986-01-01 | $2.30 |
| 1987-01-01 | $2.30 |
| 1988-01-01 | $2.30 |
| 1989-01-01 | $2.30 |
| 1990-01-01 | $2.30 |
| 1991-01-01 | $3.80 |
| 1992-01-01 | $4.25 |
| 1993-01-01 | $4.25 |
| 1994-01-01 | $4.25 |
| 1995-01-01 | $4.25 |
| 1996-01-01 | $4.25 |
| 1997-01-01 | $4.25 |
| 1998-01-01 | $4.25 |
| 1999-01-01 | $4.25 |
| 2000-01-01 | $4.25 |
| 2001-01-01 | $4.25 |
| 2002-01-01 | $4.25 |
| 2003-01-01 | $4.25 |
| 2004-01-01 | $4.25 |
| 2005-01-01 | $4.25 |
| 2006-01-01 | $4.25 |
| 2007-01-01 | $6.85 |
| 2008-01-01 | $7.00 |
| 2009-01-01 | $7.30 |
| 2010-01-01 | $7.30 |
| 2011-01-01 | $7.40 |
| 2012-01-01 | $7.70 |
| 2013-01-01 | $7.85 |
| 2014-01-01 | $7.95 |
| 2015-01-01 | $8.10 |
| 2016-01-01 | $8.10 |
| 2017-01-01 | $8.15 |
| 2018-01-01 | $8.30 |
| 2019-01-01 | $8.55 |
| 2020-01-01 | $8.70 |
| 2021-01-01 | $8.80 |
| 2022-01-01 | $9.30 |
| 2023-01-01 | $10.10 |
| 2024-01-01 | $10.45 |
| 2025-01-01 | $12.00 |
| 2026-01-01 | $13.00 |
| 2027-01-01 | $14.00 |
| 2028-01-01 | $15.00 |
*2025-2028 data estimated based on Ohio Senate Bill 256.
Historical Data Retrieved From: https://fred.stlouisfed.org/
Minimum Wage Increase for Non-Tipped Employees
- Starting January 1, 2025: The bill proposes raising Ohio’s minimum wage for non-tipped employees to $12.00 per hour.
- Annual Increases: The minimum wage will increase by $1.00 each year for the following three years, reaching $15.00 per hour by January 1, 2028.
- Post-2028 Adjustments: Beginning January 1, 2029, the minimum wage will be adjusted annually based on the Consumer Price Index (CPI), in line with Ohio’s constitutional requirements.
| Year | Hourly Wage Rate (Non-Tipped Employees) |
|---|---|
| 2025 | $12.00 |
| 2026 | $13.00 |
| 2027 | $14.00 |
| 2028 | $15.00 |
Data Retrieved From: https://www.legislature.ohio.gov/
This structured increase aims to gradually elevate the standard of living for workers in Ohio, while also allowing businesses time to adjust to the higher labor costs.
Minimum Wage Increase for Tipped Employees
- Starting January 1, 2025: The bill raises the minimum wage for tipped employees to $6.00 per hour.
- Annual Increases: The wage will increase by $0.50 each year until it reaches $7.50 per hour by January 1, 2028.
- Post-2028 Adjustments: As with non-tipped employees, the minimum wage for tipped workers will be adjusted annually based on the CPI starting in 2029.
| Year | Hourly Wage Rate (Tipped Employees) |
|---|---|
| 2025 | $6.00 |
| 2026 | $6.50 |
| 2027 | $7.00 |
| 2028 | $7.50 |
Ohio Historical Tipped Minimum Wage: 2003-2028*
| Date | Basic Combined Cash & Tip Minimum Wage Rate | Maximum Tip Credit Against Minimum Wage | Minimum Cash Wage | Definition of Tipped Employee by Minimum Tips Received | Notes |
|---|---|---|---|---|---|
| 2003 | $4.25 | $2.13 | $2.21 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales of $500,000 or less is $2.01 per hour. For non-tipped employees of such employers, the minimum rates are $3.35 for employers with sales from $150,000 to $500,000 and $2.80 with sales under $150.000. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2004 | $4.25 | $2.13 | $2.21 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales of $500,000 or less is $2.01 per hour. For non-tipped employees of such employers, the minimum rates are $3.35 for employers with sales from $150,000 to $500,000 and $2.80 with sales under $150.000. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2005 | $4.25 | $2.13 | $2.21 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales of $500,000 or less is $2.01 per hour. For non-tipped employees of such employers, the minimum rates are $3.35 for employers with sales from $150,000 to $500,000 and $2.80 with sales under $150.000. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2006 | $4.25 | $2.13 | $2.21 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales of $500,000 or less is $2.01 per hour. For non-tipped employees of such employers, the minimum rates are $3.35 for employers with sales from $150,000 to $500,000 and $2.80 with sales under $150.000. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2007 | $6.85 | $3.43 | $3.43 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales of $500,000 or less is $2.01 per hour. For non-tipped employees of such employers, the minimum rates are $3.35 for employers with sales from $150,000 to $500,000 and $2.80 with sales under $150.000. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2008 | $7.00 | $3.50 | $3.50 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales in excess of $255,000 is $3.50 per hour (plus tips). For tipped employees of employers with gross annual sales of less than $255,000, the tipped employee hourly rate is $2.93 per hour (plus tips). Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2009 | $7.30 | $3.65 | $3.65 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales in excess of $255,000 is $3.50 per hour (plus tips). For tipped employees of employers with gross annual sales of less than $255,000, the tipped employee hourly rate is $2.93 per hour (plus tips). Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2010 | $7.30 | $3.65 | $3.65 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales in excess of $255,000 is $3.50 per hour (plus tips). For tipped employees of employers with gross annual sales of less than $255,000, the tipped employee hourly rate is $2.93 per hour (plus tips). Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2011 | $7.40 | $3.70 | $3.70 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales in excess of $255,000 is $3.50 per hour (plus tips). For tipped employees of employers with gross annual sales of less than $255,000, the tipped employee hourly rate is $2.93 per hour (plus tips). Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2012 | $7.70 | $3.85 | $3.85 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales in excess of $255,000 is $3.50 per hour (plus tips). For tipped employees of employers with gross annual sales of less than $255,000, the tipped employee hourly rate is $2.93 per hour (plus tips). Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2013 | $7.85 | $3.92 | $3.93 | More than $30 | The minimum cash wage for tipped employees of employers with gross annual sales in excess of $255,000 is $3.50 per hour (plus tips). For tipped employees of employers with gross annual sales of less than $255,000, the tipped employee hourly rate is $2.93 per hour (plus tips). Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2014 | $7.95 | $3.97 | $3.98 | More than $30 | For employees of employers with gross annual sales of less than $292,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President’s signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2015 | $8.10 | $4.05 | $4.05 | More than $30 | For employees of employers with gross annual sales of less than $297,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President’s signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2016 | $8.10 | $4.05 | $4.05 | More than $30 | For employees of employers with gross annual sales of less than $297,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President’s signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2017 | $8.15 | $4.07 | $4.08 | More than $30 | For employees of employers with gross annual sales of less than $299,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President's signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2018 | $8.30 | $4.15 | $4.15 | More than $30 | For employees of employers with gross annual sales of less than $305,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President's signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2019 | $8.55 | $4.25 | $4.25 | More than $30 | For employees of employers with gross annual sales of less than $305,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President's signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2020 | $8.70 | $4.35 | $4.35 | More than $30 | For employees of employers with gross annual sales of less than $305,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President's signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2021 | $8.80 | $4.40 | $4.40 | More than $30 | For employees of employers with gross annual sales of less than $305,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President's signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2022 | $9.30 | $4.65 | $4.65 | More than $30 | For employees of employers with gross annual sales of less than $342,000, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President's signature to change. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2023 | $10.10 | $5.05 | $5.05 | More than $30 | For employees of employers with gross annual sales of less than $372,000, the state minimum wage is $7.25 per hour. Other additional deductions are permitted, for example for meals and lodging, except as noted in footnote. |
| 2024 | $10.45 | $5.23 | $5.25 | More than $30 | |
| 2025 | $12.00 | $6.00 | $6.00 | More than $30 | |
| 2026 | $13.00 | $6.50 | $6.50 | More than $30 | |
| 2027 | $14.00 | $7.00 | $7.00 | More than $30 | |
| 2028 | $15.00 | $7.50 | $7.50 | More than $30 |
*2025-2028 data estimated based on Ohio Senate Bill 256.
Historical Data Retrieved From: https://www.dol.gov/
The incremental increase for tipped employees ensures that their earnings, when combined with tips, remain in line with the rising minimum wage for non-tipped workers, thus maintaining fair compensation across different types of employment.
Relationship Between State and Federal Law
- Current Law: Ohio’s current minimum wage of $10.45 per hour is higher than the federal minimum wage of $7.25 per hour. Employers must adhere to the higher state wage where applicable.
- Under the Bill: The proposed state minimum wage will continue to be higher than the federal minimum wage, ensuring that Ohio workers benefit from the state’s more favorable wage laws. Employers in Ohio will continue to be governed by the state’s minimum wage as long as it exceeds the federal rate.
Earned Income Tax Credit (EITC) Modifications
- Current EITC: Ohio’s current state EITC is nonrefundable and equals 30% of the federal EITC, meaning the credit cannot exceed the taxpayer’s liability.
- Proposed Changes: The bill introduces an option for a refundable EITC, which offers two tiers:
- 12% of the federal EITC for taxpayers with a dependent under the age of 3.
- 9% of the federal EITC for other qualifying taxpayers.
- Impact: This modification allows eligible taxpayers to receive a refund if their EITC exceeds their tax liability, providing greater financial support for low-income households.
The introduction of a refundable EITC under S.B. 256 is intended to enhance the financial stability of lower-income families, particularly those with young children, by offering them more substantial tax relief.
Potential Impacts and Considerations
Economic Impact:
- The gradual increase in the minimum wage may boost consumer spending as workers have more disposable income. However, it could also lead to higher operational costs for businesses, particularly small businesses, which may pass these costs on to consumers or adjust their labor strategies.
