Minimum wage increase plans for your small business

  • While there has been no federal minimum wage increase in several years, several minimum wage increases by state occur every year.
  • If you are required to pay a higher wage to your employees, you’ll need a labor cost management plan to handle the increase.
  • Homebase gives you access to a robust labor cost reporting in real-time.

What are the minimum wage increases (2021)?

While there is currently an ongoing debate among administration officials around implementing a $15 minimum wage increase in the United States, the federal government has not raised the minimum wage rates since 2009, for both regular and tipped workers.

Increasing the federal minimum wage rate has been a hot topic of discussion in the last couple of years due to increased cost of living across the country. In 2019, the Raise the Wage Act aimed to implement a staggered increase to $15 over several years. In 2021, President Joe Biden signed an executive order that raised the minimum wage for federal contractors to $15.

However, effective January 1, 2021, 25 states across the country implemented increases in the minimum wage on the state level, according to the Department of Labor. Annually, many states increase their rates for both regular minimum wage and tipped minimum wage. This means that even if the federal laws don’t change, you will likely be subject to increases in your state minimum wage.

2021 minimum wage increases by state

  • Alaska: Minimum wage increased to $10.34
  • Arizona: Statewide rate increased to $12.15 with $9 for tipped employees
  • Arkansas: The new minimum wage rate is $11
  • California: Small employers who employ 25 or fewer workers must pay at least $13. Employers with at least 26 workers are required to pay $14.
  • Colorado: Colorado changed their rate to $12.32, with an increased tipped rate of $9.30.
  • Connecticut: The new minimum wage is $13 starting August 1, 2021.
  • Delaware: The Delaware rate increased to $10.25.
  • Florida: On September 30, 2021, Florida’s minimum wage will increase to $10.
  • Illinois: The state rate increased to $11, with plans to increase it to $15 by 2025.
  • Maine: Maine increased their rate to $12.15, with an increase in tipped minimum wage to $6.08.
  • Maryland: The rate in Maryland increased to $11.75, with a lower rate of $11.60 for employers with less than 25 workers.
  • Massachusetts: Massachusetts increased their minimum wage to $13.50.
  • Minnesota: Legislators increased the rate to $10.08 for large employers and $8.21 for small employers.
  • Missouri: The rate increased to $10.30.
  • Montana: Montana employers must pay at least $8.75.
  • Nevada: The state increased their minimum wage to $9.75.
  • New Jersey: New Jersey’s rate increased to $12, with the tipped minimum wage also increased to $4.13.
  • New Mexico: The standard rate increased to $10.50.
  • New York State: The State of New York increased its standard rate to $12.50 per hour in 2021, except for fast-food workers in the state, whose minimum wage increased to $15 per hour on July 1, 2021. Officials increased the New York City minimum wage rate for all employees, regardless of business size, to $15 per hour in 2019.
  • Ohio: Ohio employees received an escalated pay of $8.80 per hour, and tipped employees must be paid an increased rate of $4.40 per hour.
  • Oregon: Oregon’s plan to increase the standard minimum wage rate until 2023 continues in 2021 with an increased minimum wage of $12.75 per hour taking effect July 1, 2021.
  • South Dakota: South Dakota legislators increase the state rate—which will expand to $9.45 per hour in 2021—annually appropriately based on the Consumer Price Index laid out by the US Department of Labor.
  • Vermont: According to the Vermont Department of Labor, the state’s minimum wage will increase in 2021 to $11.75 per hour. The minimum tipped wage for employees is $5.88 per hour.
  • Virginia: The Virginia minimum wage will increase to $9.50 per hour on May 1, 2021. The rate will increase each year until it reaches $12 per hour in 2023. The tipped minimum wage remains the same at $2.13 per hour.
  • Washington: Washington State officials approved a minimum wage increase to $13.69 per hour in 2021. The State of Washington does not allow businesses to pay tipped employees at a lower rate than the standard minimum wage.

The last thing you want to do to deal with the increase in labor costs is to reduce the number of employees working for your business. Fear not, there are other strategies to consider instead of increasing the unemployment rate.

