In January 2017, a total of 40 states and jurisdictions across the country raised the minimum wage for small businesses. While nearly 4.3 million low-wage workers celebrated the change, the tens of thousands of small business owners who employ them pondered the impact the rise would have on their bottom lines.
So TSheets went straight to the source and surveyed 500 small business owners in the US to find out how they really feel about minimum wage on the rise … and the results were surprising.* While 14 percent of business owners claim they would be forced to let employees go if the minimum wage were to jump in their state, 1 in 3 businesses owners thinks increased wages could actually boost their business.
But there are a few things business owners aren’t thinking about when it comes to minimum wage. And they’re things that could go against FLSA regulations and land business owners with an FLSA wage and hour lawsuit.
To clear things up, we spoke with Frank Tresnak, business development manager at Symmetry Software — home of PaycheckCity.com — to ask him how small business owners can prepare for the influx minimum wage changes and what they need to remember.
When does minimum wage go up? Nineteen states increased their minimum wage in 2017, and another eight are slated to increase even further in 2018 and beyond. But minimum wage rates can change at any time, as determined by the local chamber of commerce or department of revenue.
1. Knowing Your Zip Code Isn’t Enough
“You need to know for sure the exact jurisdiction you’re in,” said Frank. “But knowing the ZIP code isn’t enough. The postal ZIP code system doesn’t accurately reflect where your business is located.”
It sounds easy enough, but if you’ve got employees in multiple locations or on the go, determining the jurisdiction in which the work is actually performed can get tricky.
“Let’s say you’ve got an employee who’s a plumber,” Frank explained. “Your office is in Phoenix, but your plumber is out on the job, working in different locations each and every day. Are you going to track the time spent in each of those different locations, taking into account the different minimum wage rates in each place? Or are you going to use the office location? There are people in the industry who do either/or. But it’s something small business owners need to think about.”
And if you’ve got employees who work from home, this equation gets even trickier.
“First of all, you’ve got to determine if the home counts as a place of business,” said Frank. “And if you’ve got employees working from home in multiple states, you’ve got to consider the impact of the minimum wage rates and taxes in each state.”
In any case, these are definitely not riddles you should attempt to solve on your own. Frank recommends consulting with your accountant and outlining the best practices for your business.
If you’ve got employees working from home in multiple states, you’ve got to consider the impact of the minimum wage rates and taxes in each state.– Frank Tresnak Business Development Manager, Symmetry Software
2. Your Business Size, Benefits, and Industry All Matter
Determining your jurisdiction is an important piece of the puzzle, but it’s just one piece. In many states and jurisdictions, minimum wage rates vary based on the size of your business, your employee benefits, the industry you’re in, and the type of work your employees do.
“Minimum wage rates change whether you’re a server or a food worker, whether you’re a tipped employee or you share tips, and in some places, it’s different for fast food workers than it is for other low-income positions,” said Frank. “As a business owner, there’s a lot of things you have to sift through.”
Once again, Frank recommends meeting with your accountant or employment counsel to ensure compliance. “That’s the best thing you can do,” he said. “They live and breathe this stuff every day.”
3. Stay on Top of Pending Legislation
“As a business owner,” said Frank, “all you want to do is comply!”
But it can be hard to know what does and does not apply to your business, and how to prevent your business from running afoul of the many minimum wage regulations.
Even worse, it can be hard to keep track of minimum wage changes coming down the pipeline. “Most businesses don’t have much of a system to track these things,” said Frank, “and the challenge really comes in at the local taxing jurisdiction level. They can have a council meeting and change the rate at any time, but they don’t always communicate those changes very well. Staying on top of it is a real challenge.”
“First thing, make sure you stay in touch with your payroll provider,” Frank advised. “Sign up to receive alerts for changes and rate raises that come through their application.”
Then, as always, check with your accountant. Ask them to give you a heads up when they hear about future rate changes, so you’ll know what’s coming.
Finally, Frank said, “Get on the email list for your local chamber of commerce and the department of revenue. Stay on top of those rates. They’re subject to change — and change quickly!”
He adds, “It all comes down to knowing which jurisdiction, or jurisdictions, you’re in, knowing where your business fits into the minimum wage equation, and staying on top of pending legislation that could affect you.”