Iowa — Wage & Hour

Iowa's minimum wage is $7.25 per hour. Iowa Code § 91D.1 sets the state hourly wage at $7.25 as of January 1, 2008, and requires employers to pay the greater of that amount or the current federal minimum wage pursuant to 29 U.S.C. § 206. Because the Iowa statutory rate equals the current federal rate, the effective minimum wage is $7.25 per hour for covered employees.

Source: Iowa Code § 91D.1

Iowa has no state overtime statute. Overtime in Iowa is governed entirely by the federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 207. Under the FLSA, non-exempt employees must receive overtime pay at 1.5 times their regular rate for all hours worked over 40 in a workweek. Iowa has no daily overtime threshold, no double-time requirement, and no state-specific exemptions beyond those in federal law.

Source: Iowa Workforce Development, "Your Rights Under the Iowa Minimum Wage Law"

Iowa's minimum wage law establishes both an enterprise coverage threshold based on annual gross sales and a set of categorical coverage rules that apply to specified industries regardless of sales volume.

Enterprise coverage threshold — $300,000

Under Iowa Code § 91D.1(1)(b), the minimum wage requirements do not apply to an enterprise whose annual gross volume of sales made or business done, exclusive of excise taxes at the retail level which are separately stated, is less than $300,000. This threshold is lower than the federal FLSA enterprise coverage threshold of $500,000 under 29 U.S.C. § 203(s)(1)(A)(ii). An employer with annual gross sales between $300,000 and $500,000 is therefore covered under Iowa's minimum wage law even if the enterprise does not meet the federal threshold.

The $300,000 figure refers to the enterprise's total annual gross sales or business done. "Exclusive of excise taxes at the retail level which are separately stated" means the employer may subtract retail-level excise taxes from the gross receipts figure, provided those taxes are separately itemized. Sales taxes and other taxes that are not retail-level excise taxes must be included in the gross volume calculation.

Categorical coverage — industries covered regardless of sales volume

Iowa Code § 91D.1(1)(c) provides that the minimum wage requirements apply to the following types of enterprises without regard to gross volume of sales or business done:

1. Laundering, cleaning, or repairing clothing or fabrics. An enterprise engaged in the business of laundering, cleaning, or repairing clothing or fabrics is covered regardless of annual sales.

1. Construction or reconstruction. An enterprise engaged in construction or reconstruction is covered regardless of sales volume.

1. Hospitals and related institutions. An enterprise engaged in the operation of a hospital; an institution primarily engaged in the care of the sick, the aged, or the mentally ill or persons who have symptoms of mental illness who reside on the premises of such institution; a school for persons with mental or physical disabilities or for gifted children; a preschool, elementary or secondary school; or an institution of higher education is covered without regard to sales volume.

1. Public agencies. A public agency is covered by Iowa's minimum wage law regardless of budget or scope of operations. Iowa Code § 91D.1(1)(c)(4) does not define "public agency," but the term encompasses state agencies, political subdivisions, and other governmental entities.

Federal FLSA exemptions apply with modification

Iowa Code § 91D.1(2) provides that the exemptions from the minimum wage requirements stated in 29 U.S.C. § 213 (the FLSA exemptions) apply under Iowa law, except that the FLSA's retail-or-service-establishment exemption at 29 U.S.C. § 213(a)(2) is modified. Under Iowa law, that exemption applies only to an enterprise comprised of one or more retail or service establishments whose annual gross volume of sales is less than 60 percent of the federal threshold stated in 29 U.S.C. § 203(s)(2). Because the current federal threshold is $500,000, sixty percent is $300,000 — matching Iowa's general enterprise coverage threshold in § 91D.1(1)(b).

For all other FLSA exemptions — including the white-collar exemptions for executive, administrative, professional, outside sales, and certain computer employees (29 U.S.C. § 213(a)(1)), the agricultural worker exemption (§ 213(a)(6)), and others — Iowa adopts the federal exemption standards without modification. An employee who is exempt from the FLSA minimum wage under one of these provisions is likewise exempt from Iowa's minimum wage.

Individual employee coverage

Even if an enterprise falls below the $300,000 threshold and is not in one of the categorical-coverage industries, individual employees may still be covered by Iowa's minimum wage law if they are "engaged in commerce" or in the production of goods for commerce under the FLSA definitions. Iowa Code § 91D.1(1)(b) requires every employer, as defined in the federal Fair Labor Standards Act, to pay each of the employer's employees, as defined in the FLSA, at least the Iowa minimum wage or the current federal minimum wage, whichever is greater. Consequently, an employee who is individually covered by the FLSA because of the nature of the employee's work is also covered by Iowa's minimum wage even if the enterprise itself is not covered.

Source: Iowa Code § 91D.1

Iowa does not require employers to provide meal or rest breaks to employees 16 years of age or older. The state has no statute mandating break periods for adult employees, so employers follow federal Fair Labor Standards Act (FLSA) rules only.

