As part of New York State’s budget legislation enacted on May 3, 2023, the minimum wage rates are set to rise to up to $17.00 per hour in certain parts of New York by 2026. Here’s what employers need to know about these changes and what actions you may consider taking now in response to the increase in New York’s minimum wage rates.
Regionally Based Minimum Wage Changes
As set forth in New York State’s budget, regional minimum wage rates will increase as follows:
Effective Date NYC, Westchester, Nassau / Suffolk Counties Remainder of New York State
Current $15.00/hour $14.20/hour
January 1, 2024 $16.00/hour $15.00/hour
January 1, 2025 $16.50/hour $15.50/hour
January 1, 2026 $17.00/hour $16.00/hour
January 1, 2027 $17.00 + annual increase/hour $16.00 + annual increase/hour
Employers should note that starting on January 1, 2027, there will be additional annual minimum wage increases each year based on the Northeast region measure of consumer price increases for urban wage earners and clerical works (CPI-W). These adjustments will be published by New York State’s Department of Labor no later than October 1st of each year, with the new rates taking effect the following January 1st.
It is expected that there will be no increase in any year where (a) the CPI-W for the preceding year is negative; (b) the state unemployment rate increases by a half of a percentage point from its low during the prior year; or (c) the total non-farm statement employment (which is measured seasonably) decreases over the previous six (6) months.
Exempt Salary Threshold
While the legislation does not specifically explain how the wage hike on the minimum salary threshold will impact exempt executive and administrative employees, the law provides that the amounts set by a wage order adopted in the future shall increase in the same proportion as the applicable minimum wage increases. For example, historically the salary basis threshold is set at 75 times the hourly minimum wage per week. If that remains unchanged, the salary basis threshold for executive and administrative exemptions are likely to increase as follows:
Effective Date NYC, Westchester, Nassau / Suffolk Counties Remainder of New York State
Current $58,500/year $55,341/year
January 1, 2024 $62,400/year $58,500/year
January 1, 2025 $64,350/year $60,450/year
January 1, 2026 $66,300/year $62,400/year
What Should Employers Do Now?
First, employers must review their employee rosters to determine which hourly employees may be affected by the law so that employers can update their payrolls accordingly. Since the effect of the increases can be significant for employers with nonexempt hourly workers, we highly encourage employers to review and consider appropriate updates to their budgets as necessary to account for this increase.
Second, employers may want to reclassify employees who are eligible for overtime or raise those salaries to comply with the higher thresholds set for overtime-exempt employees.
Third, even if your organization does not employ minimum wage workers, it is important to determine whether an increase to your employees’ hourly rates is required in order to stay competitive in the labor market.
Fourth, to the extent that reclassified employees previously had received bonuses, commissions or other incentive compensation, employers must determine how to factor those prior bonuses or commissions into the regular rate of any newly classified hourly workers. It is also highly recommended that employers audit their timekeeping processes for newly reclassified employees to ensure that they are following the proper procedures.
Contact PMP if you have any questions.
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