- The modification of the EITC to include a refundable option is likely to provide immediate financial relief to eligible taxpayers, potentially reducing poverty rates and increasing disposable income among lower-income groups.
Business Adjustments:
- Employers may need to reassess their payroll budgets and pricing strategies to accommodate the increased labor costs associated with the higher minimum wage.
- Tipped industries, such as restaurants and hospitality, may face additional challenges in maintaining profitability while ensuring compliance with the new wage laws.
Legal and Compliance Considerations:
- Businesses must stay informed about the upcoming changes and ensure that payroll systems are updated to reflect the new minimum wage rates each year.
- Compliance with both state and federal wage laws will continue to be critical, especially for businesses that operate across state lines or in industries with varying wage requirements.
What is the Current Minimum Wage in Ohio?
As of January 1, 2024, the minimum wage for non-tipped employees in Ohio is set at $10.45 per hour. This rate represents a $0.35 increase from the previous year, reflecting Ohio’s commitment to adjusting wages in line with inflation. It’s important to note that this wage applies specifically to businesses that have annual gross receipts exceeding $385,000.
For businesses meeting this threshold, it is mandatory to comply with the state-mandated minimum wage, ensuring that all non-tipped employees are paid no less than $10.45 per hour for their work. This wage increase is part of Ohio’s broader strategy to ensure that workers’ earnings keep pace with the cost of living, thereby improving the financial well-being of its workforce.
On the other hand, businesses with gross receipts under $385,000 are not required to pay this state minimum wage and may instead pay the federal minimum wage, which remains at $7.25 per hour. This exemption is designed to alleviate the financial burden on smaller businesses, allowing them to maintain operations without the increased costs associated with higher wages.
Tipped Employees
For employees who regularly receive tips as part of their income—such as servers, bartenders, and hairdressers—the minimum wage structure in Ohio is different. As of January 1, 2024, the minimum wage for tipped employees is set at $5.25 per hour.
However, this lower base wage comes with a critical condition: employers must ensure that the combined total of tips and the base wage equals at least $10.45 per hour for each employee. If an employee’s tips do not bring their total earnings to this minimum threshold, the employer is legally required to make up the difference. This provision ensures that tipped employees earn a wage that is comparable to their non-tipped counterparts, thereby safeguarding their income.
This system requires employers to diligently track tips and wages to guarantee compliance with Ohio’s wage laws. Failure to meet these requirements can result in legal consequences, including fines and potential lawsuits, underscoring the importance of accurate record-keeping and payroll management.
By adhering to these wage standards, Ohio aims to strike a balance between supporting businesses in the service industry and ensuring fair compensation for tipped workers. This dual approach helps maintain the financial stability of both employees and employers, contributing to the overall economic health of the state.
‘Pro-Tip’
Track Your Hours: Keep a personal log of your work hours, including start and end times, to ensure your paycheck accurately reflects the time you’ve worked. This can be crucial in resolving any discrepancies with your employer.
Exemptions and Special Cases
Small Businesses:
In Ohio, not all businesses are required to adhere to the state’s minimum wage of $10.45 per hour. Specifically, businesses with annual gross receipts under $385,000 are granted an exemption that allows them to pay their employees the federal minimum wage, which is currently $7.25 per hour. This exemption is designed to help smaller businesses manage labor costs without the financial strain that a higher state-mandated minimum wage might impose.
This exemption recognizes that smaller businesses may operate on tighter margins and that a lower wage floor can help them remain competitive and sustainable. However, even with this exemption, small business owners must remain vigilant about federal wage laws and ensure that they comply with all applicable regulations, including overtime and recordkeeping requirements.
Employees Under 16:
Ohio also has specific provisions for younger workers. Employees under the age of 16 are not subject to the state’s higher minimum wage but are instead covered by the federal minimum wage of $7.25 per hour. This provision takes into account the fact that younger workers are often employed in part-time or seasonal jobs and may not have the same financial responsibilities as older workers.
Employers hiring workers under 16 must be aware of both the wage requirements and any applicable child labor laws, which may include restrictions on the number of hours they can work, the times of day they can work, and the types of jobs they can perform. These regulations are in place to protect young workers from exploitation and to ensure that their employment does not interfere with their education or well-being.
Other Exemptions:
Ohio’s minimum wage laws also include several other specific exemptions for certain categories of workers. These exemptions are designed to address unique employment situations where the standard minimum wage may not be practical or necessary.
Babysitters and Live-In Companions:
- Individuals employed as babysitters or live-in companions are exempt from Ohio’s minimum wage laws if their duties are performed in the employer’s home and do not include housekeeping. This exemption recognizes the informal and personal nature of these roles, where compensation often includes room and board in addition to wages. Live-in companions, who may care for the elderly or convalescing individuals, typically perform tasks that are more about companionship than professional care, further justifying the exemption.
