Numerous states and cities across the country decided during last weeks midterm elections to raise their minimum wage, which has legal and retail employment experts predicting changes to other benefits could occur as a result.
John E. Thompson, partner in Fisher & Phillips Atlanta office, explains that initial impacts will be felt in industries where traditionally there have been a higher proportion of minimum wage employees, such as the fast food, restaurant and retail sectors. But, he notes that aftershocks could end up in other areas of the workforce.
The things that people miss in a lot of these debates about minimum wage increases is that unless an employer is ready to build a bunch of wage compression into its system, the impact of the minimum wage increase is going to ripple through an employers entire compensation system, explains Thompson.
The National Restaurant Association, the largest foodservice trade association by membership with nearly 500,000 restaurant businesses, will likely see some constraints due to these planned or expected minimum wage increases. History has shown that small moderate increases in the wages are the kind of things that industry can adapt to over time, but large extreme or measures that are out of context with the local economy are going to result in a change in the benefit package that employers offer employees, says Scott DeFife, executive vice president of government affairs for the association.
Things such as the Federal Insurance Contributions Act tax, a federal payroll tax imposed on both employees and employers to fund Social Security and Medicare, may be indirectly increased as a result of the increased percentage of compensation smoothing many employers will have to figure out. It could be a burden to the entire industry, says Thompson.
According to Thompson, whose practice focuses on wage and hour law, employers will revisit what benefits they have or at what levels of benefits they provide. If theyve got a finite pool of compensation resources, and by law they must allocate more of those resources to wage rates, then it might well affect whether or what levels they adopt, or continue, other benefits they might be providing, Thompson says.
In the restaurant industry, which has roughly 13 million employees, DeFife says benefits such as flexible work schedules, or providing meals to staffers will have to be thoroughly analyzed.
The bucket for salaries and benefits is only as large as it is in an industry with as narrow an operating margin that the restaurant industry has, DeFife says. You cannot continue to mandate benefits in one area without it coming at the expense of something else that may have otherwise have been voluntary.
On Nov. 4, voters in four states approved ballot initiatives that would raise their minimum wage high above the federal level, which is established by the Fair Labor Standards Act. Also, non-binding ballot questions were supported in two other states.
Meanwhile, for Alaska, Arkansas, Nebraska and South Dakota employers, these changes include:
- Alaska voted to bump up its wage from $7.75 to $8.75 in 2015 and to $9.75 in 2016.
- For Arkansas, its minimum wage will jump from $6.25 to $7.50 in 2015; to $8.00 in 2016 and to $8.50 in 2017.
- Nebraska will step up its $7.25 minimum wage to $8.00 in 2015 and to $9.00 in 2016.
- South Dakota voters sanctioned an increase in its minimum wage from $7.25 to $8.50 in 2015.
Also, states like Illinois, where voters approved a non-binding statewide referendum to raise the states wage from $8.25 to $10.00, this served as a message to legislators who now have to debate the change. Similarly, a number of counties and cities in Wisconsin voted in favor of a non-binding question to increase the states wage from the federal level of $7.25 to $10.10.
Within Californias state limits, where a $9.00 minimum wage was just made effective in July, Oakland and San Francisco voters supported increases of their own. In Oakland, the minimum wage increases from $9.00 to $12.25 in March. And San Francisco residents opted for increasing their minimum wage to $15.00 by 2018; its current level is $10.74.
According to the National Conference of State Legislatures, nine other states, and District of Columbia, have also enacted increases during the 2014 legislative session. On the national level, the Minimum Wage Fairness Act, sponsored by Sen. Tom Harkin (D-Iowa), plans to raise the federal minimum wage to $10.10 by 2016. And President Barack Obamas executive order in February proved to establish a minimum wage for federal contractors at $10.10.
Paid sick leave mandate
Coincidentally, as minimum wage hikes gained approval at the voting booth, other jurisdictions voted on mandatory paid sick time. Voters in Massachusetts approved a measure that calls for employers with 11 or more employees to earn and use up to 40 hours of paid sick time per calendar year. Also Oakland, Calif., and Trenton and Montclair, N.J. sanctioned similar paid sick leave requirements for employers. But according to Thompson, employers will likely be unable to offer more proactive benefits, such as expanding paid sick leave beyond state law, because there will be less money to go around at that point.
Meanwhile, DeFife explains that ballot initiatives for wage and hour law, and even paid leave and flexible scheduling, shouldnt become a regular occurrence. We dont think that its wise for this to become a city-by-city patchwork, says DeFife, while adding state legislators or other regulatory bodies should take up these issues in order to tailor the law as it pertains to the employee base, the local economy and the cost of living.
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