Ohio's Minimum Wage Rises to $11.40 on January 1 — Here's What Your Payroll Owes

If you run a shop, restaurant, salon or service business in Ohio, your lowest hourly rate is about to go up. On January 1, 2027, Ohio's minimum wage rises from $11.00 to $11.40 an hour, a 3.5% increase. The tipped cash wage moves from $5.50 to $5.70. The Ohio Department of Commerce announced the new numbers on September 30, 2026.

Forty cents sounds small. Across a full year and a full crew, it adds up, and it can push other pay rates up with it. Here is what changed, who it covers, and what to do before the first 2027 payroll.

The New Ohio Rates at a Glance

• Non-tipped minimum wage: $11.40 per hour, up from $11.00.
• Tipped cash wage: $5.70 per hour, up from $5.50.
• Effective date: January 1, 2027.
• Increase: 3.5% for both rates.
• Workers aged 14 and 15: remain at the federal $7.25 per hour.

Why It Rises Automatically Every Year

This is not new legislation. A 2006 amendment to the Ohio Constitution (Article II, Section 34a) ties the minimum wage to inflation. Each year the rate is adjusted by the change in the CPI-W over the 12 months ending in August. For 2027, that change was 3.5%, so both Ohio rates rose by that amount.

Because the formula is automatic, you can plan around it. Every September the state publishes the next rate, which gives owners roughly three months of lead time.

Does the Ohio Rate Apply to Your Business?

Ohio's rate applies to covered employees of businesses with annual gross receipts above a set threshold. For 2027 that threshold rises from $405,000 to $420,000.

• If your gross receipts are above $420,000, the Ohio rate applies to your covered employees.
• If your gross receipts are at or below $420,000, your workers are generally tied to the federal minimum of $7.25 per hour, unless another law covers them.

Check your numbers before assuming you are exempt. A business that crossed $405,000 this year may still land under the new $420,000 line, and a growing business can slip over it. Whichever side you fall on, talk to your accountant or an employment attorney, because other federal and state rules can still apply.

What 40 Cents an Hour Really Costs

A quick way to size the change is to multiply the 40-cent raise by the hours your lowest-paid people work. One full-time employee at 2,080 hours a year costs you about $832 more at the new base rate, before any payroll taxes that scale with wages. Ten full-time minimum-wage workers would add roughly $8,320 in wages. Part-time crews add less, but the math is the same.

Payroll taxes come on top. Employers also owe their share of Social Security and Medicare on wages, so the true cost is a little higher than the raise itself.

Watch for Wage Compression

The raise does not stop at the bottom of your pay scale. If a new hire starts at $11.40 and your best employee, who has been with you for two years, earns $11.75, the gap between them shrinks fast. Many owners adjust the next tier up so experienced staff do not feel squeezed. Decide this before January, not after someone quits.

Tipped Employees: Review Your Tip Practices

The tipped cash wage goes to $5.70, but a tip credit is only allowed within legal limits. Federal and state rules can both apply, so confirm that tips plus cash wages reach the full minimum for every pay period. Restaurant, bar, salon and delivery owners should review how tips are tracked and recorded, and who is eligible to share a tip pool.

A Pre-January Payroll Checklist

1. Find everyone paid under $11.40. Pull a payroll report sorted by hourly rate.
2. Check your gross receipts against the new $420,000 threshold.
3. Review tipped rates and your tip-credit practices.
4. Schedule the rate change in your payroll system for work performed on or after January 1, 2027. Note that it applies to the pay for hours worked, not the date a check is cut.
5. Brief managers and staff on the change so no one is surprised.
6. Update the Ohio wage-and-hour summary you make available to employees.
7. Keep records of pay rates, hours and payments for at least three years.

Building the Raise Into Your Prices and Budget

Add the new labor cost to your 2027 budget now. If you have not reviewed your profit margins recently, it is a good time to build a clear profit and loss statement so you can see how much room you have. Some owners absorb a small raise, some adjust prices a few cents on high-volume items, and some trim scheduled hours. Whatever you choose, make the decision on paper before January 1.

If you pay people as independent contractors to avoid wage rules, be careful. Misclassification can bring back-pay claims and penalties. Our guide on independent contractor vs. employee explains the tests that regulators use.

Operating in More Than One State?

Ohio is one of many states that adjust wages on January 1. If you have workers across state lines, each state has its own rate, and local ordinances can add another layer. Keep a simple chart of every location's rate and update it every fall.

The Bottom Line

Ohio employers have about eight weeks to prepare for an $11.40 base wage and a $5.70 tipped cash wage, plus a higher $420,000 coverage threshold. Run the payroll report this week, set the new rates in your system, and talk to your crew about it. A small amount of planning now prevents a wage-and-hour mistake in the first paycheck of 2027.

This article is general information, not legal advice. Check with a qualified employment attorney or the Ohio Department of Commerce for your specific situation.

Photo by Louis Hansel on Unsplash