Family Members in Family-Owned Businesses:
- Employees who are family members of the owner and work in a solely family-owned and operated business are also exempt from the state’s minimum wage requirements. This exemption acknowledges the flexibility often found in family businesses, where family members might work more informally, with compensation arrangements that may differ from standard employment practices. For example, a family business may provide compensation in non-monetary forms, such as housing or educational support, which can be more valuable to the employee than a cash wage.
Volunteers and Charitable Workers:
- Individuals who volunteer their services for public agencies, or those who work in a hospital or health institution for charitable purposes without seeking compensation, are not covered by the minimum wage laws. This exemption supports the tradition of volunteerism and charity, where the primary motivation is to contribute to the community or a cause rather than to earn a wage. It also ensures that non-profit organizations and public agencies can continue to benefit from volunteer work without the financial burden of paying minimum wages.
Camp Staff at Non-Profit Organizations:
- Employees of camps or recreational areas for children under 18 years of age, particularly those operated by non-profit organizations, are another group exempt from Ohio’s minimum wage laws. This exemption reflects the seasonal and often temporary nature of camp employment, where staff might receive room, board, and a stipend rather than a full wage. These positions are frequently filled by young adults who gain valuable experience and training in leadership and childcare, which can be seen as part of their compensation.
Additional Considerations:
Employers must be diligent in understanding and applying these exemptions correctly to avoid legal issues. Misclassification of employees or improper application of wage exemptions can lead to significant penalties, including back pay, fines, and damages. It’s essential for businesses to maintain clear and accurate records of employee classifications and wage payments to demonstrate compliance with Ohio’s labor laws.
For those unsure about whether a specific exemption applies, consulting with a legal professional or the Ohio Department of Commerce can provide clarity and help prevent potential violations. By staying informed and compliant, businesses can ensure they are meeting their legal obligations while also supporting the fair treatment of their employees.
‘Pro-Tip’
Continuously Improve Your Skills: Invest in your professional development by taking courses, attending workshops, or obtaining certifications. Continuous learning can increase your value to your employer and open up new career opportunities.
Annual Adjustments and Legal Background
Inflation Adjustment
Ohio’s approach to adjusting its minimum wage is rooted in a unique mechanism designed to keep wages aligned with the cost of living. This adjustment is based on the Consumer Price Index (CPI), a measure of the average change over time in the prices paid by urban consumers for a basket of goods and services. This connection to the CPI ensures that the minimum wage in Ohio is responsive to economic conditions, particularly inflation, which can erode purchasing power.
The foundation for this adjustment process was laid by the 2006 Constitutional Amendment, a significant legislative change approved by Ohio voters. This amendment mandated that the state’s minimum wage be tied to the CPI for the previous year, meaning that as the cost of goods and services rises, so does the minimum wage. This system helps ensure that workers’ earnings maintain their value over time, providing a measure of economic security in the face of rising living costs.
Each year, the Ohio Department of Commerce reviews the CPI data and calculates the necessary adjustment to the state minimum wage. The new rate is then announced and takes effect on January 1 of the following year. This process is automatic, requiring no additional legislative action, which allows the wage rate to adapt swiftly to economic changes.
Recent Increases
The most recent adjustment to Ohio’s minimum wage occurred on January 1, 2024. This increase saw the minimum wage for non-tipped employees rise from $10.10 per hour in 2023 to $10.45 per hour in 2024, reflecting a $0.35 increase. This change was a direct result of the annual inflation adjustment mandated by the 2006 Constitutional Amendment.
The increase from $10.10 to $10.45, though seemingly modest, represents the ongoing commitment to ensuring that wages keep pace with inflation. This adjustment is particularly important for low-wage workers, who are often most vulnerable to the effects of rising prices. By ensuring that wages increase in line with the cost of living, Ohio helps protect the purchasing power of its workforce, allowing them to afford basic necessities without their wages being eroded by inflation.
Legislation Behind the Wage
The 2006 Constitutional Amendment, passed by Ohio voters, was a pivotal moment in the state’s labor history. Before this amendment, minimum wage increases required legislative approval, a process that could be slow and subject to political debate. The amendment changed this by embedding the wage adjustment process into the state constitution, thereby ensuring regular and predictable increases without the need for further legislative intervention.
The amendment ties Ohio’s minimum wage directly to the Consumer Price Index, making the wage rate responsive to real economic conditions. This automatic adjustment mechanism has several implications for both employers and employees:
Predictability for Workers:
- Workers can expect their wages to increase each year, providing a degree of financial stability. This predictability is particularly beneficial for low-income households, which may struggle to make ends meet as the cost of living rises.
Simplicity for Employers:
- Employers benefit from the transparency and predictability of the system. Knowing that the minimum wage will adjust annually based on the CPI allows businesses to plan for labor costs more effectively. Employers can anticipate wage increases and budget accordingly, reducing the likelihood of financial strain due to sudden legislative changes.
Ensuring Fair Compensation:
- By tying wage increases to inflation, the amendment helps ensure that workers receive fair compensation relative to the cost of living. This is particularly important in periods of high inflation, where stagnant wages could otherwise lead to a significant decrease in purchasing power.
