While the changes under the Fair Labor Standards Act (FLSA) have been delayed and potentially nullified, changes are still on the horizon for Michigan employers.
On January 1st, 2017, the minimum wage will increase in Michigan from $8.50 to $8.90 per hour. It will bump up again in 2018 to $9.25 hour. While this change may not impact a number of employers who have faced increasing wage pressure based on the competitive talent market, those with a large entry-level workforce will need to plan for this change and any potential "wage creep" that may be necessary for employees that are near or just above the new minimum.
Often new employees hired at the minimum are given incremental increases during the first year or so based on satisfactory performance. If they are now near the new minimum rate, often the feeling of these staff if their pay is not "accelerated" is that they are starting over as new hires enter the workforce with no experience at nearly the same rate. This wage creep can create upward pressure on lower wage jobs that ripple up thru the organization. If wages are not able to be accelerated, careful thought must be given on how to communicate this with employees - they will be talking about it even if you are not, so this is an excellent opportunity to frame the conversation and provide insight to your staff.
Employers with tipped staff will see the minimum wage rise from $3.23 per hour to $3.38 per hour. Remember that if the gratuities plus the minimum hourly wage rate do not equal or exceed the minimum hourly wage otherwise established, the employer make up any shortfall to the employee. Based on this, effective January 1 tips must average at least $5.52/hour.
Options that are often overlooked for employers in Michigan are the 85% Training Wage and the Youth Training Wage.
The Youth Training Wage allows a Michigan employer to pay a newly hired employee age 16 to 19 $4.25 per hour for the first 90 days of employment while they are in training.
The 85% Training Wage allows a employer in Michigan to pay 85 percent of the minimum wage to employees aged 16 and 17 (currently $7.33 or $7.25 - Federal Minimum Wage rate is $7.25 per hour; employers that are covered by both State and Federal Minimum Wage law should pay the higher applicable rate). This rate will increase to $7.57 per hour on January 1st for all Michigan employers.
If you have questions about the upcoming changes, needs assistance with communication strategies, compensation modeling, or wage survey data, please let us know and we would be happy to work with your team.