How Will the Federal Minimum Wage Change Affect You?

Today, Thursday, 7/24/08 enacts another phase of the federal minimum wage requirements from $5.85 per hour to $6.55 per hour. Currently 1.7 million people make $5.85 per hour or less, according to a 2007 Department’s Bureau of Labor Statistics. A boost to those workers’ wages to the new minimum wage will deliver them an annual salary of $13,624 (2007 federal poverty line for singles is $10,210).

As an employer its important to keep up on these regulations, and be proactive on how it might affect your company – even if you pay higher than $6.55 per hour.

HOW WILL THE FEDERAL MINIMUM WAGE CHANGE AFFECT ME?

If your state’s minimum wage is too low
Obviously, if your state’s minimum wage (whether for all businesses or just a certain size or industry) you will need to comply immediately with the federal guidelines, if you are not already. The minimum wage requirements apply to all official “hours worked” as defined by the federal labor and industries standards. Non-commuting drive time, some waiting time, certain types of on-call time, and more, are considered work hours and must comply with the minimum wage laws.

If you are already paying more than minimum wage, will this affect you?
Yes. The regulations will still affect your business at least for one reason, and that is as an employer you must have current federal wage posters at your location. These can be found for free at http://www.dol.gov/esa/regs/compliance/posters/flsa.htm, or there are a number of commercial companies that charge for posters that combine several of them in one big poster. Beyond the posters you may still be affected by one of the following situations.

When your state minimum wage is lower than federal, but you pay higher than that
Watch out for a potential chain reaction. You should be aware that all of those companies in your local area with minimum wage entry level jobs will now be competing with you for the same workers. Previously what you paid looked great to people making minimum wage, but now that they are making $1 or $2 more an hour, your wages may not look that much better. What evidence is there to the potential ripple-effect raises? Not much hard research has been done on it, but there are plenty of personal stories of how it affected individual businesses. Only time will tell, but be prepared just in case you have to pay more to find the same help.

If you pay by percentage
In the service industry many people pay by percentage or piece meal if it is allowed in their state. When doing so it is important to protect yourself by protecting your employees and verifying that the actual work time, non-commuting drive-time, call-in time, etc. of the longest jobs that your employees spend time on, still come in at an equal amount or more than the minimum wage. That regulation is an employee right ensured by our federal government.

If you pay a different rate for travel time
Not to sound like a broken record but check your travel time wage, and/or travel stipends to be sure they are still within the new guidelines.

Watch what happens in other states
Even if this change does not affect you much you may want to watch what happens in other states where they had to adjust the state wage requirements, to see how it affected companies in your industry, or that pay similar wages to your business. Did it cause wages in general to go up? Did companies have more people available to choose from? You need to watch because there are some more federal minimum wage changes coming up that will affect employers in more than half of the country. The federal minimum wage will increase to $7.25 on 7/24/09.

If you hire subcontractors its time for a review
Companies that legitimately hire subcontractors may not be subject to employer/employee regulations, however this would be a great time to check again and be sure that your team can truly be defined as “sub-contractors”. It only takes one disgruntled contractor to do some math and feel that they are not even meeting minimum wage requirements to lodge a complaint that they are truly an “employee” and not a contractor. Who needs that kind of headache? Follow all of the federal and local rules to the letter, and be sure that you are being fair about compensation, and you will sleep better at night.