Tompkins County Chamber: Looking at Impact of Minimum Wage, Salaries for Local Businesses

By Jennifer Tavares

It’s January, a time of fresh beginnings and resolutions to do more, do better, and accomplish great things in 2017. Small business owners and organization leaders will also want to ensure they are compliant with New York state and federal rules regarding employee wages and overtime. Minimum wages and other rules regarding exempt vs. non-exempt employees have added increased budget and compliance pressures on many businesses and organizations.

Proposals at the federal level regarding the Fair Labor Standards Act got a lot of attention in 2016 – the often referred to “overtime rule.” The Department of Labor proposed startling increases to the salary levels required to consider an employee exempt-salaried vs. non-exempt (either hourly or salaried). While most definitions determining employee status would remain the same, the Department of Labor and administration were favoring a near doubling of the salary threshold required for salaried exempt employment – to about $47,500 per year.
For now, this threshold change has been stalled in a Texas court. But many employers had already planned to make policy changes or salary adjustments to comply with the new rule. Lesser known in my conversation with small business owners are the New York state rules regarding exempt employees. New York has always had higher requirements for exempt salary thresholds than the Federal government, but beginning on January 1, these have increased considerably. A summary of the schedule of increases for the next few years is provided here for all locales outside of New York City, Nassau, Suffolk and Westchester counties:

— $727.50 per week, starting January 1
— $780.00 per week on and after December 31, 2017
— $832.00 per week on and after December 31, 2018
— $885.00 per week on and after December 31, 2019
— $937.50 per week on and after December 31, 2020
By year 2020, New York intends to require employers to meet the same threshold that the Federal Department of Labor was intending to require by December 1, 2016. For longer term planning, it’s important to note these rather aggressive wage increases on both the minimum wage and the acceptable wage for salaried employees. Changes in exempt vs. non-exempt employment has forced adjustments from a culture perspective in many workplaces; employees who may be transitioning from “salaried to hourly” may feel that they’ve been demoted, causing potential rifts and human resources challenges for many employers.
While many would not argue that minimum wage should increase, it is noteworthy that the federal minimum wage remains at $7.25 per hour, that many other states have not implemented such increases, that minimum wage in New York has already increased about 50 percent over a few short years, and that we are on a path to $12.50 per hour by December 31, 2020. Minimum wage in New York state is now $9.70 per hour, and employers do not want to be caught non-compliant. The state has set up a hotline for individuals who “Did not get a raise” on January 1; an unfortunate phrase to use in order to ensure that employers comply with the new requirements.
Many don’t understand or have sympathy for how quickly these increases add up; I do, because I’ve done the math. Most people I speak with don’t understand that when wages increase by several thousand per employee, benefits costs also rise, and when these increases are multiplied by an entire workforce, sometimes we’re talking about tens or hundreds of thousands of dollars. And the simple fact is that “selling more product” doesn’t automatically generate increased revenue OVER expense enough to compensate for said increases in salaries and payroll.
We have sympathy for those who may struggle to implement such drastic changes in relatively short periods of time. The Tompkins Chamber, while not opposing wage increases, has tried to raise awareness regarding the very real impacts from implementing aggressive wage changes in short periods of time, and that wage compression is a significant issue for many small businesses and non-profits throughout the region.
I predict that many businesses and non-profits alike will need to make some tough decisions in the next few years in order to ensure compliance with these rules. We are so fortunate to have the economic base we do in Tompkins County, but we should not take for granted that the majority of our employers and small businesses can continue to grow in New York’s business environment.
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Jennifer Tavares is president of the Tompkins County Chamber of Commerce.