Federal FLSA rules when breaks are provided

Although the FLSA does not require employers to offer breaks, it establishes payment rules when employers voluntarily provide them. Short rest breaks—typically 5 to 20 minutes—must be counted as compensable working time and paid at the employee's regular rate. Bona fide meal periods of 30 minutes or longer need not be compensated, provided the employee is completely relieved from duty for the purpose of eating a meal. If the employee must perform any work duties during the meal period (such as answering phones or monitoring equipment), the time must be paid.

Minors under 16

Iowa Code § 92.7 requires employers to provide a meal period of at least 30 minutes to employees under 16 years of age who are scheduled to work five or more consecutive hours. The statute does not specify when during the shift the break must occur; timing is left to the employer's discretion. This meal period may be unpaid if the minor is completely relieved of all job duties.

Employer discretion and premises

Iowa law permits an employer to require an employee to remain on the business premises during a break, whether paid or unpaid, so long as the employee is relieved of work duties if the break is to be treated as unpaid time.

Source: Iowa Department of Inspections and Appeals, Wage FAQ Source: Iowa Code § 92.7

Iowa permits employers to pay a reduced initial employment wage of $6.35 per hour for the first 90 calendar days of a new employee's employment. This rate is lower than both the Iowa and federal minimum wage of $7.25 per hour. The provision is authorized under Iowa Code § 91D.1(1)(d) and implemented through Iowa Admin. Code r. 875-215.2.

Duration and calculation

The 90-calendar-day period begins on the employee's initial day of work. "Calendar days" means consecutive days, including weekends and holidays, not just workdays. If the state minimum initial employment wage rate changes during the 90-calendar-day period, the employer must pay the new effective rate. After the employee completes 90 calendar days of employment, the employer must pay at least the full minimum wage of $7.25 per hour.

Rehire limitations

The initial employment wage provision applies only once per employer-employee relationship, subject to specific rehire rules. If an employee's employment ends before completing 90 calendar days and the employee is rehired by the same employer within three years of the initial hiring, the employer may pay the initial employment wage rate in effect at rehiring only for the number of calendar days remaining from the original 90-day period.

For example, if an employee worked 40 calendar days at the initial employment wage, left employment, and was rehired within three years, the employer could pay the initial employment wage for up to 50 more calendar days (the remainder of the original 90-day entitlement).

However, if an employee completes the full 90-calendar-day initial employment period, ends employment, and is then rehired within three years from the last date of employment, the employer may not pay the initial employment wage rate upon rehire. The employee must be paid at least the full minimum wage from the first day of the second employment period.

Scope and applicability

Iowa's initial employment wage is distinct from the federal "training wage" previously authorized under the Fair Labor Standards Act. The Iowa provision applies to any new employee regardless of age or occupation, provided the employee is otherwise covered by Iowa's minimum wage law under Iowa Code Chapter 91D. Employers are not required to use the initial employment wage rate; they may pay the full minimum wage or higher from the first day of employment.

Source: Iowa Code § 91D.1 Source: Iowa Admin. Code r. 875-215.2

Iowa permits employers to pay tipped employees a reduced cash wage of $4.35 per hour and claim a tip credit of up to $2.90 per hour (40 percent of the $7.25 minimum wage), provided the employee's cash wage plus tips equals at least $7.25 per hour. If tips fall short in any workweek, the employer must make up the difference so the employee receives at least the full minimum wage.

Qualifying as a tipped employee

Under Iowa Code § 91D.1(1)(c), a tipped employee is defined as an employee of a restaurant, hotel, motel, inn, or cabin who customarily and regularly receives more than $30 per month in tips. The $30 threshold is a minimum standard; the employee must meet this level consistently to qualify for the tipped-employee classification under which the employer may take the tip credit.

Tip credit mechanics

Iowa Code § 91D.1(1)(c) provides that "for purposes of determining whether [a tipped] employee…is receiving the minimum hourly wage rate prescribed by this section, the amount paid the employee by the employer shall be deemed to be increased on account of the tips by an amount determined by the employer, not to exceed forty percent of the applicable minimum wage." With Iowa's minimum wage at $7.25 per hour, the maximum tip credit is $2.90 (0.40 × $7.25). The employer may therefore pay a cash wage as low as $4.35 per hour ($7.25 − $2.90).

The tip credit taken by the employer cannot exceed the actual tips the employee receives. If an employee earns $2.00 in tips during an hour worked, the employer may credit only $2.00 toward the minimum wage obligation for that hour and must pay the employee a cash wage of $5.25 to bring total compensation to $7.25. An employee who receives no tips in a given hour must be paid the full $7.25 cash wage for that hour.

Appeal right when tips are overstated

Iowa Code § 91D.1(1)(c) grants employees an explicit appeal mechanism: "An employee may file a written appeal with the labor commissioner if the amount of tips received by the employee is less than the amount determined by the employer under this subsection." This ensures that an employer cannot overstate the tip credit and underpay the employee.

