As business owners, you are all aware of the recent vote to raise the state minimum wage to $6.75 per hour, per Arizona voter approval of Proposition 202. In addition, the new law mandates annual wage adjustments according to increases in the cost of living (CPI). As an Arizona Human Resources Consultant, I am working with clients to inform and educate on the new regulations and impact on businesses in the community.

Most businesses will be required to comply with the new state statue, however there are limited exceptions, including any person who is employed by a parent or sibling, “casual” babysitters, the Arizona state government, the federal government, employees who regularly receive tips (may be paid a minimum of 3.75/hour), and businesses that have less than $500,000.00 in gross annual revenue and that are exempt from the state minimum wage law.

OVERTIME

The increase in wages will obviously effect overtime pay, whereas one who earns $6.75 per hour, will earn $10.13 per hour for hours worked over 40 in a workweek This change will effect the ways in which employers manage overtime of non-exempt staff. Perhaps this encourages an emphasis on work/life balance and reminds us the 40-hour workweek as originally defined by the Fair Labor Standards Act of 1938.

TIPPED EMPLOYEES

Currently, tipped employees are paid a minimum of $2.13 per hour plus tips, which must equate to at least minimum wage in a workweek. When reported wages are less than minimum wage, the employer is responsible for adjusting the employee's pay accordingly. Under the new statute, employers may pay $3.00 per hour less than the state minimum wage ($3.75 per hour). Arizona Restaurant Association was a big advocate in fighting against the raise in minimum wage hike.

RECORD KEEPING

Proposition 202 requires new measures in record keeping requirements. The Equal Pay Act and the Fair Labor Standards Act both require retention of payroll record information for three years; the new provisions necessitate retaining records for four years.

IMPACT ON BUSINESSES

Offsetting costs may be possible by passing it along to consumer. Some business may need to assess their current workforce and reductions may be in order. Businesses may consider automating processes that may result in cost savings. Outsourcing will likely become a significant cost saving measure.

IMPACT ON WORKFORCE

As low wage ($5.15 to $6.75 per hour) earners will be impacted, thusly so will workers receiving wages in excess of $6.75 per hour. Known as the “ripple effect,” Theoretically, all workers should experience a positive impact with regard their pay. Negative impacts may also arise from loss of jobs, higher income taxes and increased cost of products.

Since the passage of Proposition 202, there has been much to be said on both the positive and negative impact of raising the state minimum wage. Nevertheless, Arizona business owners and their employees are likely to face significant changes in the coming months.