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Nothing in this article constitutes legal advice. Please consult a tax attorney or tax professional if you have questions about minimum wage compliance.
At the beginning of 2020, a minimum wage increase went into effect for South Dakota. As a small business owner, it’s essential that you stay up to date on the South Dakota minimum wage requirements to make sure you’re compliant.
To help you stay on top of the latest, here’s a guide to minimum wage requirements in the Mount Rushmore State.
What is the minimum wage in South Dakota?
The minimum wage in South Dakota increased to $9.45 on January 1, 2021, up from $9.30 per hour the previous year. This is $2.20 more than the federal minimum wage. The minimum wage applies to most South Dakota employees, but there are some exemptions, including:
- Tipped employees: Employers can take a “tip credit” of up to 50 percent of the state minimum wage of $9.45, meaning they must pay tipped employees a minimum of $4.72 per hour. However, if tipped employees don’t make enough in tips to earn at least the state minimum wage, employers must make up the difference.
- Minors: For employees under the age of 20, South Dakota allows a training minimum wage of $4.25 per hour for their first 90 days of employment.
- Full-time and vocational students who work part-time can be paid 85 percent of the minimum wage for up to 20 hours of work per week at certain employers (such as work-study programs at universities).
- Employees considered exempt under the Fair Labor Standards Act (FLSA).
Keep in mind that some counties, cities, and towns may have their own minimum wage laws. Be sure to check what local wage laws may apply to you.
Minimum wage in South Dakota
|January 1, 2018||$8.65|
|January 1, 2019||$9.10|
|January 1, 2020||$9.30|
|January 1, 2021||$9.45|
|January 1, 2022||$9.95|
|January 1, 2023||TBD|
Are there plans to change the minimum wage beyond 2022?
Yes. As part of the South Dakota minimum wage increase, the rate is adjusted by any increase in the cost of living, as measured by the Consumer Price Index. For 2022, South Dakota will increase its minimum wage to $9.95 per hour for non-tipped workers, a $0.50 increase year over year. Employers must pay tipped employees no less than $4.75 (or no less than 50 percent) of the minimum wage in South Dakota.
As an employer, you should expect that the minimum wage will increase beyond 2022. While a lot of states have set forth a plan to reach a $15 minimum wage within the decade, South Dakota has not yet passed a bill proposed to reach this same goal. Even so, the state of South Dakota continues to gradually increase in line with inflation and the cost of living.
How should small business owners prepare for changes to the minimum wage?
Knowing that the South Dakota minimum wage may continue to increase, now’s the time to take stock of your business’ financial health. By doing that, you can determine if you need to make budget adjustments. Not only that, but you can take other steps to ensure your business is prepared for minimum wage changes, including the following:
- Review your staffing plan: Evaluate your monthly sales and expenses to see if you need to adjust your staffing plan. If necessary, find ways to streamline your labor costs. For example, if you have a seasonal business, consider hiring contract employees during your busy season and operate with fewer full-time employees year round. If your business is new, you can get a free EIN so you can begin hiring and stay compliant.
- Make smart hires (and keep them): As you probably know, the hiring process is time-consuming and expensive. Make it worthwhile by using best hiring practices. Once you’ve hired the right people, make retention a priority by taking these steps.
- Upgrade your technology: Consider automating time-consuming tasks like payroll to save time and money. Square’s small business payroll software has loads of features, but it’s still easy enough that you can learn how to do payroll yourself and avoid common payroll mistakes.
While these are helpful guidelines to follow, to make sure your business is prepared and stays in compliance, you should discuss South Dakota’s minimum wage laws with your accountant and lawyer.