An increasing number of cities and states are beginning to believe that $15 an hour minimum wage should be mandatory, including California which recently passed $15 per hour minimum wage laws. However, the California Chamber of Commerce called the increase “a job killer.” As more politicians and groups push for higher minimum wages, employers need to prepare now for the financial, compliance and regulatory challenges these significant changes bring.
According to the National Conference of State Legislatures, more than half of the states and Washington, DC, have minimum wages above the federal minimum wage of $7.25 per hour. When federal and state laws have different minimum wage rates, the higher standard applies. For example, California and New York have recently enacted laws that will increase those states’ minimum wages to the highest in the country, with both reaching $15 in a few years.
But while some states are raising their minimum wages, others are pushing back. For example, North Carolina recently passed a law that limited the ability of cities and towns to set minimum wages. In February, Alabama lawmakers passed a similar law to ban local governments from establishing local minimum wages. That was in response to a law in Birmingham that would have raised the minimum wage to $10.10 in the city.
Obviously, the biggest repercussions of the rising minimum wage will be financial, as companies struggle to remain competitive and profitable with skyrocketing worker costs. But there are other considerations as well, including regulatory, paperwork and compliance. Among the things companies need to know:
- Understand the changes
Different states have different timelines for the increase in minimum wage and even states that aren’t aiming for $15 have made increases. Employers need to prepare now for actions that have been already legislated, or could be in the works. It’s important to plan ahead, and work with HR and legal counsel in order to understand what changes may be on the horizon and proactively prepare for them.
- Review employee classifications
Although the minimum wage largely affects hourly workers, new laws could also impact whether employees are properly classified as exempt salaried employees. This could have far-reaching financial and HR considerations. For example, in order to be exempt from overtime laws in California employees must earn a minimum monthly salary that is no less than twice the state minimum wage. That means employers in the Golden State need to be aware of how the minimum wage boost could impact whether employees are properly classified as exempt salary personnel.
- Posting notice requirements
Employers who are required to post wage notice requirements will need to update their information if their states have increased the minimum wage. Some states also require written notice, which will need to be updated and disseminated.
As minimum wage laws go up, the stakes will only get higher. In order to minimize the expenses and risks, employers need to prepare now.