Vermont Minimum Wage 2026: $14.42 an Hour, $7.21 Tipped Wage and the Overtime Exemptions

If you hire or work for an hourly wage in Vermont, the number that matters is $14.42 an hour. That is the state minimum wage effective January 1, 2026. Employers of eligible tipped workers in hotels, motels, tourist places and restaurants may pay a tipped basic wage of $7.21 an hour, but only when the tipped rules apply. Vermont also has overtime exemptions that cover several common business types, and those exemptions are where most employers make mistakes. This guide covers the 2026 rates, how the figure is set each year, who qualifies for the tipped wage, the overtime exemptions and the steps to stay compliant.

Informational content only. This guide is not legal, tax or payroll advice. Wage rules depend on the facts of each job, and the rates and rules can change. Confirm current figures with the Vermont Department of Labor, and talk to an employment attorney or CPA before you set pay, classify a worker as exempt or resolve a dispute.

Vermont Minimum Wage at a Glance

Item	2026 Rule
Minimum wage (most hourly employees)	$14.42 an hour, effective January 1, 2026
Tipped basic wage	$7.21 an hour, one-half the minimum wage, for eligible tipped employees only
Overtime	1.5 times the regular rate for hours over 40 in a workweek, unless an exemption applies
Earned sick time pay	The greater of the employee's normal hourly wage or the minimum wage
Next scheduled change	January 1, 2027 (figure not yet announced as of October 28, 2026)

How Vermont Sets the Minimum Wage

Vermont's minimum wage is set by formula under 21 V.S.A. 384(a), not by a legislative vote each year. Every January 1, the rate rises by 5% or by the change in the CPI-U for the 12 months before the previous September 1, whichever is smaller. The rate never goes down. If the federal minimum wage is higher than the Vermont rate, the federal rate applies to covered employees.

Because the increase is capped at 5%, the most the rate can rise in a single year is about $0.72. That puts a ceiling of roughly $15.14 on the January 1, 2027 figure. The actual number depends on inflation data, so budget for a modest increase and do not treat that ceiling as the expected rate.

The 2027 Rate Is Not Yet Announced

As of October 28, 2026, the Department of Labor had not announced the 2027 minimum wage. The department typically announces the next year's figure in the fall. Check labor.vermont.gov before you finalize 2027 wage budgets, offer letters or price quotes that depend on labor costs. If you see a number that is not on the state site, do not use it.

The Tipped Basic Wage: $7.21 an Hour

The tipped basic wage is one-half of the minimum wage, which makes it $7.21 for 2026. It applies only to employees of hotels, motels, tourist places and restaurants who customarily and regularly receive more than $120 a month in tips for direct and personal customer service. That test has two parts. The employer must be in one of those industries, and the employee's tips must regularly exceed $120 a month.

Employees who do not meet that test fall under the full $14.42 rate. A line cook who never receives tips, or a retail clerk who works in a shop that happens to have a tip jar, is not automatically in the tipped category. Keep records of tips for each tipped employee so you can show how the classification was made if the Wage and Hour Program asks.

The tipped basic wage does not end your obligation to pay the full wage. Tips must bring the employee's total pay up to the full minimum wage, and the rules for how that works are specific. Check with the Wage and Hour Program at 802-951-4083 before you rely on tips to cover any part of the minimum wage.

Overtime: Time and a Half Over 40 Hours, With Exemptions

Under the Vermont rules, non-exempt employees must receive overtime at 1.5 times their regular rate for hours worked over 40 in a workweek. For an employee earning $14.42, that is $21.63 per overtime hour. A 50-hour week for that employee produces $576.80 for the first 40 hours and $216.30 for the 10 overtime hours, for a total of $793.10 before taxes and deductions.

Vermont exempts several categories of employers from the overtime requirement under 21 V.S.A. 384(b)(1) to (3). The exemptions cover the following:

• Retail or service establishments where at least 75% of sales are not for resale.
• Hotels and motels.
• Restaurants.
• Amusement or recreational establishments that operate seven months or less a year, or that have strongly seasonal receipts.

Three points matter in practice. First, the exemption applies to overtime only. The minimum wage still applies to every covered employee in an exempt business. Second, the exemption depends on the business category and its facts, not on the job title. A stockroom worker at a retailer that meets the 75% test is exempt from Vermont overtime, but that does not settle the question for a manager at a different business type. Third, the federal Fair Labor Standards Act may still require overtime even when Vermont does not. Check the federal rules separately.

If you are not sure whether your business fits an exemption, call the Wage and Hour Program at 802-951-4083 and describe your sales mix, operating calendar and job classifications. Get the answer in writing before you change how you pay people.

Earned Sick Time Pay

When an employee uses earned sick time, the employer must pay at the greater of the employee's normal hourly wage or the Vermont minimum wage. An employee who normally earns $18.00 an hour is paid $18.00 for sick time. An employee who earns the minimum wage is paid at least $14.42 an hour. Build this into your timekeeping and payroll system before an employee calls in sick, not after. Details on accrual and use rules are on the Department of Labor site at labor.vermont.gov.

The Required Minimum Wage Poster

Every Vermont employer must display a minimum wage poster in the workplace. The 2026 posters are available from the Department of Labor at labor.vermont.gov. Post it where employees can read it easily, and replace it when the rate changes on January 1. A missing or outdated poster is one of the simplest compliance gaps to fix, and one of the easiest for an inspector to spot.

Compliance Checklist for 2026

1. Confirm the current rate at labor.vermont.gov, and set a reminder to check again each fall for the next January 1 change.
2. Pay at least $14.42 an hour to every hourly employee who is not in the tipped category.
3. Limit the $7.21 tipped basic wage to employees of hotels, motels, tourist places and restaurants who customarily and regularly receive more than $120 a month in tips.
4. Document each overtime exemption you rely on, including the sales mix or operating calendar that supports it.
5. Calculate earned sick time at the greater of the normal hourly wage or the minimum wage.
6. Post the 2026 minimum wage poster and replace it when the rate changes.
7. Keep payroll and tip records that show how each classification was made.

Common Mistakes Employers Make

• Treating every restaurant worker as tipped. The tipped rate depends on the employee's regular tips, not only on the industry.
• Assuming an exemption because the business is seasonal. The test is whether the business operates seven months or less a year or has strongly seasonal receipts, and whether it is in one of the listed categories.
• Using another state's rate or the federal figure as the Vermont rate. Vermont sets its own minimum wage, and the federal rate applies only when it is higher.
• Forgetting the January 1 change. The rate can only go up under the formula, so a payroll system that stays at the 2026 figure will underpay in 2027.
• Skipping the poster. The poster is mandatory, and the 2026 version should be on the wall now.

Where to Get Answers

The Vermont Department of Labor is the primary source for minimum wage rates, posters and the current rules on earned sick time. Its website is labor.vermont.gov. For specific questions about tip credits, overtime exemptions or how a particular job should be paid, call the Wage and Hour Program at 802-951-4083.

For a business with several locations, a mix of tipped and non-tipped positions, or a dispute with an employee, talk to an employment attorney who works with Vermont employers. A CPA can help you model the payroll cost of the January 1 increase once the 2027 figure is published. Neither will replace the official state rules, but a short consultation before you change pay practices is usually less expensive than correcting an underpayment after the fact.