Data suggests that wages will have grown in 2019, albeit just slightly above 2018's growth. If predictions hold, employees should receive pay increases 0.1% higher in 2020 when compared to 2019. Some of the projected increase has to do with higher minimum wages in many states.
According to the Society for Human Resource Management (SHRM) actual mean growth in 2019 was 3.2%. Actual median growth was 3.0%. Estimates project mean and median growth for 2020 at 3.3% and 3.0% respectively. If these numbers do not mean much to you, the important thing to remember is that average salary increases for 2020 should come in at about 3.3% across-the-board.
Minimum Wage Increases
You cannot talk about annual wage growth without talking about minimum wage laws as the two are inextricably linked. No fewer than 21 states have increases scheduled for some time in the coming year. States with planned increases are as follows (listed in alphabetical order):
- Alaska – $10.19
- Arizona – $12 ($9.00 tipped)
- Arkansas – $10
- California – $12/$13 depending on size
- Colorado – $12 ($8.98 tipped)
- Florida – $8.56 ($5.54 tipped)
- Illinois – $9.25 ($5.55 tipped)
- Main – $12 ($6.00 tipped)
- Maryland – $11
- Massachusetts – $12.75 ($4.95 tipped)
- Michigan – $9.65 ($3.67 tipped)
- Minnesota – $8.15/$10 depending on size
- Missouri – $9.45 ($4.73 tipped)
- Montana – $8.65
- New Jersey – $11 for most employers ($10.30 for others)
- New Mexico – $9.00 ($2.35 tipped)
- New York – $11.80
- Ohio – $7.25 /$8.70 depending on size ($4.35 tipped)
- South Dakota – $9.30 ($4.65 tipped)
- Vermont – $10.96 ($5.48 tipped)
- Washington – $13.50.
Do take note that some of the listed states above have separate pay rates for tipped workers that are not actually listed here. In such cases, it is because those states are not increasing minimum wage for tipped employees. Therefore, only increases are listed here.
You should also note that the new overtime rule just implemented by the federal government will kick in as of the first of the year. What this means is that some previously exempt employees will no longer be exempt from overtime rules. That will undoubtedly cause an increase in wages to some degree.
Pay Raises for Your Company
All of the numbers lead to a question: is ownership planning pay raises for your company? If so, how will such raises be implemented? We would hazard a guess and say that there are as many policies as there are employers to whom we provide payroll and benefits administration services.
We would also guess that some companies will increase their wage budgets by a certain amount and then evenly distribute the increase to every employee by an equal percentage. Other companies might give their hourly workers a cost-of-living raise while reserving higher raises for middle and upper management. There is no right or wrong way to do it. Companies increase wages in whatever way makes the most sense to them.
The only thing we would recommend in this regard is that employees be transparent and forthcoming about any plans for wage increases. Let employees know exactly what they are getting so that there are no surprises. If wage increases are tied to performance reviews, make that clear as well. The last thing HR wants is a line of employees standing outside the door with questions about pay raises.
If your company is planning pay raises for 2020, now would be an appropriate time to consider outsourcing your payroll to a specialist like BenefitMall. We offer turnkey payroll solutions along with specialized solutions for the restaurant and construction industries. Our expertise is just what you need to keep on top of things as we turn the calendar to 2020.