Get Ready for Inflation-Related Pay Increases

A number of states have minimum-wage rates tied to inflation. As such, we are just starting to see announcements letting employers know how much their pay rates will increase in 2019. If you live in such a state, now is the time to start thinking about inflation-related pay increases. Pay attention to any current or pending state announcements.

For more information on a state-by-state basis, you can check out a recent post from Bloomberg BNA. Their post includes information from Minnesota, Alaska, Florida, and six other states that have already issued announcements. The post also includes a number of additional states for which announcements are scheduled to be released in the coming weeks.

How Inflation-Related Minimum Wage Works

Inflation-related minimum wage is an hourly wage that is adjusted annually to account for inflation. Let's use Minnesota as an example. As explained by Bloomberg BNA, the current minimum wage in the North Star State is $9.65/hr. for large companies with annual receipts of at least $500,000. It increases to $9.86/hr. on the first of the year.

There are different rates for smaller employers and employers who offer summer work travel exchange programs for nonresidents. Also note that the state minimum wage does not apply in Minneapolis. There they have a higher minimum wage that goes from $11.25/hr. to $12.25/hr. on July 1 of 2019.

New rates are calculated by using the rate of inflation as determined by federal and state officials. As such, inflation-related wage increases are intended to help employees keep up with the rising cost of living. Employees are expected to know and implement those increases on the appropriate date.

Here's a sampling of what some other states have in store:

  • Florida – Minimum-wage increases twenty-one cents.
  • Missouri – employees will get an additional twenty-five cents.
  • Montana – employees will get an additional 20 cents.

You will notice that all the increases are in the same ballpark. They are not exactly the same due to differences in state calculations, but they are all close.

If You Miss the Announcement

If you live in a state with inflation-related minimum wage requirements and you miss your state's announcement, you are still required to implement the correct wage on the correct date. Contact the appropriate state agency before the end of the year to find out what 2019's rate will be.

We also recommend that if you work with a third-party payroll provider you contact that company to make sure they have implemented any new pay rates that apply. Even though companies in our industry generally take responsibility for making sure these kinds of things get done, you are ultimately responsible in the eyes of the law.

Should you fail to implement required pay increases, you and your company could be held liable for both civil and criminal penalties. Do not take the chance. Make sure all your ducks are in a row before the clock strikes midnight on December 31. You and your hourly workers will ultimately be glad you did.

Let BenefitMall Handle Your Payroll

Perhaps all of this sounds too overwhelming for you to handle. We get it. Payroll is not as easy as it was 15 to 20 years ago. Nonetheless, you still have a responsibility to get it right. Might we suggest you allow us to handle your payroll for you?

We make it our business to fully understand the regulations in each and every state. We keep track of things like inflation-related payroll so that you can sleep well at night. Letting us do your payroll will take a huge burden off your shoulders.


  1. Bloomberg BNA