By Chris Hadden, CPP
Technical Sales Manager
What’s your minimum wage? You might say $7.25, which is the federal minimum wage. However, with recent events around the US, there are additional things to consider.
As we look back at 2016, the ‘fight for $15’ and other rallies continued to put a focus on minimum wage. In fact, even President-Elect Donald Trump, a Republican, has argued for an increase in the minimum wage. If I had a crystal ball to read from, I believe I would see additional minimum wage hikes in 2017. In fact, some increases are already on the books.
Here is a list of states with increasing wages in 2017 (note, some cities have higher minimum wages than state):
Alaska – increasing to $9.80 per hour
Arizona – increasing to $10 per hour
Arkansas – increasing to $8.50 per hour
California – increasing to $10.50 per hour (small employers have 1-year reprieve, at $10 per hour)
Colorado – increasing to $9.30 per hour
Connecticut – increasing to $10.10 per hour
Florida – increasing to $8.10 per hour
Hawaii – increasing to $9.25 per hour
Maine – increasing to $9.00 per hour
Massachusetts – increasing to $11 per hour
Michigan – increasing to $8.90 per hour
Missouri – increasing to $7.70 per hour
Montana – increasing to $8.15 per hour
New Jersey – increasing to $8.44 per hour
New York – increasing to $9.70 per hour
Ohio – increasing to $8.15 per hour
South Dakota – increasing to $8.65 per hour
Vermont – increasing to $10 per hour
Washington State – increasing to $11.00 per hour
How are tipped employees impacted? Under the FLSA, employers are only required to pay “tipped employees” $2.13 per hour in wages, so long as the employee’s tips are substantial enough to make up the remainder of the minimum hourly wage limit. This means the employer can take a “tip credit” of up to $5.12 ($7.25 federal minimum rate – $2.13 tipped rate). Keep in mind, though, if the employee’s tips do not bring the employee’s total wages up to the current minimum wage, the employer must make up the difference. In order to claim the tip credit, an employee must actually be classified as a “tipped employee.” “Tipped Employees” are employees who work in an occupation in which they regularly receive more than $30 a month in tips.
So what’s next? With President-Elect Donald Trump coming into office in January, the topic of raising the minimum wage is only going to increase – some fighting for raising, while others are fighting to keep it at the status quo. While Trump believes a $10 per hour minimum wage should be implemented, not everyone in his party or administration agree with him. Even Trump has stated that anything beyond $10 per hour should be handled at the state level. So, whether the federal minimum wage increases in 2017 or not, we can expect to see additional increases in the future, at least at the state level. In fact, some states have already released minimum wage hikes for 2018 and beyond.
Don’t forget your payroll software. Many payroll systems do an excellent job ensuring that a minimum wage rate is met when processing payroll (this is especially important for employees receiving tips as income). However, this rate is typically applied by the payroll user during the setup process. This can become somewhat of a challenge when a payroll user has multiple states that must be monitored to ensure minimum wage compliance is met.
So what can be done to stay compliant? Compliance changes and news alerts can be provided by member organizations, such as the American Payroll Association (APA). The APA releases annual publications regarding minimum wage change challenges in the upcoming year, which is a great resource for any payroll professional.
AS 2016 comes to an end, we can only assume that 2017 will be another dramatic year for employers and Payroll/HR professionals. Don’t get caught up in too much speculation, but do be sure to keep your eyes and ears open to legislation changes in 2017.
December edition of the American Payroll Association’s Payroll Currently
December edition of the American Payroll Association’s Paytech magazine
National Restaurant News: http://www.nrn.com/workforce/compare-state-state-minimum-wage-hikes
National Employment Law Project: http://www.nelp.org/blog/7-states-and-14-cities-and-counties-enacted-new-minimum-wage-increases-in-2016/ and http://www.nelp.org/content/uploads/PR-Minimum-Wage-Increases-New-Year-2016-2017.pdf