Minimum Wage to Increase This Year: Be Ready
With minimum wage set to rise in 21 states in 2020, businesses in those states must decide how they’re going to deal with increasing employee wages. This minimum wage increase is expected to spread, with more cities and states joining the trend. Small businesses pay an average of 30% of their profits in employee wages, and that number can increase depending on the type of business you’re involved in.
You know the needs and realities of your company better than anyone.
Also read: 7 Ways To Do Your Employee Payroll
Minimum Wage Increase
Municipal and state legislatures are leading this round of minimum wage increases. The Federal Minimum Wage is not set to increase or change in 2020. The only exception to this is Federal contractors who are set to see a modest increase in their minimum payment. Many counties are establishing minimum wage guarantees, and several large businesses have done so as well.
Businesses like Bank of America, Target, and Facebook have all set higher minimum wages for their employees. The enthusiasm for minimum wage increases looks to be staying strong, but there are some exceptions to the laws depending on the state. These exceptions are dependent upon local legislation, so you should research your local laws.
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Exceptions For Small Businesses To Minimum Wage Increases
The first major exception is that tipped employees don’t qualify for minimum wage protection. This means people that work as servers at restaurants, bartenders, and other positions where a majority of their income is from tips don’t qualify. There are also some states, like California, which are giving businesses with small rosters more time to comply.
Other states, like Minnesota, base compliance off of revenue. Knowing your local laws is the best way to tell if you’re able to avoid some of these increases. If you live in the states of Utah, Oklahoma, Louisiana, Mississippi, Tennessee, Alabama, South Carolina, or Virginia, your state doesn’t have a minimum wage.
In these states, your business will most likely fall under federal minimum wage laws, which aren’t set to increase. In many cases, the new minimum wage increase applies to part-time employees as well. State laws vary, and so understanding yours will immediately alert you to any changes in part-time minimum wage. Some exceptions do exist for students and young people.
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States With Higher Minimum Wages
What states have the highest minimum wage? States that have the highest minimum wage increases already have a higher cost of living than other states. California and Washington State are set to have the highest minimum wage requirements, with California being at $13.00 an hour and Washington at $13.50.
New York State comes in third with a minimum wage of $12.50 per hour. After that, there are numerous states that have set their minimum wages to $12.00, with many states mandating increases over time. These increases will bring some states up to $15.00 an hour by the mid-2020s.
How Do I Protect My Business?
If you operate a very small business that does under $1 million in revenue a year, has very few employees, or only a single location, you could qualify for exempted status. Research your local laws and determine the requirements in your area. If you have already done that, then you must look at other options.
Analyze the processes that your company uses and look for areas in which costs can be cut. You may find that this increase will force you to make needed cuts that make your business more profitable. If you find an area in which you can minimize the expense of employees without compromising the performance of your business, you could save some money.
Be careful not to go too far, as any reduction in service offered will likely outweigh the cost of minimum wage increases in customer loss. Investing in cheaper services, such as a paystub generator can save you money by eliminating the need for a large human resource or payroll department. These services can make your business more profitable immediately.
Tracking Minimum Wage
For most businesses, the rising minimum wage will impact their bottom line. Make sure that you monitor your compliance with new laws. Using a short blue paystub is a great way to do that, leaving a record of wages and taxes paid. You will want to make sure that your compliance is tracked. Doing so could protect you from possible liability if you’re sued over wages by disgruntled employees.
It could also remove the risk of fines for not complying with state law.
A minimum wage increase is felt more by smaller businesses. If you’re already operating on a razor-thin budget, you may need to consider limiting benefits. Benefits are not calculated into minimum wage, so even if you offer excellent health insurance or retirement, they won’t factor into the equation.
Limiting these benefits can easily make up for lost profit due to payroll. If you are paying employees more, they can also afford to provide more for themselves. Striking a balance between these two factors that work for your business can also make your employees happy.
Minimum Wage Budget
One of the first steps you should take is calculating the increase in your payroll before it applies to your business. If you haven’t already done this, make sure that you calculate increase based upon the minimum wage and then determine if you are going to increase your employees to the minimum wage or beyond it.
Budgeting properly will save you a lot of time and stress as the wages continue to rise. A minimum wage budget can help you control payroll costs.
Your Business Depends On You
Surviving any dramatic change, such as a minimum wage increase, is not only possible but could bring unexpected benefits. Cutting costs and operating expenses can make your business even more profitable, and higher-paid employees are happier. If your competition can’t weather the storm, you may even see an increase in customers and revenue.
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