Although the United States Department of Labor set the federal minimum wage at $7.25 per hour in 2009, many states and cities have since made their own decisions about the baseline rate of pay for workers. More than a dozen local minimum wage laws went into effect on Jan.1 of this year, with several more increases already scheduled.
Because the state and city laws supersede the federal standard, companies across the U.S. have begun preparing for new financial challenges. As a business owner, this need not be a detriment to your fiscal outlook, and can even be viewed as an opportunity, so long as you take the necessary steps to insulate your organization. Here’s where minimum wage rates went up in 2017 and what your business can do to adapt:
State and city minimum wage increases effective Jan. 1, 2017.
- Alaska: $9.80 per hour.
- Arizona: $10.00 per hour, with an additional increase of $0.50 scheduled for 2018.
- Arkansas: $8.50 per hour.
- California: $10.50 per hour, with an additional increase of $0.50 scheduled for 2018.
- Colorado: $9.30 per hour, with an additional increase of $0.90 scheduled for 2018.
- Connecticut: $10.10 per hour.
- Florida: $8.10 per hour.
- Hawaii: $9.25 per hour, with an additional increase of $0.85 scheduled for 2018.
- Maine: $9.00 per hour, with an additional increase of $1.00 scheduled for 2018.
- Maryland: $9.25 per hour effective on July 1, 2017, with an additional increase of $0.85 scheduled for July 2018.
- Massachusetts: $11.00 per hour.
- Michigan: $8.90 per hour, with an additional increase of $0.35 scheduled for 2018.
- Missouri: $7.70 per hour.
- Montana: $8.15 per hour.
- New Jersey: $8.44 per hour.
- New York: $9.70 per hour for Greater New York. $10.00 per hour for Nassau, Suffolk, and Westchester counties.
- New York City, NY: $10.50 for small employers. $11.00 for large employers
- Ohio: $8.15 per hour (gross receipts of $297,000 or more); $7.25 per hour (gross receipts under $297,000)
- Oregon: $10.25 per hour effective on July 1, 2017, with an additional increase of $0.50 scheduled for July 2018.
- Portland, Oregon: $11.25 per hour, with an additional increase of $0.75 scheduled for July 201
- South Dakota: $8.65 per hour.
- Vermont: $10.00 per hour, with an additional increase of $0.50 scheduled for 2018.
- Washington: $11.00 per hour, with an additional increase of $0.50 scheduled for 2018.
- Washington D.C: $12.50 per hour effective on July 1, 2017, with an additional increase of $0.75 scheduled for July 2018.
Changes to minimum wage laws will effect the amount you pay your employees.What you need to know about minimum wage compliance
Under the federal Fair Labor Standards Act, employee compensation is set by the national, state, or city minimum wage, and there are also overtime compensation rules for anyone working more than 40 hours a week. Laws that create provisions for meal periods, breaks, trainings, and other specifics also exist. Work with your HR outsourcing service partner to make sure your business is compliant with these expectations. Otherwise you could receive strict penalties and fines, or even leave your company vulnerable to a lawsuit.
Preparing for an increase to minimum wage
Even if your business pays its employees more than minimum wage, you could still see an increase in payroll costs down the line. The New York Times reported that a change in benchmark compensation will lead to higher-skilled employees eventually expecting a slightly increased salary proportional to the changed minimum wage. For employers, this also brings changes to 401(k) matching, benefits and other expenses. Whether or not you employ minimum wage workers, you should do what you can to prepare to spend more on payroll.
“Changes to compensation can yield happier, more productive employees.”
Mike Kappel, the founder and CEO of Patriot Software, LLC, wrote in Forbes that the best place to start is to reconsider your entire financial portfolio in an effort to reduce costs and increase profit margins. Could you be spending less in one department and move resources to payroll? In what ways can you promote efficiency? Kappel also suggested reassessing your business’ savings and investments to see if you could be yielding a greater ROI with these assets.
Next, consider your price points, partnerships, and other aspects of your business. BBVA Compass suggested finding solutions that either increase revenue or reduce overhead. All told, an increase in minimum wage won’t doom your business, but it should be met with a frank appraisal of your organization’s financial health.
How an increase can be an opportunity
You may find that changes to minimum wage actually benefit your company, even if it requires a bit of forward thinking and tough decision making. Some businesses will find that such changes will make automation and the introduction of technology more financially viable. As such, you can achieve new levels of efficiency to the benefit of your customers and your bottom line.
Importantly, changes to compensation can yield happier, more productive employees. Your existing staff may feel refreshed in the face of a pay raise, which can improve office culture and even output. A study from New York University found that in response to an increase in minimum wage, businesses ended up hiring more productive workers who accomplished more in less time.
There may be growing pains involved, but your business can use a change in minimum wage as an opportunity to improve. Not only will it prompt a fresh assessment of company’s fiscal standing, but will also constitute an investment in your work force. And because your competitors will be dealing with the same challenges, you won’t be the only business being asked to make changes. Select a few key initiatives to focus on and monitor changes accordingly.
