The New York State Budget provides that the minimum wage rates and overtime salary thresholds will increase under a phased-in schedule based on the employer’s location in the state. Unlike most other states, New York has one of the most complicated minimum wage rate structures. Not only does New York set a minimum wage rate, but the state minimum wage law also sets forth specific wage requirements in industries such as building services, fast food and resort services. New York is also unique in that its wage rates will change on December 31, not January 1, unlike most other states which implement rate changes on January 1.
As of December 31, 2018, the minimum wage rate structure will increase as follows:
What does this mean for employers? To put it simply, employers must know which category they fall under to understand how these wage rate increases will impact cash flow, hiring and other administrative duties.
Recently, the New York State legislature introduced its own increases to overtime salary thresholds. Like the minimum wage rate increases, the increases to overtime salary thresholds will depend on where the employer is located and possibly the number of employees.
As of December 31, 2018, the overtime salary threshold will increase as follows:
Many employers will notice that based on the increases in overtime salary thresholds, their currently employed white-collar, salaried employees may soon be compensated at a wage that falls below what their overtime salary threshold will increase to. This means that some white-collar employees who were once deemed to have exempt status, will fall into the non-exempt status. Employers have three options to deal with this change.
Require employees to track their hours and do not allow employees to work more than 40 hours per week. This seems like the simplest fix, it may require employers to implement a new time keeping process. However, this leads to major implications and consequences for a business if the employee’s sudden reduction in hours causes great difficulty to complete projects.
Transition employees to hourly pay and pay them overtime. This option may be costly for employers who have employees averaging between 45 and 50 hours per week. Since the overtime rate is 1.5 times the normal hourly rate, this essentially means employers would give those employees a substantial raise.
Simply raise salaries above the new overtime threshold. This permits employers to award employees with a fairly sizable raise which will increase employee morale and productivity. This is also much less costly than the second option and allows those employees to maintain their exempt status. Additionally, this won’t require employees to track their time and cap their weekly hours at 40 hours, and employers won’t have to pay substantial overtime wages.
Although this process may seem simple when dealing with one employee who is about to lose his/her salaried, exempt status, it becomes extremely complex when employers need to account for several employees in this situation. Hence, it is important for employers to take these changes into consideration in order to make the best decisions for your business.