Federal minimum wage not reflected in many payroll budgets

As states and cities across the country raise their minimum wages, hotels should be prepared for an increase in labor costs. Photo credit: Pexels/rawpixel.com

In June 2019, the federal minimum wage of $7.25 set a record. Last updated in July 2009, this is the longest period of time that the federal baseline pay has gone unchanged since that standard was introduced following the Great Depression. This milestone likely is not reflected in most employers’ payroll budgets because states, local governments and even larger companies have stepped in to require or to provide a higher baseline wage. In fact, approximately 22 states raised their minimum wages just this year, in addition to the many localities that have adopted minimum wages above their state minimum wage. Not only are we seeing increases in many states, we are seeing significant ones. Most New Jersey employers, for example, will see a 35 percent increase in the minimum wage from July 1, 2019 to Jan. 1, 2020. 

In many states, servers, bartenders and other tipped workers have a lower minimum wage, which is made up either by gratuities or the employer if the workers do not earn enough in tips to reach the minimum wage. These tipped rates are seeing increases, as well, in places such as Colorado, Florida, Massachusetts and Maine. Some states do not have different minimum wages for tipped workers. For those in locations that do, there has been ongoing debate regarding what structure of payment is best for workers and the businesses that employ them. This debate came to a head for Washington, D.C., voters in June 2018 when they approved a ballot measure to increase the minimum wage for tipped workers, changing the system there so that D.C.’s tipped workers will be paid the same as other workers by 2026. 

Even where changes have not been implemented by the government, businesses are facing market competition from employers raising their own wages with the goal of attracting and keeping workers when unemployment is low. For example, Amazon announced that starting in November 2018, all full-time, part-time, temporary and seasonal employees received a minimum of $15 per hour, more than double the federal minimum wage. As of June 2019, Target employees will receive at least $13 per hour, increasing to $15 per hour by 2020, and Bank of America has established a minimum wage of $17 per hour.

While it is unclear how long this record-breaking period with a $7.25 federal minimum wage will last, you can be sure that, regardless of where your business is located, minimum wage changes are either underway or headed to a labor market near you.

Andrea E. Zoia is a partner with Morgan, Brown & Joy with a practice focused on a variety of labor and employment matters. She can be reached at [email protected]