Millions of Workers Receive Another Pay Boost on January 1, 2025
In 2024, 25 U.S. states and 38 cities and counties raised the minimum wage. Well, it happened again.
Beginning January 1, 2025, 21 states increased their minimum wage. The federal minimum wage has remained at $7.25 since 2009 but state lawmakers across the U.S. have increased local minimum wages to address for the ever increasing cost of living.
From Alaska to Washington State, minimum wage increases at the state level will bring payroll budgets to the forefront, with some states (Hello Nebraska and Missouri!) raising minimum wages rising by $1 or more in 2025.
| State | 2024 State Minimum Wage | 2025 State Minimum Wage |
| Alaska | $11.73 | $11.91 |
| Arizona | $14.35 | $14.70 |
| California | $16.00 | $16.50 |
| Colorado | $14.42 | $14.81 |
| Connecticut | $15.69 | $16.35 |
| Delaware | $13.25 | $15.00 |
| Illinois | $14.00 | $15.00 |
| Maine | $14.15 | $14.65 |
| Michigan | $10.33 | $10.56 |
| Minnesota | $10.85 | $11.13 |
| Missouri | $12.30 | $13.75 |
| Montana | $10.30 | $10.55 |
| Nebraska | $12.00 | $13.50 |
| New Jersey | $15.13 | $15.49 |
| New York (NYC, Long Island, Westchester) | $16.00 | $16.50 |
| New York (remainder of state) | $15.00 | $15.50 |
| Ohio | $10.45 | $10.70 |
| Rhode Island | $14.00 | $15.00 |
| South Dakota | $11.20 | $11.50 |
| Vermont | $13.67 | $14.01 |
| Washington | $16.28 | $16.66 |
Some of the minimum wage increases are more substantial than others, if you are operating in any of the above states, be sure to follow your local laws when it comes to overtime pay for non-exempt employees. Remember, the calculation for overtime pay is an employee’s hourly rate multiplied by 1.5.
How Minimum Wage Increases Impact Pay Transparency, Equity, and Compliance
When minimum wages go up, it sets a new baseline for what employees expect to be paid. And let’s be honest—most workers are aiming for more than just the bare minimum. These increases shine a spotlight on pay transparency, and organizations need to be prepared to have those conversations.
Watch Out for Pay Compression
A big challenge with minimum wage increases is how they affect pay equity. When new hires come in at the higher minimum wage, their pay might land uncomfortably close to (or even equal to) what more experienced employees are earning. This is called pay compression, and it’s a recipe for frustration among your team. To keep things fair, it’s a good idea to review pay structures and adjust as needed.
Remote Workers and Minimum Wage Rules
Think these changes don’t apply to you because your state isn’t raising the minimum wage? Think again. If you hire remote workers, you’re on the hook to pay them at least the minimum wage where they live, not where your company is based.
For example, let’s say your company is in Dallas, Texas, where the minimum wage is $7.25/hour, but you hire a remote worker in Connecticut, where it’s $16.35/hour. You can’t pay that worker the Texas rate—by law, you need to meet the higher Connecticut wage.
And it doesn’t stop there—localities with their own wage increases can make things even more complicated.
California’s Patchwork of Minimum Wage Laws
California takes it up a notch with local minimum wages that go beyond the state’s $16.50/hour rate. Some cities have their own rules, and employers need to keep up to ensure compliance.
Here are the cities in California that have a minimum wage increase above that set by the state.
| City | 2025 Min. Wage |
| Belmont | $18.30 |
| Burlingame | $17.43 |
| Cupertino | $18.20 |
| Daly City | $17.07 |
| East Palo Alto | $17.45 |
| El Cerrito | $18.34 |
| Foster City | $17.39 |
| Half Moon Bay | $17.47 |
| Hayward | $17.36 |
| Los Altos | $18.20 |
| Menlo Park | $17.10 |
| Mountain View | $19.20 |
| Novato | $17.27 |
| Oakland | $16.89 |
| Palo Alto | $18.20 |
| Petaluma | $17.97 |
| Redwood City | $18.20 |
| Richmond | $17.77 |
| San Carlos | $17.32 |
| San Diego | $17.25 |
| San Jose | $17.95 |
| San Mateo | $17.95 |
| San Mateo County | $17.46 |
| Santa Clara | $18.20 |
| Santa Rosa | $17.87 |
| Sonoma | $18.02 |
| South San Francisco | $17.70 |
| Sunnyvale | $19.00 |
| West Hollywood | $19.65 |
Here’s a real-life example: Imagine you run a restaurant chain based in Sacramento, California, and you’re looking to hire a line cook for your location in Petaluma. California’s state minimum wage is $16.50/hour, and Sacramento doesn’t have a local minimum wage. Simple enough, right?
But here’s the catch: since the line cook will be working in Petaluma, the Sacramento-based company has to pay at least Petaluma’s minimum wage, which is $17.97/hour. The rule is clear—the wage must match the location of the worker, not the headquarters. Starting to make more sense now?
Other Cities Raising Their Minimum Wages Above State Levels
California isn’t the only state where cities are setting higher minimum wages than the state requires. As of January 1, 2025, several municipalities across the U.S. raised their local minimum wages above their state minimums. Check out the chart below for details on where these changes are happening.
| Location | 2025 Min. Wage |
| Flagstaff, AZ | $17.85 |
| Tuscon, AZ | $15.00 |
| Boulder, CO | $15.57 |
| Boulder County, CO | $16.57 |
| Denver, CO | $18.81 |
| Edgewater, CO | $16.52 |
| Portland, ME | $15.50 |
| Rockland, ME | $15.50 |
| Howard County, ME | $16.00 |
| Minneapolis, MN | $15.97 |
| St. Paul, MN | $15.97 |
| La Cruces, NM | $12.65 |
| Bellingham, WA | $17.66 |
| Burien, WA | $19.66 |
| King County, WA | $20.29 |
| Renton, WA | $20.90 |
| SeaTac, WA | $20.70 |
| Seattle, WA | $20.76 |
| Tukwila, WA | $21.10 |
The $15 Minimum Wage: A Growing Reality
Right now, about one-third of all workers live in states where the minimum wage is at least $15/hour, and this number is only going to grow. If your organization isn’t already preparing for this shift, now’s the time to start.
Why This Matters for Your Pay Structure
As more states adopt higher minimum wages, businesses should take a closer look at their pay structures. It’s not just about keeping up with the law—it’s about ensuring fairness and avoiding pay compression. Adjusting pay ranges and addressing potential equity issues will go a long way in keeping your employees happy and your operations running smoothly.
Attracting and Retaining Top Talent
For organizations in states where the minimum wage is still $7.25/hour, staying competitive in the talent market can be a real challenge. Sure, paying the legal minimum keeps you compliant, but is that enough to attract and keep the best workers? Probably not. If you want to stand out and build a strong team, it’s worth revisiting your compensation philosophy. Today’s workforce expects more, and offering fair, competitive pay can make all the difference.
Aligning Strategy with Change
Meeting minimum wage requirements isn’t just about ticking a compliance box. It’s about adopting a compensation philosophy that values fairness, rewards experience, and invests in your people. This approach not only helps you retain great employees but also positions your organization to attract top talent. Ready to align your pay strategy with the new minimum wage requirements? Start by pricing your jobs and building ranges that reflect both legal requirements and competitive market trends. It’s the first step toward creating a fair and forward-thinking pay strategy.