Homebase can help with each strategy by keeping track of your labor costs in real time and providing sales and labor forecasts so you’re always on top of how much you are spending

Time clock app punching in employee pin

Get creative with your pricing strategy

It’s not smart to drastically increase your prices as a cure-all to minimum wage hikes. However, if you go about it the right way and increase prices where it matters, you can make up for the increase in labor costs.

Take a look at your most popular items as well as which items sell best during certain times of the day. After you’ve analyzed your sales data, take stock of your inventory cost. If your establishment sells fountain drinks or coffees, keep in mind that these are high-volume, high-margin items. You can increase the price without costing your customers an arm and a leg.

Tier pricing is another strategy to consider. Charge your customers less for to-go meals that have smaller portions, and a little more for those who want a sit-down experience. If you operate a retail business, consider implementing a Good, Better, Best (GBB) model.

The GBB model offers customers three options for a product at a gradually increasing price point. This strategy tends to be effective because consumers love choices instead of being forced to buy the one option you’re offering. Plus, buyers are more likely to purchase the more expensive option if it’s considered “the best.”

Regardless of what type of business you operate, Homebase reports can provide in-depth information on your sales, labor costs, and more to help you make the right decisions in terms of increasing your prices.


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Owner at Barzotto

Work from anywhere using timeclock app

Get your labor costs in check

As a busy business owner or manager, you’re likely to lose control of labor costs from time to time—and guess what? This costs you money, especially when the minimum amount employees must be paid per hour is higher.

You need a technological partner who makes no mistakes and lets no errors slip through the cracks while you’re tending to other crucial aspects of running a business. Homebase is the perfect solution for keeping an eye on labor costs.

When you sign up for a Homebase account, you’ll get robust labor cost reporting in real time. You’ll also be able to track labor costs as a percentage of sales automatically and easily spot trends by role or department to manage costs.

Homebase even stops time theft in its tracks by preventing early clock-ins with automatic photos that are taken at clock-in, and enforcing breaks by sending automatic alerts. These may sound like simple tools, but they can save you hundreds of dollars. The average Homebase plus user saves over $192 a month in prevented labor leakage—that’s $2,304 a year.

You’ll also get a text when an employee is about to hit overtime, or if an employee is expected to reach overtime based on the hours they are scheduled to work for the week. You can even track overtime for your employees across multiple locations, so no matter where you are you will always be prepared to make the right scheduling decisions.

When you build your schedule on Homebase, you’ll be able to forecast labor costs and get ahead of upcoming overtime, all at once. You can even see the weather predictions for upcoming shifts, and you’ll have visibility into your sales forecast on the same page as your schedule builder. This way you won’t have as many surprises like a rainy day when you scheduled a few people to work on your patio.

Reduce other costs for a better ROI

It’s time to hunt for and weed out any unnecessary costs that are weighing you down. Consider replacing cheaper items you have to keep purchasing with an upfront, high quality investment that will eventually save you as much money as you are losing in pay increases.

Take inventory on how you’re spending money on a month-to-month basis. Are there any areas where you can reduce? Can you rearrange some of your budget to make up for the increase in payroll?

Think of it like a game of “budget Tetris”—sometimes all you need to do is move around some pieces and the whole operation works.

Reduce operating hours

Look at how many hours your employees are working and how much you’re paying in wages. How many of those employees do you actually need working a given shift? In fact, do you really need to be open for as long as you are, or can you reduce your operating time by a couple of hours?

If you can’t cope with closing your doors a little earlier every day, consider limiting the amount of overtime your employees can take. As you likely know, non-exempt employees who work more than 40 hours a week must be paid one-and-a-half times their regular wages, which can add up quickly.

Plus, the overtime salary threshold just changed in 2020, so you’ll want to keep an eye on how it affects your newly increased labor costs.

No matter which route you choose—even if you decide to implement a little bit of all of the above strategies—you’ll need a partner on your side to help keep track of team management better to avoid any unexpected increases in your costs.

Sign up for Homebase and get started for free today to keep track of your labor costs and successfully comply with the increases in minimum wage.