Maryland Minimum Wage Laws: What Employers Must Know

Maryland’s minimum wage laws have seen important updates in recent years, directly affecting employers and payroll practices across the state. Staying informed about wage requirements keeps businesses compliant and ensures employees are paid fairly. Employers operating in Maryland need clarity on the latest laws to avoid errors and penalties.

The Fair Wage Act of 2023 introduced significant changes that employers must implement. These adjustments reflect Maryland's commitment to improving wage standards for workers statewide. Businesses should remain up-to-date on state and local requirements, especially as rates may continue to evolve.

This article outlines the most current Maryland minimum wage laws, including statewide rates, legislative updates, and local variations that employers need to follow.

Maryland Minimum Wage Overview

The statewide minimum wage in Maryland increased to $15.00 per hour on January 1, 2024, as mandated by the Fair Wage Act of 2023. This new rate applies to nearly all employers in the state and replaces the previous $13.25 hourly wage from 2023. For tipped employees, the minimum cash wage is $3.63 per hour, but employers must ensure total earnings, including tips, meet the $15.00 hourly minimum.

The Fair Wage Act of 2023 also allows for the possibility of future increases. While the current law sets the hourly rate at $15.00, adjustments tied to inflation or economic factors may occur. The Maryland Department of Labor oversees these updates, and employers should regularly check for any announced changes.

Local jurisdictions, such as Montgomery County, enforce higher minimum wage rates. For example, as of July 1, 2024, large employers in Montgomery County must pay $17.15 per hour, while mid-sized employers owe $15.50 per hour. Employers must comply with the higher rate if a local ordinance sets a wage above the statewide minimum.

County-by-County Wage Variations

Maryland's minimum wage requirements vary depending on the county, and some local jurisdictions enforce higher rates than the state's $15.00 per hour. Employers must follow the highest applicable rate to remain compliant with wage laws.

Montgomery County

Montgomery County has established its own minimum wage tiers based on the size of the employer. As of July 1, 2024, the rates are:

Large Employers (51 or more employees): $17.15 per hour.
Mid-Sized Employers (11–50 employees): $15.50 per hour.
Small Employers (10 or fewer employees): $15.00 per hour.

These rates adjust annually on July 1, linked to the CPI for Urban Wage Earners and Clerical Workers in the Washington-Arlington-Alexandria area. Mid-sized and small employers may see additional increases of up to 1% yearly until their rates align with large employers.

For tipped employees in Montgomery County, employers must pay a minimum cash wage of $4.00 per hour. Total pay, including tips, must meet or exceed the minimum wage for the employer's size. Restaurants and other businesses using tip credits must also provide written or electronic wage statements for each pay period. These statements must show the hourly rate paid, combining tips and cash wages for all tip credit hours worked in a week.

Howard County

Howard County also requires a higher minimum wage than the statewide standard. Scheduled increases are implemented regularly, and employers should monitor county-specific guidelines for precise rates. Unlike Montgomery County, Howard County does not divide its wage requirements by employer size, applying the same rate to all businesses.

Compliance Priorities

Businesses must comply with the highest minimum wage set by local or state law. For example, Montgomery County employers are required to pay employees according to the county's rates if they exceed the state's $15.00 per hour. Non-compliance can lead to penalties or enforcement actions.

In addition to pay requirements, local reporting obligations may apply. Montgomery County employers of tipped workers must submit quarterly wage reports to the Office of Human Rights. These reports must include detailed earnings information to confirm compliance with the county's wage standards.

Overtime Requirements

Maryland labor laws require employers to follow clear overtime rules to stay compliant. Any hours worked beyond 40 in a single workweek must be paid at 1.5 times the employee's regular hourly rate. This straightforward rule applies to most non-exempt positions across industries.

Who is Exempt from Overtime Pay?

Not all employees qualify for overtime pay. Specific categories of workers are exempt based on their job type or industry. For example:

Agricultural workers: Overtime pay starts after 60 hours in a workweek instead of 40.
Executive, administrative, or professional employees: Eligibility depends on meeting salary and duty requirements set by wage laws.
Outside sales staff: Employees working primarily outside the employer's location do not qualify for overtime.
Certain food processing roles: Employees involved in canning, packing, or freezing perishable goods like seafood or produce may also fall under exemptions.

