🔒CT employers must prepare for minimum-wage hike

The minimum wage was a controversial issue this legislative session, but moving beyond the political acrimony it’s time for businesses to prepare for the new reality.

Unlike minimum-wage hikes in past years, this year’s is more nuanced, affecting certain classes of workers differently.

The new Connecticut hourly minimum wage will increase to $11 on Oct. 1, 2019; $12 on Sept. 1, 2020; $13 on Aug. 1, 2021; $14 on July 1, 2022; and $15 on June 1, 2023.

The state’s current minimum wage is 10.10 per hour vs. the federal minimum hourly wage of $7.25 per hour.

There is an exception to Connecticut’s recent minimum-wage increase for employees who work for tips, which include restaurant staff and bartenders. Their minimum wage will be frozen at $6.38 for hotel and restaurant staff, and $8.23 for bartenders.

Due to these lower hourly wages for tipped workers, the law requires tips to make up the difference between their current hourly wages and the new minimum wages for non-tipped employees.

Younger workers under the age of 18 who are learners or beginners are not guaranteed the minimum wage in all situations. With the new law, employers are allowed to pay these younger employees 85 percent of the minimum hourly wage for the first 200 hours of employment.

Strategy shifts

There are various strategies business owners can adopt to deal with these wage increases. One approach would be to use these increased hourly wages to attract more applicants and possibly raise the level of your employee ranks.

This could lead to less turnover and more productivity, which would be huge money savers.

Additionally, businesses could add additional employees to minimize or eliminate overtime for their minimum-wage earners.

Other strategies include delaying the increases until required by the law, reducing overtime without increasing employee count or simply reducing headcount.

Companies should examine their internal processes and use technology to automate the manual components.

In addition, technology such as automated phone attendants and doorway exit and entry technology can also reduce headcount.

Finally, reworking job requirements could allow employers to utilize salaried individuals to absorb work previously performed by minimum-wage earners.

Economic impact

Experts have different opinions on how the minimum-wage increase will impact the economy.

While many feel that a higher minimum wage is a good thing for the state, experts who work alongside small businesses and nonprofits seem to have a different opinion.

We have seen small-business closures in places (including New York City) that have already raised their minimum wage to $15 per hour. Businesses in Connecticut will be forced to pass these news costs onto customers, thus making the cost of living higher here.

Businesses may need to lay off employees, which will have a negative impact on the unemployment rate in Connecticut. We also need to consider the effects on our Connecticut municipalities and the state’s not-for-profit industry. These entities will experience dramatic increases in wage costs with few options to increase revenues, which means there may be reductions in the services they render.

There is an ongoing debate at the national level about the impact of minimum-wage increases.

In written testimony on Connecticut’s wage-hike bill, David Cooper, a senior analyst at the left-leaning Economic Policy Institute think tank, noted “Research has shown that past minimum-wage increases have achieved their intended effects, raising pay for low-wage workers with little to no negative impact on employment.”

However, Michael Saltzman, managing director at the right-leaning Employment Policies Institute, said in an April 2017 article that “Economists don’t agree on much, but there’s broad recognition among the experts that a $15 minimum wage is a terrible idea,” … that “hurts those it’s intended to help.”

Regardless, the policy is now law and employers must adapt.

Michael Sabol is the co-founder of MahoneySabol, a Glastonbury certified public accounting firm.