The minimum wage is the minimum amount of money per hour that must be paid to all employees—with some restrictions by type of industry. The minimum wage is set by the federal government, though it can be overridden by local law with a higher minimum wage requirement. Consult with your state wage enforcement division to determine the local rate.

To determine if an employer is paying at least the minimum wage, summarize all forms of compensation earned during a workweek and divide it by the number of hours worked. The most common forms of compensation include base wages, commissions, shift differentials, piece-rate pay, and performance bonuses. If the calculation results in an average rate that drops below the minimum wage, then the employer must pay the difference between the actual rate paid and the minimum wage.

Example. The Close Call Company, which specializes in making rush deliveries, pays its delivery staff at a rate of $8 per delivery made. In the last week, one employee completed 25 deliveries, which entitled him to $200 in wages. However, because the minimum wage of $5.15 for the 40 hours worked should have entitled him to a base wage of $206, the company must pay him an additional $6 in order to be in compliance with the law.