Implications for Future Wage Increases
Looking forward, the 2006 amendment ensures that Ohio’s minimum wage will continue to rise annually, in line with the CPI. This means that as long as inflation continues, so too will the increases in the minimum wage. However, it also means that during periods of low inflation, wage increases may be smaller, reflecting the slower rise in the cost of living.
For employers, this means that staying informed about CPI trends is crucial for financial planning. For employees, the amendment provides a level of assurance that their wages will continue to grow, albeit at a pace dictated by broader economic conditions.
Moreover, the amendment’s entrenchment in the state constitution makes it difficult to reverse or alter, providing long-term stability to the wage adjustment process. Any changes to this system would require a new constitutional amendment, which would need to be approved by Ohio voters—a significant barrier to potential reductions in the minimum wage or changes to the adjustment mechanism.
‘Pro-Tip’
Utilize Company Resources: Take advantage of any employee assistance programs, wellness resources, or educational reimbursements your employer offers. These can provide support in both your personal and professional life.
Overtime Pay and Recordkeeping Requirements
Overtime Pay
In Ohio, employers are required to pay overtime wages to employees who work more than 40 hours in a single workweek. The state’s overtime laws mandate that employers must compensate these additional hours at a rate of 1.5 times the employee’s regular hourly wage. This means that if an employee’s regular wage is $10.45 per hour, their overtime wage would be $15.67 per hour for any hours worked beyond the standard 40-hour workweek.
This overtime requirement applies broadly, ensuring that employees are fairly compensated for extra hours worked. The law is particularly important for hourly workers, who often rely on overtime pay to supplement their regular income. It also serves as a deterrent to employers who might otherwise overwork their staff without providing additional compensation.
However, there are special cases where certain employers may be exempt from this overtime requirement. Specifically, businesses with annual gross receipts of less than $150,000 are not required to pay the overtime rate. This exemption recognizes the financial limitations of very small businesses, allowing them to manage their labor costs without the added burden of paying overtime wages. Employers who qualify for this exemption must still comply with the federal minimum wage law and ensure that they are paying at least the standard hourly wage for all hours worked.
For businesses that do exceed the $150,000 threshold, it’s critical to adhere to the state’s overtime regulations. Failure to do so can result in significant legal and financial consequences, including back pay, fines, and potential lawsuits. Employers should also be aware that simply classifying employees as “salaried” does not automatically exempt them from overtime pay—exemptions are determined by specific criteria related to the nature of the job and the employee’s duties.
Recordkeeping
Proper recordkeeping is a cornerstone of compliance with Ohio’s wage and hour laws. The state requires employers to maintain detailed records of their employees’ work and pay, which must be kept for a minimum of three years. This requirement is designed to ensure transparency and accountability, providing a clear and accessible record in the event of an audit, investigation, or dispute.
The key records that employers must maintain include:
Employee Information:
- Name
- Address
- Occupation or job title
Wage Details:
- Rate of pay
- Amount paid to the employee each pay period
- Any overtime earnings, where applicable
Work Hours:
- Hours worked each day
- Total hours worked each week
These records must be comprehensive and accurately reflect the hours worked and wages earned by each employee. Employers are required to make these records available for inspection by the Director of the Ohio Department of Commerce upon request. This means that records should be organized and stored in a manner that allows for quick retrieval and review.
The importance of maintaining accurate records cannot be overstated. Inadequate or inaccurate recordkeeping can lead to significant legal issues, including fines and penalties. In cases where wage disputes arise, such as allegations of unpaid overtime or incorrect wage rates, these records serve as the primary evidence of compliance with the law. Without proper documentation, employers may find it difficult to defend against such claims.
Moreover, Ohio law requires that employers post the most current Ohio Minimum Wage poster in a conspicuous place within the workplace. This poster must be updated annually to reflect any changes to the minimum wage. Failure to display this poster can result in penalties, as it is considered a violation of state labor laws.
‘Pro-Tip’
Stay Ahead of Wage Law Changes: Regularly review state and federal labor law updates to ensure your payroll practices remain compliant. Staying informed can prevent costly legal issues.
Compliance Tips for Ohio Employers
Ensuring compliance with Ohio’s wage and hour laws is essential for all employers, regardless of size. Adhering to these regulations not only protects businesses from legal consequences but also fosters a fair and positive work environment. Below are detailed tips to help Ohio employers stay compliant with state labor laws.
Staying Updated
One of the most critical aspects of compliance is staying informed about the latest changes in wage laws. Ohio’s minimum wage is subject to annual adjustments based on the Consumer Price Index (CPI), which means that the minimum wage may increase each year. Employers must take proactive steps to ensure their payroll systems are updated before these changes take effect.
Update Payroll Systems:
- Why It Matters: Failing to update your payroll systems before the new wage rates take effect can lead to underpaying employees, which may result in costly fines, back pay, and potential lawsuits. Ensuring your payroll system reflects the most current wage rates is essential for accurate employee compensation.
- How to Implement: Set reminders for the end of each year to review the Ohio Department of Commerce’s announcements regarding minimum wage changes. Update your payroll software or manual payroll systems to incorporate the new rates starting January 1st. If you use third-party payroll services, confirm that they are aware of the upcoming changes and will adjust accordingly.
