In June 2018, Massachusetts Governor, Charlie Baker, signed a bill with the intention of raising the state’s standard minimum wage. This initiative clearly outlined the goal to boost the wage from $11 an hour to $15 an hour by 2023 and from $3.75 to $6.75 for tipped employees. This bill took its first steps in 2019 when wages were increased to $12.75 per hour, but there is more work to be done. For many business owners and employees, it’s important to understand the intentions of Massachusetts’ minimum wage in 2021 and how it will change in the near future.
What is the Current Minimum Wage in Massachusetts?
As of January 1st, 2021, the minimum wage in Massachusetts was raised from $12.75 to $13.50 per hour. Likewise, the minimum service rate, for tipped employees, increased to $5.55 per hour. Additionally, tipped employees must earn a minimum of $13.50 per hour when tips and wages are combined. If the tips don’t bring the employees to at least the minimum hourly wage ($13.50) at the end of their shift, employers are required to make up the difference.
The minimum wage will increase to $14.25, and the minimum service rate will increase to $6.15 on the first of January 2022. The final step in the goal to increase the minimum wage ($15) and service wage ($6.75) will take effect on the first of the year 2023.
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What Does This Mean for Small Businesses?
Not all small businesses will adapt to the change in minimum wage requirements as easily as some others will. With changes to the minimum wage on the horizon, it is important for business owners to prepare as much as possible. Every company has different needs, but here are some options that may need to be considered:
- Audit expenses: Create a budget.
- Create an affordable hiring plan: In some cases, it may be more effective to hire temporary employees. This can be more cost-effective than hiring permanent full-time staff.
- Hire and keep the right employees: Replacing employees can be costly. This can be avoided by hiring (and retaining) candidates with noteworthy track records and strong recommendations. After the hiring process, it’s important for small business owners to build amicable relationships with their employees, creating a healthy work culture, and provide well-established pathways for employee growth. Happy, fulfilled employees are more likely to stay in their role.
- Analyze services and prices to ensure healthy margins: Pareto’s Principle or the “80/20” rule is a concept that 80% of effects are derived from 20% of the causes. This theory has been widely adopted in economics and businesses. When businesses evaluate their capacities and structure, the 80/20 can help analyze where most of the revenue opportunities are.
- Find ways to reduce production costs: This could be done by updating necessary tech equipment.
- Lean on support: Payroll companies and payroll service providers are there to help businesses of all sizes navigate the evolving state requirements.
It is important and necessary for small business owners to ensure that they are operating in compliance with state law. It is advisable for small business owners to discuss the changes to the Massachusetts minimum wage laws with their accountant and lawyer.
At Brabo Payroll, we pride ourselves on helping small businesses and aim to be THE payroll company for small businesses. Please reach out with any questions regarding minimum wage, payroll services solutions, mass payroll, workers comp insurance, or multi-state payroll!
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