Minimum-wage workers in two Rocky Mountain and Plains states get a raise on Jan. 1, 2027. Montana’s minimum wage goes from $10.85 to $11.20 an hour, a gain of 35 cents. South Dakota’s goes from $11.85 to $12.30, a gain of 45 cents, and its tipped rate rises from $5.925 to $6.15.
Both increases follow state formulas tied to the consumer price index, so they were set by inflation and not by a vote this fall. Both states land well above the federal floor of $7.25 an hour.
Montana’s $0.37 adjustment, rounded to $11.20
Montana’s Department of Labor and Industry announced the new rate in an Oct. 7 determination letter signed by Commissioner Sarah Swanson. The letter says the consumer price index for all urban consumers rose 3.40% over the prior year. Under state law, that produces a 37-cent adjustment to the current $10.85 rate.
The math in the letter runs $10.85 plus $0.37 equals $11.22, which is then rounded to the nearest five cents, giving $11.20. The department must finish the annual adjustment by Sept. 30, and the letter cites section 39-3-409 of the Montana Code.
The department’s minimum wage page adds the rules around that number. Montana’s rate is the higher of the federal or state minimum, Montana allows no tip credit, meal credit or training wage, and a business not covered by the federal wage law with gross annual sales of $110,000 or less may pay $4.00 an hour. A worker covered by the federal law, such as one who produces or moves goods across state lines, must still receive the higher state or federal rate.
The open question for workers is how much more a minimum-wage paycheck will bring in January. For someone working a full 2,080-hour year, the raise comes to about $728 in Montana and $936 in South Dakota before taxes. People who work part time or hold a second job paying minimum wage should check the new rate against their own hours.
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Montana’s formula looks at the change in the consumer price index from August of the prior year to August of the current year. If prices did not rise, there is no adjustment. If they did, the department rounds the new amount to the nearest five cents.
South Dakota’s tipped and non-tipped rates
South Dakota’s Department of Labor and Regulation posts the new numbers on its minimum wage page. The non-tipped rate is $11.85 an hour through the end of this year and $12.30 from Jan. 1, 2027. The tipped rate is $5.925 now and $6.15 in 2027, and employers must make sure tipped workers still reach the full minimum when tips are counted.
The state raises the non-tipped wage each year at the same rate as the cost of living, measured by the Labor Department’s consumer price index, and rounds the increase up to the nearest five cents. The wage cannot decrease. The new rate must be posted by Oct. 15 each year.
Some South Dakota workers fall outside the rate. The page lists seasonal amusement or recreation establishments, babysitters and outside salespersons as exempt, with separate rules for training wages, apprentices and people with a developmental disability.
What 35 and 45 cents add up to over a year
A full-time schedule runs 2,080 hours a year. At that pace, 35 cents an hour adds up to $728 before taxes in Montana, and 45 cents an hour adds up to $936 in South Dakota. That is simple multiplication, not a figure either state publishes.
A part-time worker gets a proportional amount. Someone working 20 hours a week would see about $364 more in Montana and $468 more in South Dakota over a year. In weekly terms, that is a few dollars more on each pay stub starting with the first one of 2027.
Anyone paid tips in South Dakota should look at the cash-wage line, which rises 22.5 cents, from $5.925 to $6.15. In Montana, tipped workers get the full state wage from the employer, since the state allows no tip credit.
Why a raise can shift other income
Older workers who earn a little on top of Social Security or a pension have a second thing to watch. Benefit programs with income limits look at earnings, so a larger paycheck is worth checking against each program’s limit. The state office that runs a program can say how the new wage will be counted.
Employers in both states are the ones who have to change the payroll. Workers who want to check the new rate can call Montana’s Employment Standards Division at (406) 444-6543, or South Dakota’s Department of Labor and Regulation at 605-773-3101.
One question is left for each worker: will the first paycheck of 2027 carry the new rate? Hours worked on or after Jan. 1 are paid at $11.20 in Montana and $12.30 in South Dakota, so a pay period that straddles New Year’s Day will have two rates. The stub should show the difference.
The federal floor stays put
The U.S. Labor Department’s state minimum wage table, dated July 1, 2026, lists $7.25 an hour as the federal rate for employers in states with no state law. Montana’s and South Dakota’s rates are far above that floor, so the January changes come entirely from state formulas.
Will the first January pay stub show $11.20 or $12.30?
A pay period that crosses New Year’s Day is the easy place for an old rate to slip through, and a small error repeats every pay period. Even a correct raise changes the income figure that benefit programs count.
The Benefits Checklist covers that side. It scans eleven benefit programs retirees most often miss, with the 2026 income limits for each, a 50-state phone directory and a printable application tracker. Part 8 lays out all eleven at a glance, with when to act.
Get the benefits checklist and income limits before the January raise changes the math →
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This article was produced with the assistance of AI and reviewed by the editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
