What is the Minimum Wage in Kentucky?

Minimum Wage in Kentucky Overview

The minimum wage in Kentucky is currently set at $7.25 per hour, which aligns with the federal minimum wage rate. This rate has been in place since 2009, when the federal government last adjusted the nationwide minimum wage. Kentucky does not have a state-specific minimum wage that exceeds the federal rate, meaning businesses in the state are required to comply with the federal wage standard.

Kentucky’s minimum wage applies to most employees, including full-time and part-time workers. However, some exemptions and special cases may affect whether a worker is entitled to this base wage, which will be covered later in this blog. For example, for tipped employees, such as restaurant workers, Kentucky employers are allowed to pay a lower base wage, provided the worker’s tips bring their total earnings up to the full minimum wage.

Understanding US Minimum Wage Tiers

The U.S. federal minimum wage is set at $7.25 per hour, which has remained unchanged since 2009. States can choose to adopt this federal minimum or implement their own state-specific rates that are higher. However, Kentucky follows the federal minimum wage of $7.25 per hour, which applies to most workers across the state.

The United States has a tiered system for minimum wages, where individual states, cities, and counties can set rates higher than the federal minimum. For instance, states like California and New York have set their minimum wages significantly above the federal level. However, Kentucky has opted to align with the federal standard, meaning that it does not have a higher state minimum wage like some other states do.

For employers in Kentucky, this means that the minimum wage requirements are the same across the entire state, as there are no local jurisdictions that mandate a higher wage.

Kentucky Minimum Wage for Workers with Tips

In Kentucky, tipped employees, such as servers and bartenders, are subject to a different minimum wage structure compared to non-tipped workers. The base wage for tipped employees is $2.13 per hour, which is the federal standard. However, the law mandates that if a tipped employee's total hourly earnings, including tips, do not meet the full minimum wage of $7.25 per hour, the employer is required to make up the difference.

Employers must closely track the tips earned by employees to ensure compliance with this requirement. Failure to do so can result in penalties and back payments.

The lower base wage for tipped workers is common across many U.S. states, but the key point is that these employees must always earn at least the full minimum wage when tips are factored in. In Kentucky, this regulation applies to all workers who regularly receive more than $30 per month in tips.

Kentucky Minimum Wage History

Kentucky’s minimum wage has been tied to the federal rate of $7.25 per hour since 2009. While the state has not passed its own legislation to increase the minimum wage beyond the federal level, there have been attempts at the local level to raise wages in certain cities.

In 2015, both Lexington and Louisville decided to raise their minimum wages above the federal rate. Louisville’s minimum wage increased to $7.75 per hour on July 1, 2015, and then to $8.20 on July 1, 2016. However, these local wage hikes were short-lived. On October 20, 2016, the Kentucky State Supreme Court ruled that cities do not have the authority to set their own minimum wage rates. As a result, the minimum wage in Louisville and Lexington reverted back to the federal minimum of $7.25 per hour.

Exemptions for Minimum Wage

While the standard minimum wage in Kentucky is $7.25 per hour, there are several exemptions that apply to specific types of workers under both Kentucky and federal law. These exemptions allow certain employees to be paid less than the standard minimum wage in particular circumstances.

Under 20 Training Wage

Federal law permits employers in Kentucky to pay a new employee under the age of 20 a training wage of $4.25 per hour for the first 90 days of their employment. After this period, the employee must be paid the full minimum wage of $7.25 per hour.

Student Minimum Wage

Full-time high school or college students working part-time may be paid 85% of the Kentucky minimum wage, which comes out to $6.16 per hour. This rate applies for up to 20 hours of work per week in jobs like work-study programs at universities.

Tipped Minimum Wage

As mentioned, tipped employees, such as restaurant workers, may be paid a lower base wage of $2.13 per hour. However, the total earnings, including tips, must equal or exceed $7.25 per hour. If the employee's tips do not make up the difference, the employer is required to pay the shortfall to ensure the worker earns at least the full minimum wage.

Best Practices and Tips for Compliance

Ensuring compliance with Kentucky's minimum wage laws is essential for employers to avoid penalties and maintain a positive workplace. Here are some best practices and tips for staying compliant with minimum wage regulations in Kentucky.

