Illinois Minimum Wage Increase

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Illinois Minimum Wage Increases Starting in January

 

As most everyone is aware, Illinois Governor J.B. Pritzker signed a law to progressively increase the minimum wage in our state. Illinois is among one of the first states in the nation to pass an increase this large. The first increase will take effect in just a few short months on January 1, 2020.

In January, the minimum wage will increase to $9.25 per hour. That is a dollar more than the current state minimum wage of $8.25. Shortly thereafter, on July 1st, the minimum will increase another $0.75 to $10.00 hour.

A few other changes that take effect under this law is that minors (18 years of age and under) may be paid a lower wage per hour as long as they don’t work more than 650 hours per year. Damages to employers for violating the new Illinois Minimum Wage Act have increased drastically.

The state has implemented a tax credit to try to offset some of the burden on small employers. Businesses with 50 employees or less will be able to claim a tax credit for 25 percent of the cost in 2020. As the minimum wage continues to go up however, the credit will decrease and eventually be phased out completely.

What does all of this mean for you as an employer? There are several things that need to be considered when the minimum wage is increased.

Wage Compression – the definition of wage compression is the regularity that wages for low-skilled workers and wages for high-skilled workers tend toward one another. Not only does the minimum wage have to go up, but most likely the wage that you are paying your skilled workers as well.

Effects on small businesses – oftentimes wage increases force small business owners to raise prices on their goods and services or reduce the cost of doing business. This can lead to operating your business with leaner staff or cheaper products.

Passing on the cost to consumers – for obvious reasons, this could mean passing on these additional costs to your consumer. There are obviously pros and cons to this. Consumers will likely be making more money and can afford to pay a little more for goods and services. On the other hand, some businesses aren’t able to pass on increases to their consumers to remain competitive or due to the national standard for some of these goods and services.

As stated earlier, there are several things that need to be considered when the Illinois minimum wage increase takes effect. If you are curious about the minimum wage increases for the state of Illinois over the next several years, check out this link: https://www2.illinois.gov/idol/Laws-Rules/FLS/Pages/minimum-wage-rates-by-year.aspx.

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