Posting the Latest Ohio Minimum Wage Poster:
- Why It Matters: Ohio law requires that employers display the most current Ohio Minimum Wage poster in a visible location within the workplace. This poster provides employees with essential information about their wage rights and helps ensure transparency. Failing to display the updated poster can result in penalties and may signal non-compliance to regulators.
- How to Implement: Each year, obtain the updated minimum wage poster from the Ohio Department of Commerce’s website or directly from the Division of Industrial Compliance. Post it in a prominent location where all employees can easily see it, such as in break rooms, near time clocks, or in common areas. Ensure that the poster remains in good condition and is replaced immediately if damaged or defaced.
Tracking Hours and Wages
Accurate record-keeping is not just a best practice; it is a legal requirement under Ohio law. Properly tracking hours worked and wages paid is crucial to demonstrate compliance and protect your business in the event of an audit or dispute.
Importance of Accurate Record-Keeping:
- Why It Matters: Inaccurate or incomplete records can lead to significant legal issues, including wage disputes, audits, and potential penalties. Detailed records serve as your primary defense if an employee claims they were not paid correctly. They also ensure that you are complying with overtime rules, minimum wage laws, and other labor regulations.
- How to Implement: Implement a system that accurately tracks the number of hours each employee works per day and per week. This includes not just regular hours but also any overtime worked. Ensure that wage records, including pay rates and amounts paid, are stored securely and are accessible for at least three years, as required by law. Regularly review your records to ensure they are complete and accurate, and address any discrepancies immediately.
Use of Payroll Tools
Leveraging technology can simplify compliance and reduce the risk of errors in tracking and managing employee wages. Payroll tools like TimeTrex can be invaluable in ensuring that you meet all of Ohio’s wage and hour requirements.
- Recommendation of Payroll Tools:
Why It Matters: Managing payroll manually or using outdated systems increases the likelihood of errors, which can lead to non-compliance with wage laws. Automated payroll tools streamline the process, ensuring accuracy in wage calculations, overtime pay, and record-keeping. They also help you stay informed about wage law changes and other compliance requirements.
How to Implement: Consider adopting a payroll tool like TimeTrex, which is specifically designed to help small and medium-sized businesses manage their hourly workforce. TimeTrex offers features such as automatic payroll calculations, which sync employee clock-ins and clock-outs with payroll, ensuring accurate payment of wages and overtime. The tool also provides detailed wage statements and maintains comprehensive records of hours worked, pay rates, and overtime, which can protect your business in the event of an audit or lawsuit.
Compliance Alerts: Tools like TimeTrex also provide proactive compliance alerts, notifying you of upcoming changes to minimum wage laws or other regulatory updates. This feature helps ensure that you never miss an important update, keeping your business compliant with state and federal laws.
Employee Classification: Payroll tools can assist in correctly classifying employees, ensuring that those who are eligible for overtime are compensated accordingly. Misclassification of employees as exempt from overtime can lead to significant legal repercussions, so it’s essential to get it right.
Simplified Record-Keeping: By using a digital payroll system, you can easily store and retrieve employee records, reducing the administrative burden on your HR team. This also helps in maintaining compliance with Ohio’s requirement to keep records for at least three years.
‘Pro-Tip’
Implement Fair Scheduling Practices: Use scheduling tools like TimeTrex to ensure shifts are distributed fairly among employees, taking into account their availability and preferences. Fair scheduling promotes job satisfaction and reduces turnover.
Potential Future Changes: The Push for a $15 Minimum Wage
The discussion around raising the minimum wage in Ohio has gained significant momentum, with various groups advocating for a substantial increase. The current focus is on raising the state’s minimum wage to $15 per hour, a move that could have far-reaching implications for workers, employers, and the economy as a whole.
Current Proposals
There are currently two primary proposals to raise Ohio’s minimum wage to $15 per hour, each taking a different approach in terms of implementation and legal structure.
Constitutional Amendment Proposal:
- Overview: This proposal, spearheaded by the nonprofit organization One Fair Wage and supported by various labor and advocacy groups, seeks to amend the Ohio Constitution to establish a $15 minimum wage. The proposed amendment would increase the minimum wage to $12.75 per hour on January 1, 2025, and then to $15 per hour on January 1, 2026. After reaching $15, the minimum wage would continue to be indexed to inflation, ensuring that it adjusts automatically based on changes in the Consumer Price Index (CPI).
- Timeline: The timeline for this proposal is relatively aggressive, with the full $15 minimum wage being implemented by 2026. The amendment would also gradually phase out the lower minimum wage for tipped employees, ensuring that all workers are eventually covered by the same wage floor.
- Legal Structure: As a constitutional amendment, this proposal would enshrine the $15 minimum wage into Ohio’s Constitution. This would make it difficult to reverse or alter the wage rate, as any changes would require another constitutional amendment, which would need to be approved by Ohio voters.
