Minimum wage and your small business

As of the time of writing this newsletter, the Minimum Wage Conference Committee has decided to increase Minnesota’s employer-paid minimum wage by 2016 to $9.50 per hour for large businesses and $7.75 for businesses with less than $500,000 in revenue. There is a lower minimum for very small businesses, trainees, teens, and employees from other countries working at places such as resorts. A total exemption from a minimum wage remains for very small businesses, babysitters, and others.

After much debate, the bill will include an automatic annual increase to the minimum wage based on inflation. A proposed constitutional amendment has been dropped.

The conference committee bill will not address wages earned from tips. The hospitality industry had sought a $6.15 to $7.25 base wage paid by the employer with wages earned through tips ensuring that $9.50 per hour or more was earned.

Background:  With no adjustments to the state’s minimum wage in 10 years, Minnesota became one of only four states with a minimum wage below the federal level. (The other states are Arkansas, Georgia and Wyoming. Five states have no minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. See details at the United States Dept of Labor.)

Currently, Minnesota’s state minimum wage is $6.15 per hour; the federal minimum is $7.25. Some Minnesota businesses are required to pay the federal minimum wage while others pay the state wage. Very small businesses, babysitters, taxi drivers, and others are exempt from the minimum wage.

Minnesota will very likely pass a minimum wage of $9.50 per hour with the exceptions mentioned earlier in this article. According to the Massachusetts Institute of Technology Living Wage Calculator, a livable wage for a single adult in Minnesota is $9.11 per hour.

Small Business Minnesota position: During the first weeks of the legislative session, Small Business Minnesota expressed support for increasing the minimum wage while remaining concerned that once-a-decade 23 to 35 percent increases were burdensome and made it difficult for businesses to plan. We recommended that the minimum wage be reviewed every 1-2 years for potential moderate increases. We also supported a $7.25 per hour minimum paid by employers who had employees earning additional wages of $2.50 or more per hour through tips.