Understanding Colorado’s Minimum Wage

Small business owners in the Centennial State know how important it is to stay up to date on minimum wage regulations. You want to make sure you’re in compliance, of course. But staying aware of upcoming changes also lets you better plan for the future of your business.

That’s why we put together this quick guide with information you should know about the Colorado minimum wage.

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What is the minimum wage in Colorado?

The Colorado minimum wage increase in 2020 brought wages up to $12 per hour, which is $4.75 higher than the federal minimum wage.

If you have tipped employees, no more than $3.02 per hour in tips can be used to offset the minimum wage. So, if an employee’s tips combined with the employer’s cash wage of at least $8.98 per hour do not equal $12 an hour, the employer must make up the difference in cash wages.

For those who work overtime in Colorado, the minimum wage is $18 for every hour worked over 40 in a typical work week (any seven consecutive work days).

Keep in mind that counties, cities, and towns may have their own minimum wage laws. The Denver, Colorado minimum wage, for instance, is $12.85 per hour and will increase to $14.77 an hour on Jan. 1, 2021, $15.87 an hour on Jan. 1, 2022, and yearly increases based on the Consumer Price Index after 2022. Be sure to check which local wage laws may apply to you.

Are there plans to change the minimum wage?

After Colorado’s Amendment 70 went into effect January 1, 2017, every January 1, the minimum wage increased until it reached $12 per hour in January 2020. After that, it will be adjusted annually for cost of living increases, as measured by the Consumer Price Index used for Colorado. The state Department of Labor and Employment has proposed increasing the 2021 minimum wage in Colorado to $12.32 per hour, and for tipped employees, $9.30 per hour.

Date Minimum Wage
January 1, 2017 $9.30
January 1, 2018 $10.20
January 1, 2019 $11.10
January 1, 2020 $12.00

The same goes for the minimum wage for tipped employees. It’s $7.18 in 2018. It will rise by $0.90 to $8.08 in 2019 and $8.98 in 2020.

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

Small business owners should be used to the Colorado minimum wage increase, as the rate has been gradually increasing nearly every year since 2007.

Still, the minimum wage has increased more in some years than in others. For example, it rose just eight cents between 2015 and 2016, but 99 cents between 2016 and 2017. The Colorado minimum wage increased another 90 cents annually in 2019 and 2020, and is set to raise 32 cents in 2021, so business owners should run their numbers to see how the new rates will affect their bottom line, and figure out if they will need to adjust staffing or prices.

Here are some other steps you can take to make sure your business is ready for anything:

  • Evaluate your staffing: Take a look at your hourly, weekly, and monthly sales to determine if your current staffing levels are appropriate. Maybe you do need more full-time employees. Or maybe your increases in sales are confined to certain times of year and you should consider hiring seasonal help.
  • Hire the best: Hiring the right people is always important, but doubly so when you operate a small business. So take your time and cast a wide net when recruiting new employees. And once you have your team in place, make employee retention a priority by offering them a path to growth and development and by making your business an attractive place to work.
  • Upgrade your technology: When you streamline complicated, time-consuming aspects of management with tools like automatic payroll, you can spend more time focusing on issues like staffing and growing your business. Square Payroll software includes custom payroll features for your specific business needs, and small business pricing helps keep your costs down. Square also offers small business resources to help you navigate things like COVID-19 challenges and how to get a free EIN.

While these guidelines help make sure your business is prepared and stays in compliance, it’s also advisable to discuss Colorado minimum wage laws with your accountant and lawyer.