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Riding the Wave of Minimum Wage

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Seattle recently adopted the nation’s highest minimum wage, raising an employee’s pay to $15 an hour. This represents a 60-percent increase from $9.25 and more than double the national average. Hold on – before anyone packs their bags to head to the Emerald City, finish reading.

This decision came soon after hundreds of employees from fast-food chains went on strike in hopes of forcing employers to pay a higher hourly wage. Although this more-money movement pushes to close the income-inequality gap and lower the poverty level, it may end up doing more harm than good. Even if minimum wages increase, small and large businesses alike threaten to release workers as a result.

The plan from Seattle Mayor Ed Murray would give companies with no more than 500 employees seven years to implement the new wages; larger companies would get three years. Whether the plan comes to fruition remains to be seen, but what businesses need to take away today is the value of each employee. As minimum-wage changes are implemented, companies will see their workforce drastically change, which directly impacts the value of their hiring process. Employers can use the increase in wages to their advantage, in order to create more revenue and a stronger overall business.

There are a number of things employers should understand as they move forward in this new per-hour era, but among the two most relevant are below.

  1. Everything is more expensive

 

The federal minimum wage is $7.25 an hour. In contrast, Seattle’s increase to $15 paints a bull’s-eye on organizations with high turnover rates. Research indicates the cost of firing an employee is, conservatively, 30 percent of his or her annual salary. When calculating full-time employees only, the payment cycle breaks down to:

  • $7.25 (federal minimum wage) x 40 (hours per week) = $290 a week
  • $290x 52 (weeks) = $15,080 a year

 

By these numbers, the off-boarding process can cost employers $4,524 per fired employee without breaking a sweat.

Managers realize how difficult it is to let an employee go, but they also understand the obstacles and costs of finding another suitable candidate. To replace anyone in your workforce is tedious and time-consuming. The on-boarding process involves paperwork, training and switching schedules to accommodate the newcomer’s lack of experience.

Although many may not notice, the minimum-wage level plays a crucial role in whether employers can afford to hire additional help. By raising the minimum wage to $15 an hour, the entire cost of the process is turned on its head. Below are the new numbers for employers to consider before taking action:

  • $15 (proposed minimum wage) x 40 (hours per week) = $600 a week
  • $600 x 52 (weeks) = $31,200 a year

 

The numbers never lie. Employers in Seattle will have to ask themselves if replacing one employee is worth approximately $9,360.

  1. You get what you pay for

 

From an employer’s viewpoint, one silver lining is that the door for new possibilities has been opened. The days of hiring the next person to walk in and scribble their name on an application are over. “Minimum wage” is synonymous with “minimal risk,” and as that figure grows, employers should realize that a candidate with only a high school diploma or GED may not be worth any risk. Raising the minimum wage allows managers to be more selective in whom they hire. In doing so, organizations can seize the opportunity to hire only those candidates who have the skills to rise up in the company, thereby granting organizations more assets, which in turn leads to business growth.

If the minimum wage should double nationwide in the coming years, managers also should double their efforts in hiring the right employees. Seattle’s situation already has demonstrated a ripple effect southward, as activists have gained ground in San Francisco and Los Angeles to raise the hourly wage to $12.82 and $15.27, respectively. Now more than ever, organizations and their management need to align their business practices with the changing pay landscape.

OK, now you can pack your bags. But don’t be naive: Raising the minimum wage to $15 may not necessarily correlate to a stronger economy. When it comes to the level of the minimum wage and the number of actual jobs, more could mean less.


Aaron Santelmann

by Aaron Santelmann


Author Bio: A young and enthusiastic writer and researcher, Aaron is an instrumental member of Paycom’s lead generation and reporting team. Aaron is an engaging writer who maintains a strong presence on Paycom’s blog where he focuses on politics, government and compliance, tax guidelines and other employer regulations that impact businesses across the country. Outside of work, Aaron enjoys reading, exercising and spending time with his family.

IRS Continues to Enforce Affordable Care Act

IRS Continues to Enforce Affordable Care Act

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The IRS recently released an information letter indicating that the IRS continues to enforce the Affordable Care Act (ACA).

Dated June 30, Letter 2017-0010 was sent to a member of Congress who reached out to the IRS at the request of a constituent, a tax-exempt entity concerned it may owe an employer shared responsibility payment (ESRP) because it did not comply with the ACA rules on offering health insurance to its employees, for both financial and religious reasons.

The letter first provides a brief summary of the circumstances that might lead to a large employer owing an ESRP, and notes that there is no provision in the ACA that provides for the waiver of an ESRP.

The letter then addresses the effect of the president’s Jan. 20 executive order on the enforcement of the ACA. Titled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal,” the order directed federal agencies to exercise discretion permitted to them by law to reduce potential burdens imposed by the ACA.

However, it did not change the health care law. The legislative provisions of the ACA are still in force until changed by Congress; therefore, taxpayers remain required to follow the law and pay what they may owe.

For more information on the executive order and the current tax filing season, visit https://www.irs.gov/tax-professionals/aca-information-center-for-tax-professionals.

What This Means for Employers

Since Congress has not yet passed a bill that would repeal the ACA, and Republicans have struggled to draft a bill that would receive majority support, employers should use caution and plan to comply with the law’s requirements unless and until the ACA is repealed and any new law’s provisions actually go into effect. Continued compliance may be required for a transition period, following passage of an ACA repeal bill, depending on the language of that legislation.

