U.S. Minimum Wage Increase 2026: New Hourly Pay Rates

U.S. Minimum Wage Increase 2026: What Changes on January 27

Several jurisdictions across the United States update minimum wage rates at the start of the year. For 2026, January 27 is the effective date for specific changes in some states and localities. Employers must confirm which rates apply to their workers and adjust payroll before the first pay period that includes the date.

This article outlines how to find new hourly pay rates, steps for payroll compliance, and practical examples to help implement changes without errors.

Which employers are affected by the U.S. Minimum Wage Increase 2026

Federal, state, and local rules can all apply at once. The highest applicable rate—federal, state, or municipal—governs the minimum an employer must pay an employee for hours worked.

Most private employers and many public employers are covered. Exemptions exist for certain workers, apprentices, and tipped employees. Check official notices for your jurisdiction.

How to find New Hourly Pay Rates Effective January 27

Use authoritative sources to confirm rates. Rely on official labor department websites rather than media summaries.

• Visit the U.S. Department of Labor website for federal guidance.
• Check your state labor department or wage and hour office for state rates and updates.
• Look up city or county ordinances if you operate in localities with separate minimum wages.

Payroll steps to implement New Hourly Pay Rates Effective January 27

Advance planning prevents compliance gaps. Start by auditing current pay practices and preparing payroll adjustments at least two weeks before the effective date.

Key steps include updating payroll software, recalculating budgeted labor costs, and communicating changes to staff and accounting teams.

Update payroll systems and recordkeeping

Ensure your payroll provider or in-house software reflects the new base pay. Confirm that timekeeping systems record hours that cross the effective date correctly.

Maintain documentation of rate changes, effective dates, and notices to employees for your records.

Calculating pay and overtime under the new hourly rates

When the hourly base rate changes, recalculate overtime thresholds and premium pay. Overtime pay is typically based on the employee’s regular rate of pay, which may increase when the base hourly rate rises.

• If an employee works overtime in a pay period that includes Jan 27, compute overtime using the new regular rate for hours worked after the rate change where required.
• Check whether you must apply the increased rate retroactively to hours worked after the effective date but before payroll was processed.

Tipped employees and exemptions

Tipped employees often have a lower direct cash wage supplemented by tips. Verify the tipped minimum in your state and employer tip-credit rules.

If the tipped credit does not cover the full new minimum, the employer must make up the difference to ensure the employee receives at least the required hourly rate after tips.

Communicating the U.S. Minimum Wage Increase 2026 to staff

Clear communication reduces confusion and morale issues. Explain the timing of pay changes and any effects on scheduling or benefits.

Provide a written notice that includes the effective date (January 27), the new hourly rates that apply, and contact information for payroll questions.

Case study: Small cafe adjusting to New Hourly Pay Rates Effective January 27 (Example)

This brief example shows practical steps for a small employer. The numbers below are illustrative and based on a hypothetical local increase.

Cafe A has five hourly staff. Their current minimum payable wage is $11.00. On Jan 27 the local minimum increases to $12.50.

• Step 1 — Audit: The owner lists all hourly staff and their scheduled hours for the pay period covering Jan 27.
• Step 2 — Update payroll: Payroll software is set to pay $12.50 for hours worked on or after Jan 27 and $11.00 for earlier hours in the same period.
• Step 3 — Notify staff: The owner provides a written notice explaining the effective date and the new hourly rate.
• Step 4 — Budget: The owner revises weekly labor budgets to reflect the increased cost and adjusts scheduling where necessary.

Outcome: Payroll processed correctly with clear records showing the split-hour calculation for the pay period that includes Jan 27.

Quick checklist: Compliance steps before January 27

• Confirm the exact new hourly rates for federal, state, and local levels.
• Update payroll software and timekeeping rules.
• Recalculate overtime and tipped employee pay where needed.
• Notify employees in writing about the rate change and effective date.
• Keep records of the new rates and notices for at least the minimum retention period required by law.

Final notes on the U.S. Minimum Wage Increase 2026

Because wage rules vary by location, accurate compliance requires checking multiple sources and acting early. Use the steps above to prepare your payroll and reduce the risk of wage violations or employee confusion.

If you have complex payroll situations, such as multi-state employees, salaried-exempt conversions, or collective bargaining agreements, consult a labor attorney or payroll specialist before Jan 27.