What You Need to Know About Iowa’s 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.

Small business owners in Iowa know how important it is to stay up to date on minimum wage regulations. Naturally, you want to make sure you’re complying, 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 some key information you need to know about the Iowa minimum wage.

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What is the minimum wage in Iowa in 2023?

The minimum wage in Iowa is $7.25. This is the same as the federal minimum wage, which has not changed since July 2009.

There are some exceptions to the $7.25 minimum wage:

  • Iowa employers can pay a new employee who is under 20 years of age a training wage of $4.25 per hour for the first 90 days of employment.

  • Some employers can pay full-time high school or college students 85% of the Iowa minimum wage (or $6.16 per hour) for up to 20 hours of work per week at certain jobs, like work-study programs at universities.

  • Employers can take a tip credit (up to $2.90 per hour) for employees who make more than $30 in tips per month. With a tip credit, employers can pay a lower cash wage of $4.35. However, general wages plus tips must equal at least $7.25 per hour.

  • There is also an exception for employees who are considered exempt under the Fair Labor Standards Act (FLSA).

  • Federal contractor employees must be paid a minimum wage of $12.15 per hour, effective Jan. 1, 2023.

  • Overtime in Iowa also follows the federal minimum wage laws, at $10.88 per hour for any hours over 40 worked in a week.

Will the Iowa minimum wage change beyond 2023?

There is currently no legislation being considered at the state level that would raise Iowa’s minimum wage above the federal level. Wage increases in Iowa are not in the forecast, and Iowa’s minimum wage history has been stagnant since 2008, when wages were raised from $5.15 per hour.

How should small business owners prepare for changes to Iowa’s minimum wage?

Here are some other steps you can take to make sure your business is ready for any financial changes, or if the minimum wage in Iowa does increase:

  • Evaluate your staffing: Take a look at your hourly, weekly, and monthly sales to determine if your current staffing levels are appropriate. Based on those sales and the rest of your finances, make a plan for any future hiring. Maybe you need to add a new full-time employee each year. Or maybe your sales are seasonal and hiring contract employees during your busy seasons makes more sense.

  • 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 employee benefits and a path to growth and development to make your business a more attractive place to work.

  • Upgrade your technology: When you automate 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 is easy to customize and affordable with small business pricing and custom payroll features.