Tip pooling and dual jobs

Iowa Administrative Code r. 875-217.54 (effective February 12, 2025) addresses tip pooling. When employees practice tip splitting—such as food servers sharing tips with bussers—only the amounts each employee retains after the pool is divided count as that employee's tips for purposes of the tip credit. The employer may credit only the net tips actually received and kept by each employee.

For employees working in both tipped and non-tipped occupations during a workweek (dual jobs), Iowa Admin. Code r. 875-217.56(e) and the updated regulations limit the tip credit to hours actually worked in the tipped occupation. If a server spends four hours waiting tables and two hours performing non-tipped back-office work, the employer may claim the tip credit only for the four tipped hours; the two non-tipped hours must be paid at the full minimum wage of $7.25 per hour in cash.

Forms of tips

Tips include cash, amounts paid by check or other negotiable instrument, and credit-card gratuities transferred by the employer to the employee pursuant to customer direction. Special gifts such as theater tickets or merchandise do not count as tips. Iowa Admin. Code r. 875-217.53 (renumbered as r. 875-217.5 effective February 12, 2025) mirrors the federal definition at 29 C.F.R. § 531.53.

Interaction with initial employment wage

Iowa permits a separate initial employment wage of $6.35 per hour for the first 90 calendar days of employment (covered in the "Initial employment wage rate" section of this guide). An employer may not stack the tip credit and the initial employment wage reduction; the tip-credit provision applies to employees of restaurants, hotels, motels, inns, or cabins who meet the $30-per-month threshold, and the initial employment wage applies more broadly. In practice, most tipped employees in covered establishments will be paid under the tip-credit rules ($4.35 cash wage plus tips) rather than the initial employment wage, because the tip credit yields a lower cash-wage obligation when tips are substantial.

Source: Iowa Code § 91D.1 Source: Iowa Admin. Code ch. 875-217 (effective Feb. 12, 2025) Source: Iowa Workforce Development, "Your Rights Under the Iowa Minimum Wage Law"

Iowa requires employers to pay all wages earned by a separated employee—whether the separation is a discharge, layoff, or voluntary resignation—no later than the next regular payday for the pay period in which the wages were earned. Iowa Code § 91A.4 uses the phrase "when the employment of an employee is suspended or terminated" and does not distinguish between involuntary and voluntary separations; both trigger the same payment deadline.

Payment deadline

The employer must pay all wages earned up to the time of suspension or termination by the next regular payday for the pay period in which those wages were earned, as established under Iowa Code § 91A.3. Section 91A.3 requires regular paydays to be designated in advance and spaced at consistent intervals (monthly, semimonthly, or biweekly), with the payday occurring no more than twelve days (excluding Sundays and legal holidays) after the end of the pay period.

For example, if an employee's regular payday is the 15th and last day of each month, and the employee is terminated or resigns on June 10, the employer must pay all wages earned through June 10 by June 30 (the next regular payday for the pay period covering June 1–June 30). The statute does not require immediate payment or accelerated payment upon separation; the existing pay schedule controls.

Commission wages — extended deadline

Iowa Code § 91A.4 provides a limited exception for certain commission-based wages. If wages are calculated as "the difference between a credit paid against wages determined on a commission basis and the wages actually earned on a commission basis," the employer must pay that difference within thirty days after the date of suspension or termination. This exception applies when the employer has paid a draw or advance against future commissions during employment and must reconcile the final commission amount after separation.

What constitutes "wages"

Under Iowa Code § 91A.2, "wages" includes compensation owed by an employer for labor or services rendered, whether determined on a time, task, piece, or commission basis. It also includes "vacation, holiday, sick leave, and severance payments which are due an employee under an agreement with the employer or under a policy of the employer." Consequently, if the employer has established a written policy or past practice of paying out accrued vacation upon separation, those amounts are wages and must be included in the final paycheck by the next regular payday (or within thirty days for commission reconciliations). Iowa does not mandate vacation payout in the absence of an employer policy or agreement.

Deductions and delivery

The employer may deduct only lawful deductions specified in Iowa Code § 91A.5 from the final paycheck. The wages may be delivered to the employee at the employee's regular place of employment, mailed, or sent by any reasonable means the employee requests in writing. If the employee has previously authorized direct deposit, the employer may use direct deposit for the final paycheck unless the employee revokes that authorization in writing.

No distinction by reason for separation

Practitioners should note that Iowa is among the minority of states that apply a uniform final-paycheck deadline regardless of whether the employee quit, was discharged for cause, or was laid off. The statute's language—"suspension or termination"—is broad and encompasses all forms of separation. The Iowa Division of Labor has consistently interpreted § 91A.4 as applying the same next-regular-payday rule to discharges, layoffs, and resignations alike.

Source: Iowa Code § 91A.4 Source: Iowa Code § 91A.2 Source: Iowa Code § 91A.3