Complete Guide to Indiana Minimum Wage Laws

Knowing the rules around minimum wage is non-negotiable for employers in Indiana. The state follows the federal minimum wage of $7.25 per hour, but specific rules for tipped employees and training wages require close attention. Missteps in compliance can lead to fines and payroll headaches, so clarity on the law is key.

Indiana’s minimum wage laws haven’t changed in years, but the details still matter. Employers with two or more employees must stay aligned with federal requirements, including how wages are calculated for workers who earn tips or are just starting out in their roles. Missing even small nuances can lead to big consequences.

Here's a complete guide to Indiana's minimum wage rates for 2025, including exact figures and employer responsibilities.

Indiana Minimum Wage Rates for 2025

Key Statutory Rate: Indiana's minimum wage remains $7.25 per hour. No state-specific increases have been passed, so the federal minimum wage applies statewide.
Who the Law Affects: Employers with at least two employees must comply, regardless of industry or business type.
Reason the Rate Has Not Changed: State lawmakers have chosen not to introduce a higher rate, leaving Indiana tied to the federal standard.

Tipped Employees

The minimum base wage for tipped employees is $2.13 per hour. Employers are required to ensure tips make up the difference to reach $7.25 per hour.
If an employee's tips fall short of the minimum wage, the employer must pay the difference to meet compliance.
Tip credit laws apply to employees earning at least $30 in tips each month. Employers need to keep detailed records to verify eligibility.

Training Wages

Employees under age 20 can earn $4.25 per hour for their first 90 consecutive days of employment. This reduced rate serves as a temporary training wage.
After 90 days or once the employee turns 20, wages must increase to at least $7.25 per hour.
Employers who fail to adjust pay after the training period risk penalties for underpayment.

Coverage and Exemptions under Indiana Law

Indiana law applies to most employees, but certain groups fall outside the coverage. Employers must clearly identify which workers are exempt to ensure compliance and avoid legal issues.

Excluded Individuals: Independent contractors are not eligible for minimum wage protections because they are not classified as employees. Student workers employed directly by educational institutions may also be excluded, depending on the nature of their role. Seasonal employees who work limited or irregular hours might not qualify either. Employers should carefully review employment agreements and job classifications for accuracy.
Tipped Workers: Tipped employees must still earn the full minimum wage of $7.25 per hour when combining their tips and base pay. The base wage of $2.13 per hour provides only a partial exemption, and it is the employer's responsibility to make up any shortfall if tips are insufficient. Accurate payroll tracking for tipped employees is non-negotiable to meet this requirement.

Certain salaried roles, such as administrative, professional, or executive positions, may be exempt from overtime pay under the FLSA. To qualify for this exemption, the role must meet specific criteria under the FLSA. For example, the employee must earn a salary above the federally established threshold and perform duties that involve significant decision-making or management responsibilities. Misclassifying employees in these roles can trigger penalties and retroactive pay obligations.

Overtime Pay Requirements

Employees who work more than 40 hours in a single workweek must receive overtime pay at 1.5 times their regular hourly rate. This rule applies to all non-exempt employees, regardless of job title or industry. Employers must calculate overtime correctly to comply with both state and federal laws.

For tipped employees, overtime must be based on $7.25 per hour rather than the $2.13 base wage. Employers cannot use tips to offset overtime pay obligations. This ensures tipped workers are fairly compensated for all hours worked beyond 40 in a week.

Employers should maintain detailed records of hours worked, including any overtime, to avoid disputes or penalties under the FLSA, as advised by the Indiana Department of Labor. Proper documentation is especially important for roles with inconsistent schedules or variable income, such as tipped positions.

Required Workplace Postings

Indiana employers must post the Indiana Minimum Wage Poster in a location employees can easily access, such as a common area, breakroom, or near time clocks. The poster outlines the state's minimum wage requirements and ensures employees understand their pay rights. Keeping the poster visible and up to date is a mandatory requirement to maintain compliance with state labor laws.