Employers must carefully review job classifications to determine whether an exemption applies. Misclassification can lead to compliance issues and penalties.

Best Practices for Overtime Recordkeeping

Accurate records are the backbone of proper overtime management. Employers must document hours worked and pay rates to ensure compliance with wage laws. Here are key steps for effective recordkeeping:

Use reliable timekeeping systems: Track employee hours with time clocks or digital time-tracking tools, ensuring precise records of start, end, and break times.
Review hours weekly: Monitor work schedules to identify employees nearing the 40-hour threshold and adjust workloads if necessary.
Retain payroll records: Maintain detailed records, including timesheets, pay stubs, and overtime calculations, for at least three years to comply with state regulations.

Proactive record management minimizes risks of disputes or errors and ensures employees are paid fairly for their work.

Tipped Employees Requirements

Maryland requires employers to pay tipped employees a minimum cash wage of $3.63 per hour. Tips received by the employee must bring their total hourly earnings to at least $15.00, which matches the state's current minimum wage. If the combined cash wage and tips fall short of this amount, the employer is responsible for covering the difference to ensure compliance.

Local Wage Rules for Tipped Employees

In Montgomery County, the minimum cash wage for tipped employees is higher than the state standard, set at $4.00 per hour. Employers in the county must ensure that total earnings, including tips, meet or exceed the local minimum wage rates based on business size:

Large employers (51 or more employees): $17.15 per hour.
Mid-sized employers (11–50 employees): $15.50 per hour.
Small employers (10 or fewer employees): $15.00 per hour.

Howard County may also have additional local wage rules for tipped employees. Employers should confirm specific requirements in their jurisdiction and follow the higher applicable rate to avoid non-compliance.

Wage Documentation and Reporting

Employers must follow strict recordkeeping and reporting guidelines for tipped employees. Clear documentation helps avoid disputes and ensures compliance with wage laws. Requirements include:

Detailed wage statements: Employers must provide written or electronic statements for each pay period, showing the employee's hourly rate. This includes the combination of cash wages and tips for every workweek in the pay period.
Tip credit tracking: Employers utilizing a tip credit must maintain precise records of tips earned by each employee. This confirms that combined earnings meet the applicable minimum wage.
Quarterly reporting in Montgomery County: Employers of tipped workers must submit a quarterly wage report to the Office of Human Rights within 30 days after the quarter ends. This report verifies that tipped employees meet local wage standards.

Adhering to these requirements minimizes the risk of fines or enforcement actions. Employers should prioritize detailed recordkeeping and timely reporting to remain compliant.

Exemptions and Special Cases

Maryland wage laws include specific exemptions that impact how certain employees are paid. These exemptions depend on job roles, employer type, or employee characteristics and determine whether workers qualify for minimum wage, overtime, or both. Employers must clearly identify which roles fall under these categories to remain compliant and avoid costly errors.

Fully Exempt Workers

Some employees are excluded from both minimum wage and overtime requirements due to the nature of their work or employment arrangement. Examples include:

Family members in family-owned businesses: Spouses, children, and parents working for a family business do not fall under Maryland's minimum wage laws.
Volunteers in non-profits or charitable organizations: Individuals who provide services without expectation of regular wages are exempt.
Executive, administrative, and professional employees: Workers meeting specific salary and job responsibility criteria qualify for exemption.
Outside sales staff: Employees who spend most of their time making sales away from the employer's primary location are not covered by wage or overtime laws.

Employers must carefully evaluate whether a position meets the full exemption requirements. Misclassification risks fines and back pay obligations.

Overtime-Only Exemptions

Several roles are exempt from overtime rules but must still follow Maryland's $15.00 minimum wage requirement. These include:

Agricultural workers: Overtime applies only after 60 hours of work in a single week.
Commission-based auto dealership staff: Mechanics and sales employees paid by commission are exempt from overtime.
Taxicab drivers: Drivers are not eligible for overtime pay regardless of hours worked.
Event-based non-profit employees: Staff engaged in productions or promotions for concerts or theater events may qualify for exemption.

Exemptions vary based on job duties, compensation structure, or industry. Clarifying these roles can prevent payroll errors.

