Minimum Wage Increase

| Jul 28, 2014 | Uncategorized |

As a result of recent legislation, Minnesota’s minimum wage rates will rise according to the following chart:

  • Large employers (gross volume of sales made or business done of $500,000 or more per year) must pay at least $8 an hour
  • Small employers (gross volume of sales made or business done of less than $500,000 per year) must pay at least $6.50 an hour
  • Training wage rate is $6.50 an hour (90-day training rate paid to employees who are younger than 20 years of age)
  • Youth wage rate is at least $6.50 an hour (paid to employees younger than 18 years of age

These rates will rise each August 1 until the general minimum wage $9.50/hr. For many years Minnesota had a minimum wage of $6.15/hr. which was lower than the federal minimum wage of $7.25/hr. As of August 1, low wage workers can expect a raise of $0.75 if they were being paid the federal minimum wage. The law also changed the definition of “large employer” to be businesses with annual gross revenues of $500,000, which is lower than the prior threshold of $625,000. As a result, more businesses will be required to pay the higher wage rates. For more information see http://www.dli.mn.gov/LS/minwage.asp

These changes have  brought about a lot of discussion on the merits of minimum wage increases. They have also highlighted that Minnesota is one of eight states that prohibits so called “tip credits” where a tipped employee, like a waitress, can be paid the tipped employee minimum wage ($2.13) so long as their overall pay (wage + tips) is equal to or greater than the general minimum wage. Many states allow the employer to pay that $2.13/ hr. and apply the tip credit on the remaining $5.12 bringing the employee’s wage to at least $7.25, the federal minimum wage. A thorough examination of state laws on this subject can be found at http://www.dol.gov/whd/state/tipped.htm