The federal minimum wage notice is also required and must be displayed separately. This notice highlights the current federal minimum wage of $7.25 per hour and applies to workplaces in Indiana since the state minimum wage matches the federal rate. Both postings need to be legible and placed where employees can clearly see them without barriers.

Labor law updates, including changes to wage claims or workplace rights, often require revised notices. Employers are responsible for replacing outdated materials as soon as updates are issued, in accordance with state labor laws. Ignoring updated posting requirements risks fines and can leave employees uninformed about their legal protections. Regularly reviewing mandatory postings ensures compliance with both state and federal regulations.

Record-Keeping Obligations

Employers must keep precise records of every employee's time worked and wages earned. Each record should include:

Daily and weekly hours worked.
Hourly pay rates or salary amounts.
Deductions such as taxes, benefits, or authorized withholdings.
Total wages paid during each pay period.

Federal law generally requires wage and hour records to be stored for at least three years. Payroll tax filings, employment agreements, and other wage-related documents may need to be retained for longer periods, depending on specific legal requirements.

Accurate timekeeping systems are essential for maintaining compliance. Employers should verify that reported hours match recorded payroll data and resolve any discrepancies immediately. Errors in wage records can lead to penalties, audits, or disputes over pay calculations. Frequent audits of record-keeping processes help prevent issues and ensure compliance with state and federal regulations.

Wage Deductions and Assignments

Indiana allows employers to make deductions from wages only under specific conditions, and every deduction must comply with strict guidelines, according to Indiana’s wage deduction laws. For instance, employers can deduct costs for uniforms or work-related equipment, but only if the deduction does not reduce an employee's hourly pay below $7.25. Clear and accurate calculations are necessary to ensure compliance with this rule, as even minor errors can result in violations.

Written consent from employees is required for any voluntary deductions. Without signed authorization, deductions cannot legally proceed. Examples of deductions requiring consent include:

Loan repayments: Employers may recoup advances or loans given to employees, provided the employee has agreed in writing.
Cafeteria plan contributions: Contributions for benefits like health insurance or retirement plans under approved pre-tax arrangements.
Other voluntary deductions: Items such as education reimbursements, charitable donations, or optional benefits must be explicitly authorized by the employee.

Indiana law also limits the total amount an employee can assign to deductions each year. The maximum allowable amount is the lesser of $2,500 annually or 5% of the employee's weekly disposable earnings. Employers must monitor deductions closely to ensure they never exceed the permitted threshold.

Penalties for Noncompliance

Noncompliance with Indiana's wage deduction laws can lead to significant financial and legal consequences. Late payments or improper withholdings expose employers to liability for the unpaid wages, attorney's fees, and court costs. Payroll errors or delays can quickly escalate into costly disputes.

If a court determines that wage withholding was not conducted in good faith, the employer may also face liquidated damages. Liquidated damages effectively double the financial liability by requiring payment of both the unpaid wages and an equivalent penalty. Employers should thoroughly document any payroll disputes to demonstrate good faith if challenged in court.

Failing to pay any wages owed is the most severe violation. Courts can impose penalties equaling twice the amount of unpaid wages, in addition to requiring immediate payment of the wages owed. Employers must process payroll accurately, on time, and in full to avoid these repercussions.

Filing Wage Claims in Indiana

The Wage and Hour Division of the Indiana Department of Labor oversees all wage claim filings and enforcement. Employees who have not received payment for hours worked, overtime, or other earned wages can submit a wage claim directly to the division. The process begins with the employee providing detailed documentation of the unpaid wages, including pay stubs, timesheets, or correspondence with the employer. Once a claim is filed, the division evaluates the evidence and determines whether further investigation is warranted.

If an investigation confirms unpaid earnings, the division may issue an order requiring the employer to compensate the employee. This back pay order typically includes the exact amount owed and may carry additional penalties if the employer failed to act in good faith. Penalties can range from fines to liquidated damages, and in some cases, the employer may be required to adjust payroll practices to comply with wage laws moving forward.

