Minimum Wage Changes for 2016 

 

As we roll into 2016, a concern from 2015 has followed us into the New Year. During 2015, much had been said, speculated, and decided in regards to minimum wage increases. A good amount of the fruition of those discussions and decisions begins in 2016. In our first Astronology of 2016, we will explore the changes in minimum wages in 2016.

Currently, the Fair Labor Standards Act (FLSA) has set the federal minimum wage to $7.25 per hour. According to the United States Department of Labor’s website, “Many states also have minimum wage laws. Where an employee is subject to both the state and Federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.” Although the federal minimum wage is $7.25, your state may have a higher rate.  In that case, the state minimum wage prevails, as it is more generous to the employee.

Because your state may have a higher minimum wage rate than the federal level, and possibly scheduled annual increases, it’s important to stay informed on any state labor changes. As of now, scheduled increases for 2016 include the following:

Minimum Wage
State	Date	New Rate	Notes
Alaska	January 1, 2016	$9.75	Future Increases 1-1-2017
Arkansas	January 1, 2016	$8.00	$8.50          1-1-2017
California	January 1, 2016	$10.00
Colorado	January 1, 2016	$8.31
Connecticut	January 1, 2016	$9.60	$10.10        1-1-2017
Hawaii	January 1,2016	$8.50	$9.25          1-1-2017 $10.10        1-1-2018
Maryland	July 1, 2016	$8.75	$9.25          7-1-2017 $10.10        7-1-2018
Massachusetts	January 1, 2016	$10.00	$11.00        1-1-2017
Michigan	January 1, 2016	$8.50	$8.90          1-1-2017 $9.25          1-1-2018
Minnesota	August 1, 2016	$9.50 Large Employers $7.75 Small Employers	Future Increases Annually 1-1-2018
Nebraska	January 1, 2016	$9.00
New York	December 31, 2015	$9.00 All $9.75 Fast Food	Future Increases To $15.00 fast food by 2018, all other industries by 2021
Rhode Island	January 1, 2016	$9.60
South Dakota	January 1, 2016	$8.55
Vermont	January 1, 2016	$9.60	$10.00          1-1-2017 $10.50          1-1-2018
Washington D.C.	July 1, 2016	$11.50	Future Increases Annually 7-1-2017
West Virginia	January 1, 2016	$8.75

According to www.blr.com

             
The National Conference of State Legislatures highlighted the following on the 2016 minimum wage updates:

• Of the 14 states that begin the New Year with higher minimum wages, 12 of them increased their rates through legislation passed in 2014 and 2015.  Two states automatically increased rates based on cost of living.

• There are 11 states that currently tie minimum wage increases to the cost of living.  Eight of those did not increase their minimum wage rates for 2016. The three states from the 11 that will be making increases in 2016 are 
•  Colorado ($0.08 per hour increase)
• South Dakota ($0.05 per hour increase)
• Nevada (to be announced later this year, and taking effect in July 2016)
• Maryland, Minnesota, and Washington D.C. have increases scheduled later in the year.

Perhaps your state may not have any scheduled increases this year. Are you aware of the current minimum wage for all locations where your organization has employees?  The National Conference of State Legislatures website has a helpful, more inclusive list of the established minimum wages for all 50 states for 2016. You can also check your State Department of Labor (DOL) websites from the United States DOL site.   In addition, cities or other local jurisdictions may have minimum wage rates.  It is critical to ensure compliance with all applicable minimum wage legislation for all employees for their applicable work locations.

While increases to the minimum wage may present financial challenges to employers who have a substantial number of employees paid at that level, all employers need to be aware of and responsive to minimum wage changes. “Pay compression is a consideration for many of our clients,” explains National Director Jennifer Loftus. “Pay compression occurs when the pay rates for new employees are at the same or higher levels than those for current employees. Pay compression can also occur between pay rates of employees at the minimum wage, and rates for positions one to two pay grades above.” Loftus explains that employers should conduct compression analyses to determine additional employees impacted by the minimum wage changes, and determine the cost to adjust pay rates accordingly, to ensure internal equity is maintained between employees and various grade levels, and compression is avoided. “Pay compression is sometimes a costly matter to address,” states Loftus, “but the costs of employee turnover may be far greater.”