Vermont's minimum wage hits $14.42/hr with unique indexing
Effective January 1, 2026, Vermont's state minimum wage increases to $14.42 per hour. This rate is subject to annual adjustments based on a distinctive indexing formula: the lesser of the CPI-U increase or 5%. Furthermore, Vermont maintains a higher-than-federal tip threshold for employers to claim a tip credit.
Vermont Minimum Wage
Ensures fair compensation for all non-exempt employees, with specific provisions for tipped workers and annual indexation.
What those rules do as a Vermont shift is created.
Teambridge automatically processes Vermont's minimum wage requirements, ensuring every shift scheduled and every payroll processed aligns with state law, including the distinctive indexing and tipped wage rules.
Minimum Wage Enforcement
For every hour worked in Vermont, Teambridge verifies that the employee's effective hourly rate meets or exceeds the current state minimum of $14.42/hr, flagging any discrepancies before payroll finalization.
Tipped Wage Compliance Check
Teambridge ensures that the combined cash wage ($7.21/hr) and tips received by tipped employees meet the full state minimum wage. It also validates that the employee receives at least $120 per month in tips to qualify for the tip credit.
Automatic Annual Indexing
Our system automatically updates the state minimum wage and tipped wage rates on January 1st of each year, applying Vermont's unique CPI-U or 5% (whichever is lower) indexing formula without manual intervention.
Stop tracking compliance. Start running your business.
Let Teambridge handle the complexities of Vermont's wage and hour laws, so you can focus on growth.
Vermont sets a $14.42 minimum wage with a unique CPI-or-5% indexing cap.
Vermont's minimum wage regulations are designed to provide a living wage, featuring a distinctive annual adjustment mechanism and specific rules for tipped employees that differentiate it from federal standards.
21 V.S.A. § 384 — Minimum Wage
(a) Minimum wage. Except as hereinafter otherwise provided, every employer shall pay each employee wages at a rate of not less than $14.42 an hour, effective January 1, 2026. On January 1, 2027, and on each subsequent January 1, the minimum wage shall be increased by the lesser of five percent or the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) for the preceding 12-month period ending on August 31, rounded to the nearest cent.
(b) Tipped employees. An employer may pay a tipped employee a wage of not less than one-half of the minimum wage established in subsection (a) of this section, provided the employee receives a total of at least $120 per month in tips. If an employee's tips combined with the employer's cash wage do not equal the minimum wage, the employer must make up the difference.
Annual Indexing Mechanism
Vermont's minimum wage is not static. Beginning January 1, 2027, and each subsequent year, the rate will be adjusted. This adjustment is tied to the Consumer Price Index for All Urban Consumers (CPI-U) for the 12-month period ending the prior August 31st. Crucially, the increase is capped at 5%, meaning the minimum wage will rise by either the CPI-U percentage or 5%, whichever is lower. This unique cap provides a measure of predictability while ensuring wages generally keep pace with inflation.
Tipped Employee Provisions
For employees who regularly receive tips, Vermont law allows employers to pay a reduced cash wage, provided certain conditions are met. The tipped minimum wage is set at 50% of the standard state minimum wage, which means $7.21 per hour as of January 1, 2026. However, employers can only utilize this tip credit if the employee receives at least $120 per month in tips. If the combined cash wage and tips do not average out to the full state minimum wage over the pay period, the employer is legally obligated to make up the difference.
Teambridge handles Vermont's unique wage requirements, automatically.
From initial wage setting to complex annual indexing and tipped employee calculations, Teambridge ensures your operations are always compliant with Vermont's distinctive minimum wage laws.
Initial Wage Configuration
Teambridge automatically applies the Vermont state minimum wage of $14.42/hr for all non-exempt employees and $7.21/hr for eligible tipped employees, effective January 1, 2026, across your Vermont locations.
Automated Annual Adjustments
Our system tracks the CPI-U and applies Vermont's unique indexing formula on January 1st each year, ensuring your minimum wage rates are always current without manual input or monitoring.
Tipped Employee Income Validation
Teambridge continuously monitors tipped employee earnings, verifying that the $120/month tip threshold is met and that total compensation (cash wage + tips) equals or exceeds the full state minimum wage.
Proactive Compliance Alerts
If an employee's earnings fall below the required minimum or if tip thresholds are not met, Teambridge generates immediate alerts, prompting necessary adjustments to ensure full compliance before payroll processing.
People also ask.
What is the minimum wage in Vermont as of January 1, 2026?
As of January 1, 2026, the minimum wage in Vermont is $14.42 per hour for most employees.
How is Vermont's minimum wage indexed annually?
Beginning January 1, 2027, and each subsequent year, the minimum wage will increase by the lesser of 5% or the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) for the preceding 12-month period ending on August 31st.
What is the tipped minimum wage in Vermont and what are the conditions?
The tipped minimum wage in Vermont is 50% of the standard minimum wage, which is $7.21 per hour as of January 1, 2026. Employers can pay this reduced rate only if the employee receives at least $120 per month in tips, and if the combined cash wage and tips equal or exceed the full state minimum wage.
Does the $120/month tip threshold apply to all tipped employees?
Yes, for an employer to utilize the tip credit and pay the reduced tipped minimum wage, the employee must regularly receive at least $120 per month in tips. This is higher than the federal threshold.
What happens if a tipped employee's tips combined with their cash wage don't meet the full minimum wage?
If a tipped employee's tips, when added to their cash wage, do not meet the full state minimum wage of $14.42 per hour (as of Jan 1, 2026), the employer is legally required to make up the difference to ensure the employee receives the full minimum wage for all hours worked.
Are there any exemptions to Vermont's minimum wage law?
While most employees are covered, Vermont law does provide limited exemptions for certain categories of workers, such as agricultural workers, certain student learners, and outside salespersons. Specific details should be reviewed in the statute or with legal counsel.