Businesses Affected by Increases in State and Local Minimum Wages
Do you own a business in a state where the minimum wage is increasing in 2019? Do you have employees working in a state where there are local minimum wage requirements? There’s a good chance you’re an employer who fits into one of these two categories, considering that 21 states and many jurisdictions have raised their minimum wage or are scheduled to do so in 2019.
There is also some movement at the federal level to attempt to raise the floor of the minimum wage, including a bill making its way through committee in the U.S. House of Representatives. That bill proposes to more than double the current minimum wage of $7.25 to $15 by 2024.
The federal minimum wage has not increased since 2009.
Of the 21 states increasing minimum wage, eight are due to wages being indexed to changes in the cost of living; seven states were spurred by citizen-initiated ballot measures; while six states and Washington, D.C., resulted from legislative bills that scheduled specific increases.
Additionally, many states have local minimum wages (cities, counties, etc.) that have a minimum wage rate that is higher than the state rate. For example, businesses in the states of New York and Washington must manage with wage increases that exceed state minimums in 2019.
Two states now have a minimum wage of $12 applicable to employers of any size. New York City businesses that have 11 or more employees saw the biggest hike – $2 – of anywhere in the nation, while Washington, D.C., will increase its minimum wage to $14 in 2019. New Jersey will see the largest increase in the United States in 2019, incrementally moving up $1.30.
Note: Employers who have tipped workers may be able to take a tip credit against minimum wage if they meet the requirements to do so. The tips the employee receives plus the cash wage must equal the minimum wage, otherwise the employer must make up the difference. Some states and local jurisdictions have the same minimum cash wage, some have a higher minimum cash rate, and others do not allow a tip credit. For example, Washington, D.C., has a minimum cash rate for tipped workers set at $3.89. Businesses that employ tipped-wage workers are responsible for knowing what the minimum cash wage is in their state and the requirements necessary to stay compliant.
Where is minimum wage the highest?
The minimum wages in the states of Washington and Massachusetts increased to $12 an hour.
What is minimum wage today?
The following is a breakdown of the states with the highest minimum wage, as well as states and jurisdictions that will see the largest increase in their minimum wage.
New York and New York City Minimum Wage
The state has four different minimum wage requirements that went into effect Dec. 31, 2018, and will continue to increase every New Year’s Eve until 2021. New York City businesses with 11 or more employees will see the largest increase per hour in 2019 at an extra $2 per hour – bringing the minimum wage to $15. Businesses with 10 or fewer employees are at $13.50 per hour after a $1.50 hike went into effect on the last day of 2018. The counties of Westchester, Suffolk, and Nassau – the former bordering the city to the north and the latter two on Long Island – bumped up $1 to $12 and will see annual $1 upticks for the next three years until they reach the $15 mark on Dec. 31, 2021.
The rest of the state increased $0.70 per hour and similarly will have the same amount added every Dec. 31 until reaching $12.50 per hour in 2020. Any increase thereafter will be determined by indices.
California Minimum Wage
The Golden State saw its minimum wage increase to $12, but only for businesses with 26 or more employees. The minimum wage is $11 for businesses with 25 or fewer employees. Under the Fair Wage Act of 2016, the minimum wage is expected to increase to $15 per hour by 2022. Minimum wage would then be tacked to inflation after that.
New Jersey Minimum Wage
The Garden State will see the largest increase of any state this year, moving to $10 for most employers by July 1, 2019. The state minimum wage will go up $1.30 in 2019, with a scheduled increase in July. The New Jersey minimum wage will continue to increase each Jan. 1 through 2024, when it will reach $15. Wage increases after that would be tied to the consumer price index.
There are exceptions, including a different wage increase structure for seasonal workers – those defined as working between May 1 and Sept. 30 each year – as well as agricultural workers, and small businesses with five or fewer workers. There is even a training wage beginning in 2020 that would allow employers to pay employees in training programs wages equal to at least 90 percent of the minimum wage.
Massachusetts Minimum Wage
The Massachusetts’ minimum wage increased to $12 following a compromise between the state legislature and the organization Raise Up Massachusetts that kept a citizen-initiated measure off the ballot. The sticking points were the year required to reach $15 per hour and tying minimum wage to inflation after that. The “Grand Bargain” legislation – named because the bill included other initiatives such as Paid Family and Medical Leave, for instance – went into effect Jan. 1, 2019.
