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Your Guide to the Arkansas Minimum Wage

Nothing in this article constitutes legal advice. Please consult a tax attorney or tax professional if you have questions about minimum wage compliance.
Mary Hohn, Writer

Arkansas voters passed a ballot measure for a series of minimum wage increases that started in 2018. The Arkansas Minimum Wage Act increased wages from $9.25 in 2019 and will increase them again in 2021.

To make sure you’re up to date on the upcoming increases, we’ve put together this guide for business owners on the current minimum wage in Arkansas.

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What is the current minimum wage in Arkansas?

Effective January 1, 2020, the Arkansas minimum wage is $10, $2.75 higher than the federal rate of $7.25. The wage increase was approved in the 2018 November election, and it will boost wages for an estimated 300,000 workers — about a quarter of the state’s workforce.

The current Arkansas minimum wage applies to most employees:

  • Tipped employees, who must be paid a minimum of $2.63 per hour. This amount plus tips must equal at least the state minimum wage.
  • Full-time students, who can be paid 85 percent of the Arkansas minimum wage if they are working up to 20 hours per week.
  • Employees considered exempt under the Fair Labor Standards Act (FLSA) may be exempt from paying the highest minimum wage.
  • Overtime, must be paid to most employees who work over 40 hours per week. There are some special provisions to overtime in Arkansas for workers like police, fire departments, hospitals, and residential care facilities.

Are there plans to change the minimum wage beyond 2020?

Yes. As part of the ballot measure passed in November 2018, known as Issue 5, the state minimum wage will increase one more time in 2021. The minimum wage will increase to $11, which is still under the living wage in Little Rock.

Considering the Arkansas minimum wage increase, it’s important to take proactive measures to ensure your business is prepared.

How should small business owners prepare for changes to the minimum wage?

As an employer in Arkansas, you may be accustomed to making minimum wage increase adjustments already. In case you need some tips, we recommend the following:

  • Evaluate your staffing: Review your monthly sales and overhead costs to determine if your current staffing levels are appropriate. Based on your monthly cash flow, decide if you need to make adjustments to your hiring plan. If you have a seasonal business, for example, it might make sense to hire contract employees instead of full-time employees.
  • Use best hiring practices: To make sure you find the right employees, use best hiring practices and ask smart interview questions to thoroughly vet candidates. Once you hire employees, focus on retention. The hiring process is time-consuming and expensive, but if you take time up front for hiring and prioritize employee retention, you’ll save money in the long run.
  • Upgrade your technology: If you automate time-consuming and tedious tasks, such as automatic payroll, you can streamline operations and free up time to focus on issues like staffing and growing your business. Square payroll software offers small business pricing to get any size business set up with easy ways to pay your employees. There are even custom payroll features to fit your unique needs.
  • Set yourself up for success: If you’re just starting your business, use our small business resources to learn how to navigate decisions during COVID-19 and how to avoid common payroll mistakes like payroll mishaps. Understand how to handle payroll for salaried employees versus hourly workers with ease.

While these are helpful guidelines to follow, make sure your business is prepared and stays in compliance, you should discuss Arkansas minimum wage laws with your accountant and lawyer.

Mary writes for Square, where she covers topics that affect business owners — from starting a business to growing a business — and the tools and technology that help them succeed.