Tips for Employers Handling Claims

Employers managing wage claims should prioritize compliance and accuracy. Following clear steps can reduce the risk of disputes escalating into legal action:

Respond Immediately to Notifications
Acknowledge wage claim notifications from employees or the state as soon as they are received. Delayed responses can lead to higher penalties or automatic rulings against the employer. Provide all requested documents, such as payroll records or employment agreements, within the deadlines set by the Wage and Hour Division.
Keep Detailed Payroll Records
Maintain organized and accurate payroll documentation for every employee. Records should include all time entries, hourly rates, overtime calculations, and deductions. Proper documentation can provide clarity during disputes and is often the key to resolving claims in the employer's favor.
Establish a Clear Internal Process for Wage Claims
Create a documented workflow for reviewing and resolving wage disputes. Assign a specific team or individual to handle wage claim reviews, verify timesheets, and communicate with employees. A structured process ensures consistency and demonstrates a commitment to fair and compliant payroll practices.

Employers who maintain detailed records, respond promptly, and follow a structured approach can better manage wage claims while minimizing risk.

Steps for 2025 Indiana Wage Compliance

Maintaining compliance with Indiana wage laws in 2025 requires focused action on specific processes and procedures. Employers must evaluate payroll systems, monitor legislative changes, and ensure supervisors and staff are well-trained on wage requirements. Following clear, actionable steps will minimize compliance risks and payroll errors.

Check for Legislative Updates: Regularly review updates from the Indiana Department of Labor for any proposed changes to the state's minimum wage or related regulations. Legislative sessions can result in new wage rates or modified requirements. If lawmakers pass changes, update payroll systems immediately and notify employees of adjustments to their pay.
Review Payroll Systems: Audit payroll software to confirm accuracy in wage calculations, including overtime rates and tip credits. Ensure the system categorizes employees correctly, especially tipped workers and roles exempt from overtime. For manual processes, implement double-checks to catch errors before payroll is finalized. Small mistakes in calculation or classification can lead to underpayment and potential penalties.
Train Supervisors: Organize training sessions with managers and supervisors responsible for approving hours and tracking employee time. Focus the training on accurate recordkeeping, proper overtime approvals, and legal requirements for wage deductions. Supervisors should also understand how to address wage-related employee questions, such as inquiries about pay discrepancies or tips.
Update Posters: Replace outdated labor law posters with updated versions whenever wage laws change. Ensure the Indiana Minimum Wage Poster and federal minimum wage notice are displayed prominently in common areas accessible to all employees, such as breakrooms or near time clocks. Regularly check the condition of the posters to confirm they remain legible and compliant.
Audit Payroll Records: Conduct a detailed payroll audit at least once per year. Review time records, deductions, and wage calculations for all employees, paying special attention to tipped workers, employees transitioning out of training wages, and overtime pay. Document any discrepancies found during the audit and correct them immediately to avoid compliance issues.

Using HR Software for Compliance

Streamline compliance with Indiana wage laws by incorporating automated payroll and time tracking systems. Digital solutions reduce manual errors and improve record accuracy while saving time for payroll administrators.

Automate Wage Calculations: Use payroll systems programmed to calculate minimum wage, overtime, and tip credits based on current Indiana and federal laws. Automated calculations eliminate guesswork and ensure wages comply with all legal requirements.
Track Employee Hours Accurately: Implement a digital time tracking system that records all hours worked, including overtime. Features like mobile clock-ins, geofencing, and automated timecards simplify tracking for both on-site and remote employees. Accurate time records reduce the likelihood of disputes or errors during payroll processing.
Centralize Payroll and Compliance Documents: Store wage records, benefits documentation, and compliance materials in a unified system. Centralized storage makes it easier to access records for audits or wage claim investigations. It also ensures all documents reflect the most up-to-date regulations, reducing the risk of outdated or incorrect information.

Taking these steps ensures clear processes for wage compliance and provides confidence in payroll accuracy.

Navigating Indiana's minimum wage laws requires attention to detail and a commitment to compliance. We're here to help you streamline payroll processes, maintain accurate records, and stay aligned with state and federal regulations. Book a demo with us today to learn how our HR software solutions can simplify compliance for your business.