The state of Tennessee doesn’t have its own minimum wage law but instead relies on the federal standard of $7.25 an hour.
What you’ll learn
What you’ll learn
Key takeaways
- Tennessee has no state minimum wage law and defaults to the federal rate of $7.25 per hour
- No wage increase is expected in 2026, despite proposals at both the state and federal level
- Tipped employees can be paid a reduced cash wage, provided tips bring their total hourly earnings up to the federal minimum
- Overtime is governed by federal law and not state statutes
This article covers what employers in the Volunteer State need to know about the federal rules, how to calculate tipped wages and overtime, and what staying compliant looks like in practice.
What is the minimum wage in Tennessee in 2026?
The minimum wage in Tennessee is $7.25 per hour, which is the same as the federal minimum wage. Because the state has never enacted its own wage statute, it defers entirely to the federal rate established in the Fair Labor Standards Act (FLSA).
For most employees, $7.25 is the floor. The FLSA covers businesses with at least $500,000 in annual gross sales, plus those engaged in interstate commerce. That second category is broader than it sounds. If you ship goods, accept credit cards, or do business across state lines, you’re almost certainly covered.
Tennessee’s minimum wage to tick up?
- As of March 2026, there are no scheduled changes in Tennessee to boost the minimum wage. However, various proposals to raise the federal minimum have circulated in recent years. Though none have become law, there were some rumblings in the state’s senate at the beginning of 2026.
- HB Bill 1399 was introduced in 2025 but failed to pass a second vote in the senate in February 2026. The bill would have been a significant change as it called for a minimum wage increase to $20 if passed.
This table below summarizes what Tennessee employers are currently required to pay. For a broader look at how the state compares to others, check out the minimum wage by state guide which is updated regularly as rates change.
| Worker category | Minimum wage rate (2026) |
| Most employees | $7.25 per hour |
| Tipped employees (cash wage) | $2.13 per hour (tips must bring total to $7.25) |
| Small businesses below FLSA threshold | May not be covered (under $110,000 annual gross sales) |
Does Tennessee follow federal minimum wage laws?
Because Tennessee has no wage law of its own, federal law fills the gap. Any employer covered by the FLSA must pay at least $7.25 per hour. Most Tennessee businesses meet that threshold.
Not every employer automatically falls under FLSA coverage, though. Businesses with less than $110,000 in annual gross sales that don’t engage in interstate commerce may be exempt. This applies to a narrow slice of very small, locally focused operations. If you’re unsure whether your business qualifies, it’s a good idea to check with a payroll resource or consult an employment attorney.
Tipped employees and tip credit rules
For most hourly workers, the $7.25 rate applies. However, as per federal law, tipped workers in Tennessee are entitled to a direct cash wage of $2.13 per hour. There is a firm condition, though. If an employee’s tips don’t bring their total hourly earnings to at least $7.25, with no exceptions, the employer must make up the difference.
This arrangement is called a tip credit. Using it comes with responsibilities including:
- Letting employees know upfront that you are applying a tip credit
- Consistently tracking tips, ideally through your point-of-sale or payroll system
- Checking each pay period to make sure all workers’ total hourly pay reaches the minimum
Tip pooling is also permitted under federal rules, provided managers and supervisors are excluded. The employer’s guide to tipped wages has the full breakdown.
Overtime rules and wage exemptions
Beyond how you pay workers, there is the question of when overtime kicks in. Tennessee has no state overtime law, so the federal standard under the FLSA also governs these requirements. If they work more than 40 hours a week, a nonexempt worker must be paid at 1.5 times their regular wage.
Not every employee is entitled to overtime. Exemptions apply to workers classified as executive, administrative, professional, outside sales, or certain computer employees who earn at least $684 per week, the current federal salary threshold. Misclassifying an employee as exempt is a common payroll mistake, and it can quickly become expensive.
In Tennessee, three more points trip up many small employers:
- Overtime is calculated weekly, not by pay period. A biweekly payroll doesn’t let you average hours across two weeks to avoid paying overtime
- The rate used to calculate overtime must include certain additional compensation, such as nondiscretionary bonuses
- Part-time and hourly employees can qualify for overtime if they work more than 40 hours per week
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Key compliance details for Tennessee employers
Along with minimum wage and overtime requirements, a few additional details can affect how federal rules apply to your payroll in Tennessee.
- Living wage gap: The $7.25 minimum wage is well below the $20.77 per hour that some researchers estimate is a living wage for a single adult in Tennessee. To stay competitive in a tight labor market, many employers pay above the legal minimum
- Legislative activity: Bills to raise Tennessee’s minimum wage have been introduced at the state level, and separate efforts to raise the federal floor have surfaced in Congress. As of 2026, neither has resulted in a change. But business owners should watch carefully to stay abreast of changing requirements
- Federal contractor rules: If your business holds a federal contract, a higher minimum wage may apply under separate executive orders. Check your contract’s terms
- Youth minimum wage: Federal law allows employers to pay underage workers $4.25 an hour during their first 90 days of employment
It’s important to track all federal and state payroll updates that could affect your Tennessee payroll.
Effectively managing Tennessee payroll compliance
Though the minimum wage in Tennessee has remained unchanged, the topic of an increase has begun to attract attention. As state lawmakers discuss proposals to change the minimum wage, employers should monitor legislative developments and prepare for potential shifts in labor costs.
Relying on a payroll service like OnPay is a practical way to keep up with these shifting regulations. We help automatically handle payroll calculations, flag overtime rules, and track tip credits to maintain compliance during wage transitions. This allows you to stay focused on running your business rather than spending too much time on back-office tasks. If you need any help or have questions, our team would love to hear from you!
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.