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Understanding the Tennessee Minimum Wage

This article doesn’t constitute legal advice. Please consult a lawyer or accountant in your state to learn more about minimum wage legislation as it applies to your business.
Colleen Egan, Writer

Small-business owners in the Volunteer State know how important it is to stay up to date on Tennessee minimum wage regulations. You want to make sure you’re complying, 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 a summary of minimum wage laws and restrictions in Tennessee.

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What is the minimum wage in Tennessee?

The minimum wage in Tennessee is $7.25, which is the same as the federal minimum wage.

Tennessee is one of five states that does not have a minimum wage law, or exemptions for certain categories of workers, like tipped employees and full-time students. When a state doesn’t have a minimum wage, then the federal rate applies. Tennessee also doesn’t have an overtime law, so federal overtime rules apply.

According to the U.S. Bureau of Labor Statistics, about 4 percent of hourly workers in Tennessee earned at or below $7.25 an hour, the highest percentage of minimum wage workers in the country.

Are there plans to institute a minimum wage in Tennessee?

There are no current plans to implement a state minimum wage in Tennessee, but there’s been some conversation about it.

In 2015, State Representative G.A. Hardaway introduced a bill to raise Tennessee’s minimum wage from $7.25 to $10.10 per hour. Under the proposed legislation, the state’s minimum wage would increase annually on July 1. However, the bill failed in committee.

However, in January of 2020, Sen. Sara Kyle (D-Memphis) introduced Senate Bill 1788. The bill, called the “Tennessee Minimum Wage Act,” seeks a Tennessee minimum wage increase to $15 from the current $7.25 per hour. The bill is still in discussions, but it has been passed on second consideration and referred to the Senate Commerce and Labor Committee.

Will the federal minimum wage increase beyond 2020?

There are no plans to increase the federal minimum wage, something that would have to be approved by Congress. It’s been nine years since the federal minimum wage was increased—almost the longest period that it has remained unchanged since it was first established in 1938.

There has been a recent push to increase the federal minimum wage. In 2019, the U.S. House of Representatives passed legislation to raise the federal minimum wage to $15 an hour by October 2025. However, the bill did not pass the Senate.

How should I prepare for changes to the minimum wage as a business owner?

Even in a state like Tennessee that has no minimum wage law, it’s a good idea to discuss federal minimum wage law with your accountant and lawyer to ensure that your business remains in compliance, like making sure you get an EIN.

Also, since federal minimum wage changes depend on the current party in Congress or the Oval Office, it makes sense to prepare for various scenarios. Here are some other steps you can take to make sure your business is ready for anything:

  • Reevaluate your staffing: Take a look at your hourly, weekly, and monthly sales to determine if your current staffing levels are appropriate. For example, perhaps you only need to hire temporary employees during your busy seasons instead of taking on more full-time regular staff.
  • 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 making your business an attractive place to work.
  • Upgrade your technology: When you automate complicated, time-consuming aspects of management, like payroll, you can spend more time focusing on issues like staffing and growing your business. Our payroll features allow you to import timecards from the Square POS, Square Team app, or third-party partners, so tracking your staff’s hours happens automatically.

Whether it’s navigating Tennessee minimum wage or searching for COVID-19 small-business resources, we are here to help your small business succeed. We have hardware and tools with pricing options for small businesses, so you can worry less about outgoing expenses and more about growing your business.

Colleen writes for Square, where she covers everything from how aspiring entrepreneurs can turn their passion into a career to the best marketing strategies for small businesses who are ready to take their enterprise to the next level.