Seattle, Washington, and Portland, Oregon Minimum Wage
Washington, like many states, has a locale whose minimum wage differs from the state. The city of Seattle implemented a $16 per hour rate for companies with more than 500 employees worldwide. Likewise, employers in metropolitan Portland, Oregon, must pay employees $12.50 per hour, effective July 1, 2019 – $1.25 more than all business in the rest of the state. In fact, when Oregon’s scheduled minimum wage hike goes into effect in July, all businesses outside of Portland will be paying $11.25 an hour.
Washington, D.C. Minimum Wage
The nation’s capital minimum wage increased to $14 in July 2019, headed toward $15 by 2020. The minimum wage applies to any employee who works at least 50 percent of the time in Washington, D.C., regardless of where the worker lives. The city will become the first to reach the $15 mark in the country. In comparison, neighboring Virginia follows the federal minimum wage ($7.25), while Maryland’s statewide minimum wage is $8.75 except for several counties that have higher established minimum rates.
What Are State Minimum Wages in 2019*?
*-If a jurisdiction within the state has a higher minimum wage, the higher minimum wage prevails.
Note: All states not listed either do not have a minimum wage or have the same amount as the federal minimum wage of $7.25. The states with the federal minimum wage are Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Virginia, Wisconsin, and Wyoming. Alabama, Louisiana, Mississippi, South Carolina, and Tennessee have no minimum wage requirements.
1-Listed rate is for employers in California with 26 or more employees. Employers in California with 25 or fewer employees have a minimum wage of $11 per hour.
2-Listed rate is for large employers. Small employers must follow a minimum wage of $8.04 per hour in 2019. The 90-day training wage and youth wage will also be $8.04 per hour.
3-For employers who do not offer health insurance. If an employer offers health insurance, the minimum wage is $7.25.
4-Scheduled for second increase of year on July 1, 2019, to bring rate to $10 for most employers.
5-Listed rate is for most employers in New York state. The minimum wage for New York City will be $15 for large employers (11 or more employees) and $13.50 for small employers (10 or fewer employees). The minimum wage for all employers in Long Island and Westchester counties is $12. There are also differing minimum wage rates for certain industries, such as hospitality and the fast food, building services, farm workers, and the apparel industry.
6-Listed rate is the standard minimum wage. Portland Metro region minimum wage is $12 per hour until July 1, 2019, when it raises to $12.50, and non-urban counties have a minimum wage of $10.50 per hour, with an increase effective July 1, 2019, to $11 per hour.
How can businesses plan for minimum wage hikes?
Business owners are taking different approaches to the minimum wage hikes in their respective states, but the initial reaction from some has been to cut costs to offset the increase in money they must budget for payroll. One survey conducted for restaurants in New York City and shared on the industry website Restaurant Business indicated that 75 percent of restaurants in NYC have cut labor costs by either trimming staff (36 percent) or employee hours (77 percent).
Other businesses are raising prices for goods and services simply because it costs more for them to purchase the materials they need to run the business.
The bottom line is the bottom line, with profit margins and cash flow top of mind for businesses. Employers should conduct an audit of their expenses to determine what their cash flow is and who can they afford to hire.
However, there are opportunities for business owners to take advantage of the increase in minimum wage. A better-paid employee can help reduce turnover and increase productivity by fostering longer tenure and more loyalty. Businesses can also utilize low-cost benefits and mix traditional and non-traditional benefits to appeal to employees, especially if a rise in minimum wage forces employers to trim in other areas.
If business owners are paying more per hour for employees, they want to make sure they are attracting the right candidates. The average cost of hiring an employee is $4,425, according to the Society of Human Resource Management’s “2017 Talent Acquisition Benchmarking Report.” Businesses can prepare by using mobile recruiting methods that meet the needs of the business and the candidates they seek.
A higher minimum wage is an investment in an employee, so businesses should consider investing in better technology that automates some processes and provides self-service options, which can help reduce costs. Automating payroll, using better HR technology to onboard new hires, and implementing a learning management system (LMS) to engage employees with skills training and career development are all potential avenues for employers to look at.
What employers should know
Any change in minimum wage creates additional compliance requirements, especially for employers in states with multi-tiered minimum rates where employees might have different payroll tax requirements.
If you have a business in a state where the minimum wage is not changing this year and the rate mirrors the federal minimum wage, you need to stay informed on any changes at the federal level that will affect the requirements of your state, as well as any potential legislation that affects your state specifically.
Paychex will continue to monitor jurisdictions for changes in the minimum wage and the potential impact on businesses. There are many proposed minimum wage changes on the horizon, and any information contained in this article is current as of publication date but subject to change.