State Legislation (S.B. 256):
- Overview: This proposal, introduced by Republican State Senator Louis Blessing III, takes a more gradual approach to raising the minimum wage. The legislation would increase the minimum wage to $12 per hour on January 1, 2025, with annual increases until it reaches $15 per hour by January 1, 2028. Like the constitutional amendment, this legislation would also tie future wage increases to inflation.
- Timeline: The timeline under this legislative proposal is more extended, with the $15 minimum wage not being reached until 2028. This slower increase is intended to give businesses, particularly small businesses, more time to adjust to the higher labor costs.
- Legal Structure: As a state law, this proposal is more flexible and could be modified or repealed by future legislation. This provides the legislature with the ability to respond to economic conditions or unintended consequences more quickly than would be possible under a constitutional amendment.
Implications for Tipped Workers
Both proposals would have significant implications for tipped workers, who currently earn a lower minimum wage in Ohio.
Constitutional Amendment Impact:
- The constitutional amendment proposal includes a plan to gradually eliminate the lower tipped minimum wage by 2029. This would mean that tipped employees, who currently earn $5.25 per hour plus tips, would eventually be guaranteed the full $15 minimum wage, regardless of their tips. While this change is intended to protect tipped workers from wage theft and ensure a stable income, it has sparked concern among some workers and employers.
- Potential Effects: Some tipped workers fear that the elimination of the lower tipped wage could lead to a reduction in tipping practices, particularly if employers decide to move to a no-tipping model or if customers feel that tipping is no longer necessary. Employers in industries that rely heavily on tipped workers, such as restaurants and hospitality, may face increased labor costs, which could lead to higher prices for consumers or changes in staffing levels.
State Legislation Impact:
- Under the state legislation proposal (S.B. 256), the tipped minimum wage would remain at half of the non-tipped minimum wage, meaning that by 2028, tipped workers would earn $7.50 per hour plus tips. This maintains the current structure but ensures that tipped workers still benefit from the overall wage increase.
- Potential Effects: This approach allows tipped workers to see an increase in their base pay while still preserving the tipping culture that is prevalent in many service industries. However, it also means that tipped workers would continue to rely on tips to reach or exceed the minimum wage, leaving them vulnerable to fluctuations in tipping behavior.
What to Expect
If either of these proposals is implemented, Ohio employers and employees can expect significant changes in the wage landscape. Here are some potential challenges and outcomes:
Challenges for Small Businesses:
- Small businesses, particularly those with tight margins, may struggle to absorb the increased labor costs associated with a $15 minimum wage. This could lead to a variety of responses, including raising prices, reducing hours, automating certain tasks, or even downsizing staff. Businesses that cannot pass on the costs to consumers may face financial difficulties, potentially leading to closures.
Economic Impact:
- Proponents of the wage increase argue that higher wages will boost consumer spending, as workers have more disposable income. This could stimulate the local economy and create a positive feedback loop of increased demand for goods and services. However, opponents worry that the increased costs for businesses could lead to inflation, as companies raise prices to cover higher wages, which might offset some of the gains for workers.
Impact on Employment:
- The impact on employment is a contentious issue. While some studies suggest that modest increases in the minimum wage do not significantly affect employment levels, others argue that a substantial increase to $15 could lead to job losses, particularly in low-wage industries. Employers may opt for a leaner workforce or invest in automation as a cost-saving measure.
Legal and Legislative Considerations:
- If the constitutional amendment is passed, it would be challenging to reverse, making it a permanent fixture in Ohio’s labor laws. In contrast, the legislative approach offers more flexibility, allowing for adjustments based on the economic climate. Employers and employees should closely monitor the legislative process, as the final outcome could have significant implications for their livelihoods and business operations.
Uncertain Outcomes:
- The outcome of these proposals is uncertain. Even if the state legislature passes the $15 minimum wage law, the constitutional amendment could still be placed on the ballot, leading to a potential conflict between the two measures. The resolution of this conflict would likely depend on voter preferences and the political climate at the time of the vote.
‘Pro-Tip’
Recognize and Reward Employees: Regularly acknowledge the hard work and achievements of your employees through recognition programs, bonuses, or other incentives. Positive reinforcement boosts morale and loyalty.
FAQ: Ohio Minimum Wage and Labor Laws
1. What is the current minimum wage in Ohio for non-tipped employees?
- Answer: As of January 1, 2024, the minimum wage for non-tipped employees in Ohio is $10.45 per hour. This wage applies to employees of businesses with annual gross receipts of more than $385,000.
2. What is the minimum wage for tipped employees in Ohio?
- Answer: The minimum wage for tipped employees in Ohio is $5.25 per hour as of January 1, 2024. Employers must ensure that the total of tips plus the base wage equals at least $10.45 per hour. If tips fall short, the employer is required to make up the difference.
3. How is Ohio’s minimum wage adjusted?
- Answer: Ohio’s minimum wage is adjusted annually based on the Consumer Price Index (CPI). This adjustment is mandated by a 2006 Constitutional Amendment, which ties wage increases to inflation. The new wage rate is announced each year and takes effect on January 1st.
