Minimum wage increase 2027: what it costs your restaurant

As of October 3, 2026, at least 11 states had posted minimum wage increases for January 1, 2027 on their official sites, from 40 cents an hour in Ohio to $1.27 in Michigan, and so had cities such as Denver, Minneapolis and Seattle. Your extra labor cost is the hours you pay under the new rate × the raise per hour, plus payroll taxes. If your labor percentage stays inside your target range, absorb it for now; if not, cut the hours that run below your sales-per-labor-hour line first, and raise prices only for what that doesn't cover.

Which increases are confirmed for January 1, 2027

The table lists January 1, 2027 rates posted on official state and city pages as of October 3, 2026. More states and cities announce through the fall, and some change on other dates. If your state adjusts every year and isn't listed, its 2027 rate couldn't be confirmed on its official site on October 3; look again before January. A city or county minimum can be higher than the state's: California's labor department, for one, says employers must pay the higher local rate where it applies.

The small print that can change your number:

• New Jersey: seasonal employers and those with fewer than six employees go from $15.23 to $16.25, a $1.02 raise.
• Ohio: $11.40 covers businesses with yearly gross receipts over $420,000; smaller ones stay at the federal $7.25.
• Colorado: the state sets a rate for each year, and its guidance on local minimum wages names January 1 as the day it changes.
• Other cities: Washington's announcement names several more cities above the state rate, and Minnesota's names Minneapolis and St. Paul. Check your city's labor office.

New York: no change on January 1, 2027. The state labor department says a condition in the law that can stop the yearly inflation increase was met, so the minimum stays $17.00 an hour in New York City, Long Island and Westchester and $16.00 elsewhere. The governor has proposed new rates; they need the Legislature's approval and would start March 1, 2027.

Tipped staff. Where a state raises its tipped cash wage on January 1, 2027 and its page gives the new rate, it's in the table below. California, Minnesota and Washington allow no tip credit, so tipped staff get the full minimum, according to the Labor Department's tipped wage table (July 1, 2026). Elsewhere, tipped rates and tip credit rules vary by state: check that table and your state labor office.

What it adds to your labor cost

Work it out for one week from your own payroll. Count every hour paid below the new rate, including staff who earn a little more than today's minimum.

• Hours and pay rates: last pay period's payroll register, or your time clock report.
• Payroll tax rate: employer taxes ÷ gross wages on a recent payroll report. It runs higher early in the year, when unemployment taxes start over.
• Sales and labor cost now: net sales from your POS for the same week, and wages, payroll taxes and benefits from payroll or your P&L.

The example restaurant has six or more employees, so the $16.48 rate applies, and its tipped cash wage rises by the same 56 cents. Elsewhere the two raises can differ (in Michigan, $1.27 regular and 81 cents tipped), so run each group of hours at its own raise.

Two more costs move with the minimum wage. Budget for them too:

• Staff just above the new rate. When the minimum catches up with an experienced cook's pay, the gap between new hires and veterans shrinks. That's wage compression. The law doesn't require raises for them, but if you plan any, price them the same way and add them to the total.
• Salaried managers. In some states the minimum salary for exemption from overtime moves with the minimum wage. From January 1, 2027 it's $72,384 a year in California and $47,101.08 in Maine; in Washington, $82,976.40 for employers with up to 50 workers and $92,196 for larger ones. Below it, a manager no longer meets the salary test for the exemption; check with your state labor office.

Reprice, trim hours or absorb it

Decide from two of your own numbers: the new labor percentage and your sales per labor hour, hour by hour. Our restaurant labor cost guide explains the ranges and the cut line.

1. 01Absorb it for now if your new labor percentage is at or under the top of the range for your type of restaurant, and recheck it with January's first four weekly payrolls. The example can't: 35.4% is over 35%, the top of the full-service targets RestaurantDoctorAI uses (30–35% of sales).
2. 02Trim hours first if you're over and some hours run below your cut line. Pull sales by hour from your POS and hours worked by hour from your time clock; every hour under the line is a candidate. Hours to cut = extra cost ÷ the hourly cost, with payroll taxes, of the shifts you'd cut. In the example: $277.20 ÷ ($16.48 × 1.10) = 15.3 hours a week of non-tipped time. A tipped hour saves only its cash wage.
3. 03Reprice for the rest if those hours can't cover it. Price rise = the cost trimming doesn't cover ÷ net sales, or up to extra cost ÷ labor cost now to get your old percentage back. In the example, just over 0.9% covers the cost with no trimming, and 2.7% brings labor back to 34.5%.

This week

1. 01List everyone paid under your 2027 rate. From last pay period's payroll register, note each person's rate and weekly hours, then hours × (2027 rate − their rate). Put tipped staff on their own lines, at the tipped cash wage.
2. 02Rerun your labor cost for January. In the labor cost calculator, enter last week's figures with the extra wages added to hourly staff pay and the extra taxes to payroll taxes, keeping the same net sales. If the new labor percentage is over the top of your range, mark the hours below your cut line before you write January's first schedule.
3. 03Set the date for any price change. If the rules above say reprice, pick the percentage (between your cover-the-cost and keep-your-labor figures) and the day it starts, and book any menu reprint by December 1.