Youth Employment Rules

Maryland permits a reduced wage for employees under 18. Minors can earn 85% of the state minimum wage, translating to $12.75 per hour in 2024. This reduced rate applies only to those working less than 20 hours weekly.

Work hour restrictions also apply:

School days: Minors can work up to 4 hours per day, with a weekly cap of 20 hours.
Non-school days: Work hours increase to 8 per day, with a maximum of 40 hours per week during breaks.

Employers hiring minors must secure work permits from the Maryland Department of Labor and adhere to all youth labor laws.

Non-Profit and Small Business Exemptions

Some non-profits and smaller businesses qualify for adjusted requirements. Non-profits with tax-exempt status may have employees exempt from overtime or minimum wage, depending on their duties.

Small businesses with fewer than 15 employees may also receive reduced compliance obligations but must still meet the $15.00 minimum wage unless explicitly exempt under Maryland law.

Agriculture-Specific Rules

Agricultural employers follow distinct wage requirements. Workers engaged in initial processing of perishable goods, such as canning or freezing, may be exempt from overtime. Farms with fewer than 500 "man-days" of labor in a calendar quarter are exempt from both minimum wage and overtime rules.

Employers in agriculture should confirm their eligibility for these exemptions, as they often depend on specific conditions or seasonal operations. Clear documentation ensures compliance and reduces risk of disputes.

Compliance and Recordkeeping

Employers in Maryland must follow specific payroll and recordkeeping guidelines to remain compliant with state labor standards. Clear processes for payments and documentation help avoid penalties, disputes, and legal risks. Staying organized is not just a best practice—it's a mandatory responsibility.

Payroll Frequency

Maryland labor laws require employers to pay employees on a regular schedule, either biweekly or semi-monthly. For biweekly schedules, wages must be paid within 14 days following the end of the pay period. For semi-monthly schedules, payments must be made within 15 days. Employers must establish and communicate a consistent pay schedule to employees. Late or irregular payments risk employee complaints and potential fines.

Record Retention Requirements

Maryland law mandates that payroll records be stored for a minimum of three years. Employers must keep accurate and complete records to document employee wages, hours worked, and tips received. Organized and accessible documentation is critical for payroll audits or resolving disputes.

Required records include:

Hourly and overtime rates: Detailed pay rates for all employees, including adjustments or bonuses.
Time records: Daily and weekly logs of hours worked, especially for non-exempt employees.
Tip documentation: Written records showing the breakdown of tips and cash wages, ensuring total earnings meet or exceed minimum wage requirements.
Pay stubs: Itemized wage statements provided to employees, showing gross earnings, deductions, and net pay.

Specific jurisdictions, such as Montgomery County, may require additional reporting for tipped employees, including quarterly wage reports. These must comply with local ordinances and be submitted on time.

Automating Payroll Compliance

Managing payroll manually can lead to errors, missed deadlines, and compliance challenges. Employers can benefit from payroll systems that handle calculations, wage adjustments, and reporting requirements automatically.

A reliable payroll system ensures timely payments, tracks tipped wages accurately, and generates compliance-ready reports aligned with Maryland's wage laws. Systems with built-in legislative updates also help employers stay ahead of changes to state or local minimum wage rates. Automating these processes reduces administrative burdens and keeps payroll operations running smoothly.Maryland law defines the baseline for fair pay across the state. Whether you're an employer managing payroll or an employee tracking earnings, knowing the rules ensures compliance and clarity. Legislation like the Fair Wage Act of 2023 has reshaped pay standards, and staying informed is key to avoiding missteps.

The statewide minimum wage, local variations, and exemptions create a layered framework that employers must navigate carefully. Beyond the base rate, factors like overtime, tipped wages, and youth employment rates add complexity. Understanding these specifics allows businesses to operate smoothly while meeting legal obligations.

This guide breaks down everything employers need to know about Maryland’s current wage laws, including updates, county-specific rules, and frequently asked questions.

Navigating Maryland's wage laws can be complex, but staying informed keeps your business compliant and your employees paid fairly. We're here to help you understand the rules and simplify your payroll processes. Book a demo with GoCo today to see how our platform can streamline your HR and ensure you're always up-to-date with Maryland's wage requirements.