4. Are there any exemptions to the Ohio minimum wage?
Answer: Yes, there are several exemptions:
- Small Businesses: Businesses with gross receipts under $385,000 per year can pay the federal minimum wage of $7.25 per hour.
- Employees Under 16: Workers under the age of 16 are also subject to the federal minimum wage of $7.25 per hour.
- Other Exemptions: Certain employees, such as babysitters, live-in companions, and family members in family-owned businesses, may be exempt from Ohio’s minimum wage laws.
5. What are the overtime pay requirements in Ohio?
- Answer: In Ohio, employees must be paid 1.5 times their regular wage for any hours worked over 40 in a single workweek. This applies to most employees, except those working for businesses with annual gross receipts under $150,000, which are exempt from paying overtime.
6. How long are employers required to keep payroll records in Ohio?
- Answer: Employers in Ohio are required to keep payroll records for a minimum of three years. These records must include detailed information such as employee names, addresses, occupations, wage rates, hours worked, and amounts paid for each pay period.
7. What happens if an employer fails to comply with Ohio’s minimum wage and overtime laws?
- Answer: Employers who fail to comply with Ohio’s wage and hour laws may face legal penalties, including fines, back pay owed to employees, and potential lawsuits. Non-compliance can also damage a business’s reputation and lead to increased scrutiny from regulatory agencies.
8. Are there any proposed changes to the Ohio minimum wage?
Answer: Yes, there are current proposals to raise Ohio’s minimum wage to $15 per hour:
- Constitutional Amendment Proposal: This would increase the wage to $15 by 2026 and phase out the lower tipped wage.
- State Legislation (S.B. 256): This proposal would gradually increase the wage to $15 by 2028, while maintaining a lower tipped wage at half the regular minimum wage.
9. How will the proposed $15 minimum wage affect tipped employees?
- Answer: Under the constitutional amendment, the tipped minimum wage would be phased out by 2029, requiring employers to pay tipped employees the full $15 per hour. The state legislation, however, would maintain the tipped wage at half the non-tipped minimum wage, meaning tipped employees would earn $7.50 per hour plus tips by 2028.
10. How can employers stay compliant with Ohio wage laws?
Answer: Employers can stay compliant by:
- Updating Payroll Systems: Ensure payroll systems reflect the latest wage rates before they take effect.
- Posting the Latest Minimum Wage Poster: Display the most current Ohio Minimum Wage poster in a visible location.
- Accurate Record-Keeping: Maintain detailed records of hours worked and wages paid for at least three years.
- Using Payroll Tools: Tools like TimeTrex can help automate payroll calculations, track hours, and ensure compliance with wage laws.
11. Is Ohio’s minimum wage different from the federal minimum wage?
- Answer: Yes, Ohio’s minimum wage is currently higher than the federal minimum wage. As of January 1, 2024, Ohio’s minimum wage is $10.45 per hour for non-tipped employees, while the federal minimum wage remains at $7.25 per hour. However, some small businesses and certain employees are permitted to be paid the federal rate.
12. What should employers do if there are conflicting wage laws?
- Answer: When state and federal wage laws conflict, employers must follow the law that provides the highest wage or greatest protection to the employee. In Ohio, this typically means adhering to the state’s higher minimum wage unless an exemption applies.
13. Will the $15 minimum wage apply to all businesses in Ohio?
- Answer: If the $15 minimum wage is implemented, it will apply to most businesses. However, small businesses with gross receipts under $385,000 per year may still be allowed to pay the federal minimum wage, depending on the final details of the law or amendment passed.
14. What resources are available to help Ohio employers comply with wage laws?
- Answer: Employers can access resources such as the Ohio Department of Commerce’s website, legal counsel, and payroll management tools like TimeTrex. These resources can provide guidance on compliance, updates on legal changes, and tools for accurate payroll processing.
15. How can employees ensure they are being paid correctly?
- Answer: Employees should regularly review their pay stubs, keep track of their hours worked, and be aware of the current minimum wage rates. If they believe they are being underpaid, they can file a complaint with the Ohio Department of Commerce or seek legal advice.
Disclaimer: The content provided on this webpage is for informational purposes only and is not intended to be a substitute for professional advice. While we strive to ensure the accuracy and timeliness of the information presented here, the details may change over time or vary in different jurisdictions. Therefore, we do not guarantee the completeness, reliability, or absolute accuracy of this information. The information on this page should not be used as a basis for making legal, financial, or any other key decisions. We strongly advise consulting with a qualified professional or expert in the relevant field for specific advice, guidance, or services. By using this webpage, you acknowledge that the information is offered “as is” and that we are not liable for any errors, omissions, or inaccuracies in the content, nor for any actions taken based on the information provided. We shall not be held liable for any direct, indirect, incidental, consequential, or punitive damages arising out of your access to, use of, or reliance on any content on this page.
About The Author
Roger Wood
With a Baccalaureate of Science and advanced studies in business, Roger has successfully managed businesses across five continents. His extensive global experience and strategic insights contribute significantly to the success of TimeTrex. His expertise and dedication ensure we deliver top-notch solutions to our clients around the world.
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