Raising the Minimum Wage Means Increased Need for Payroll Management

10 Jun

Raising the minimum wage could impact many businesses.

States and cities across the country have already started increasing their minimum wages, causing many employers to rethink their payroll management software and strategies. The Associated Press reported at the end of May that Michigan Gov. Rick Snyder recently signed a bill granting a rise in the state's minimum wage to $9.25 an hour over the next four years, which will be a 25 percent boost from the state's current wage of $7.40 per hour. According to the Los Angeles Times, Seattle's city council unanimously voted to increase the city's wage to $15 an hour, making Seattle the city with the highest minimum wage in the U.S. These are just the standouts in the minimum battle currently waging at the state level. According to the Society for Human Resource Management, more than a dozen states boosted their minimum wages this past year, with most having gone into effect this past Jan. 1.

Minimum wage remains a federal issue as well. The Washington Post reported that Congress continues to be split on whether to raise the federal minimum wage to over $10 per hour, a considerable increase from its current $7.25 an hour. The Los Angeles Times noted that Congress's efforts to increase the minimum wage have been stagnated by the lobbying of opponents. However, with so many states and municipalities taking on the issue and raising their own minimum wages, the federal government may end up doing the same soon. The AP reported President Barack Obama and many lawmakers support increasing the minimum wage, and labor unions continue rallying across the country for the hike.

Payroll Management Key With Higher Minimum Wages
What does this mean for employers? McDonald's CEO Don Thompson has already come out saying that the company supports a minimum wage boost, according to the Chicago Tribune. Thompson said that even though McDonald's would have to double its current base pay to meet a minimum wage hike to $15 an hour, the company "will be fine."

"We'll manage through whatever the additional cost implications are," Thompson said on May 12, according to the Tribune.

Yet not many employers are as large as McDonald's and may not be able to afford doubling their base salaries. A recent Congressional Budget Office report looked at how raising the minimum wage at two different rates – to $10.10 or $9.00 – would impact employment. According to the report, the $10.10 option would have a bigger impact on employment than the $9.00 option, with approximately 500,000 workers losing their jobs by the second part of 2016. This loss is a 0.3 percent drop in employment. Yet the report noted as many as 1 million employees may lose their positions because of a $10.10 hike.

Employers and HR professionals will need to use the right payroll management software if there is a rise in the minimum wage. Employers may have to adjust their payrolls to comply with their state's or the federal government's minimum wage. 

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