Compensation is a big deal. It’s a big deal for business owners who must budget for their employees. It’s a big deal for employees to fund their lives. For hourly employees, every penny counts. And with unemployment down and open positions up, competition is high for qualified individuals. So what’s the deal with minimum wage anyway?
Minimum Wage As It Stands Today
Twenty-nine states and the District of Columbia currently offer higher minimum wage than federal law. Fourteen states offer the same federal minimum wage of $7.25/hour. Two states are lower than federal minimum wage, and 5 don’t have a minimum wage requirement at all. Individual state legislative activities can control the state minimum wage thresholds. If the state minimum wage is higher than federal law, the state wages win. Adjustments to minimum wage amounts typically occur in January. There are 19 states scheduled for annual adjustments.
With regard to federally funded or assisted construction projects, the Davis-Bacon and Related Acts (DBRA) comes into play, specifically for those projects that meet the minimum threshold of $2,000. Essentially, DBRA ensures that laborers are compensated based on local prevailing wages, including fringe benefits. According to the National Conference of Legislatures, “the prevailing wage for the covered occupations is determined by the US Department of Labor through surveys of wages paid in those occupations in surrounding areas, so that the wages reflect the local economy.” The surveys include both union and non-union labor and are conducted on a regular basis to ensure accurate wage rates.
Two Sides of the Minimum Wage Coin
Should we increase minimum wage rates? Should we increase them to $15? That’s an interesting conversation between groups right now. On the one side, some warn that increasing minimum wage will have negative effects by eliminating jobs because employers will hire less or cut back on hours. They believe it could also lead to steep increases in prices overall as businesses try to balance an increased compensation demand with their need for increased income to make it all work. On the other side of the coin, some say the higher wage rates will result in positive effects including stimulating the economy and reducing taxpayer spending on assistance programs.
Robert Anderson, CEO, Jimboy’s Tacos, recently told QSR Magazine in the May 2018 issue, “We anticipate the labor market to become more competitive and drive wages upward. Therefore, we have an intensely aggressive focus on building value in our customer experience at Jimboy’s restaurants. Inherently, we can have more impact on building value in the customer experience than in trying to control wages in the marketplace . . . Increased sales and productivity are the great equalizer to increased labor costs.”
Seattle said yes to a $15 minimum wage, jumping from $9.47 with future increases expected. Was this a good decision? Depends who you ask.
One thing is for sure, compensation rate is a hot topic, especially for hourly employees.
Staying Competitive with Compensation
The job market is hot right now. Unemployment is low and open positions are high. Yet, many business owners are still feeling the struggle of finding and retaining qualified individuals. One way to relieve that pressure is by taking a good look at your compensation plan for your open positions. Make sure you review the state and federal rates for minimum wage if you hire hourly employees. You should plan to meet or exceed these rates. Candidates are seeking higher pay, even in the hourly space. So if you can sweeten the pot by offering an enticing compensation, you’ll edge out your competition for those qualified individuals.