 

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Posted in ACA, Blog, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Missouri minimum wage

Missouri Minimum Wage to Decrease from $10 to $7.70

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An overwhelming trend in the U.S. is cities and states increasing the minimum wage employers must pay their employees. However, St. Louis, Missouri is bucking this trend – although not willingly – by decreasing its minimum wage from $10 to $7.70, effective Aug. 28.

Court Battle

In 2015, St. Louis passed an ordinance raising its minimum wage to $10, with an automatic increase to $11 scheduled for January 2018. This prompted the Missouri legislature to pass legislation to pre-empt the ordinance from taking effect. The legislation was quickly enjoined in a lawsuit that went all the way to the Missouri Supreme Court.

In May of this year, St. Louis prevailed in the lawsuit and the minimum wage increased to $10. However, three months after the $10 minimum wage was implemented, the Missouri legislature passed another law disallowing any city in the state from having a higher minimum wage than the state, which is currently $7.70, this forcing St. Louis to reverse.

States vs. Cities

State governments dictating cities’ minimum wages is not altogether uncommon. In 2016, Alabama’s legislature shut down the Birmingham City Council’s efforts to raise its minimum wage. Similar efforts were undertaken by Ohio to block the City of Cleveland.

Other states have preemptively prohibited localities from passing minimum-wage ordinances – even before cities have commenced such efforts. Some of these states include:

  • Colorado
  • Idaho
  • Indiana
  • Kansas
  • Kentucky
  • Michigan
  • North Carolina
  • Oklahoma
  • South Carolina
  • Tennessee
  • Texas
  • Wisconsin

 

Although the St. Louis minimum wage decrease runs counter to the national trend, state legislatures prohibiting local increases is not uncommon. As more cities begin to adopt higher minimum wages, expect some state legislatures to push back.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

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Posted in Blog, Featured, Payroll

Jason Hines

by Jason Hines


Author Bio: Jason Hines is a Paycom compliance attorney. With more than five years’ experience in the legal field, he monitors developments in human resource laws, rules and regulations to ensure any changes are promptly updated in Paycom’s system for our clients. Previously, he was an attorney at the Oklahoma City law firm Elias, Books, Brown & Nelson. Hines earned a bachelor’s degree from the University of Central Oklahoma and his juris doctor degree from the Oklahoma City University School of Law, where he graduated cum laude. A fan of the Oklahoma City Thunder, Hines also enjoys exploring the great outdoors with his wife and daughter.

WOTC Tax Credits

What Tax Credits Are You Leaving on the Table?

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Federal tax credits for businesses are far from easy if you aren’t familiar with the program, and business leaders may find themselves in unfamiliar territory when it comes to their company’s eligibility for tax credits. As a leading provider of comprehensive human capital management software, we have found that the Work Opportunity Tax Credit (WOTC) is one Federal tax credit many leaders underutilize, meaning that they are leaving money on the table when it comes time to do their taxes.

In fact, one Paycom client in the fast-food industry found $447,000 in government-appropriated funds available once they took full advantage of the tax credits available to them. Read more about this client’s experience in our recent case study.

Is your organization is leaving money on the table?

The Purpose of WOTC

WOTC was designed to encourage employers to hire people from segments of the general population who have “consistently faced barriers to employment.”

On average, one in eight new hires potentially qualifies for the WOTC, and that number increases when it comes to the fast-food industry, in which one in four new hires is potentially eligible for the credit.

What WOTC Means for Your Company

Depending on which target group your new hire represents, the number of hours they work and the wages they earn determine the amount of the credit, you can receive up to $9,600 for each eligible new hire.

Like the client in our case study, you may find, that many of the people in your hiring pool are already eligible for the tax credit. They received an average of $1,128 per certified employee.

Who You Can Hire

Qualifying new hires can be full- or part-time workers. They must belong to specific “target groups” designated by the U.S. Department of Labor. These target groups are populations of people who are able and willing to work, but have found barriers to employment for a variety of reasons. Target groups include:

  • veterans
  • Temporary Assistance for Needy Families recipients
  • SNAP recipients
  • designated community residents (living in empowerment zones or rural renewal counties)
  • summer youth employees living in designated communities
  • long-term unemployed

 

 How You Can Receive These Tax Credits

To receive these tax credits, 8850 and 9061 forms must be completed on or before the job offer and sent to your state employment agency within 28 days of the employee’s first day of work. The client in our case study was able to save 75 hours (nearly two weeks of work!) by working with Paycom to process their available tax credits.

If you’re intimidated by or unaware of Work Opportunity Tax Credits, you’re not alone. But you might be missing out by leaving money on the table. Paycom clients using its tax credits service pay nothing for the search if they are found to have eligible employees. Want to learn more about WOTC? Sign up for our August 3 webinar “What’s New With WOTC” to learn the most up-to-date information on WOTC and ask questions specific to your business.

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Posted in Blog, Compliance, Featured, Franchises, Hospitality, Restaurant

Rich Stupansky

by Rich Stupansky


Author Bio: Rich came to Paycom in January of 2010 from Cleveland Ohio and is the Director of Tax Credits at Paycom. Rich was instrumental in developing and creating our tax credits program. Rich has more than 12 years’ experience with federal tax credits and an extensive background in working with companies of all sizes to maximize their full tax credit potential.

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