Regularly Review Wage Laws

Minimum wage laws can change over time, and it’s important to stay up to date with both federal and state requirements. Kentucky follows the federal minimum wage of $7.25 per hour, but employers should monitor any potential changes to wage laws at the state or federal level by regularly consulting official resources like the Kentucky Labor Cabinet or the U.S. Department of Labor.

Accurate Recordkeeping

Maintain detailed and accurate records of employee hours worked, wages paid, and any tips earned for tipped employees. This is essential not only for compliance with wage laws but also for resolving potential disputes and ensuring that all workers are paid fairly. According to federal law, records of wages and hours must be kept for at least three years.

Understand Exemptions and Special Cases

Make sure you understand the specific exemptions for workers, such as tipped employees, students, and training workers under 20 years old. Kentucky allows lower wages for certain categories of workers, but strict guidelines apply to ensure employees ultimately receive at least the minimum wage where applicable.

Stay Transparent with Employees

Open communication with your staff about how wages, tips, and overtime are calculated can help prevent misunderstandings and build trust. Provide employees with clear, itemized pay stubs that show all deductions, tips, and hours worked.

How to Offer Fair Wages to Your Restaurant Staff

Providing fair wages to your restaurant staff can be a challenge, especially when operating on tight margins. Here are some ways to boost profitability so you can provide fair wages to your team.

Optimize Your Menu

Conduct a menu audit to identify your most profitable items and focus on promoting those. By removing or reworking low-margin or underperforming dishes, you can streamline operations, reduce waste, and increase the profitability of each order. Menu engineering techniques, such as using visual hierarchy to guide customer choices, can also encourage guests to choose higher-margin items.

Offer Upselling and Add-Ons

Train your staff to upsell items, such as appetizers, desserts, or beverages, which can increase the average check size. Offering add-ons like extra toppings, premium ingredients, or larger portions for a slight additional cost can also boost revenue without significantly increasing labor or food costs.

Strategically Increase Menu Prices

One of the most direct ways to increase profits is by raising menu prices. However, this must be done carefully to avoid losing customers. Start by adjusting prices on high-demand or high-margin items, or consider implementing small, incremental increases across the menu. Highlight the quality of ingredients or unique aspects of your dishes to justify the higher prices to customers.

Leverage Special Events and Promotions

Hosting special events, such as themed dining nights or happy hours, can attract more customers during typically slower periods. Promotions like prix fixe menus or bundled meal deals can increase foot traffic and sales, allowing you to generate additional revenue.

Increase Online Ordering Sales

Expanding your online ordering offerings with food delivery apps can be a significant revenue driver. Optimize your menu for delivery by focusing on popular items that travel well and have high margins.

Focus on Customer Retention

It’s more cost-effective to retain existing customers than to acquire new ones. Use strategies such as loyalty programs and email marketing to keep customers engaged with special offers and updates.

Additional Kentucky Minimum Wage Laws

In addition to complying with minimum wage, Kentucky employers must also follow other important laws related to minimum wage.

Kentucky Overtime Minimum Wage

Employers are required to pay 1.5 times the employee’s regular hourly wage for any hours worked over 40 in a workweek. This mirrors federal Fair Labor Standards Act (FLSA) rules and applies to all non-exempt employees in Kentucky.

Kentucky Minimum Wage & Labor Law Posters

Employers must display an approved Kentucky minimum wage poster in visible areas within the workplace. These posters outline important information on minimum wage, overtime, and employee rights, ensuring transparency and legal compliance. You can access the required and optional Kentucky labor law posters here.

Upcoming Kentucky Minimum Wage Adjustments

There are no scheduled increases to Kentucky’s minimum wage currently. However, minimum wage adjustments are a frequent topic at both the state and national levels.

Should the federal minimum wage be increased, Kentucky would be required to comply with the new federal standard, as the state minimum wage cannot be lower than the federal rate.

Restaurant owners should stay informed about potential changes to the minimum wage, as an increase could impact labor costs and overall business expenses. Preparing for possible wage increases by optimizing operations and pricing strategies can help mitigate the financial impact of a minimum wage increase.

Minimum Wage in Kentucky FAQs