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Minimum Wage Increases: Planned vs. Indexed [1]

['Jana Bjorklund', 'Dana Holle']

Date: 2024-06-03 16:25:58+00:00

Not all minimum wage increase provisions are created equal. There are two types of minimum wage increases: planned and indexed. Although it may sound simple, each type of increase has differing implications for companies when complying with these laws.

In this article, we will discuss definitions, challenges, and the value of understanding planned and indexed minimum wage increases along with the complexity of managing wages in hundreds or even thousands of locations across multiple jurisdictions.

How Planned Wage Increases Work

First, let’s talk about planned increases. A planned minimum wage increase is a mandated rate that is on a scheduled cadence. This wage can widely vary from one jurisdiction to another, making it tiresome to track.

Hypothetically, a jurisdiction with planned minimum wage increases may look like this:

Employees must be paid minimum wages as follows:

$15 per hour on and after Jan. 1, 2025;

$16 per hour on and after Jan. 1, 2026;

$17 per hour on and after Jan. 1, 2027;

$18 per hour on and after Jan. 1, 2028;

$19 per hour on and after Jan. 1, 2029;

$20 per hour on and after Jan. 1, 2030.

In this example, payroll managers can plan several years ahead knowing what wage increases will be. Additionally, in our hypothetical example above, payroll managers will know that after Jan. 1, 2030, the minimum wage will remain at $20 until the law is amended.

At first glance, planned wage increases might seem easier to manage. However, there are still implications to organizations with multiple jurisdictions to manage. When planned increases aren’t researched and implemented accurately across organizations, there can be significant compliance issues for the organization such as:

Inaccurately paying employees

Competing in the marketplace

Disparities in standard of living across regions

Non-compliance with minimum wage laws

Potential penalties and class action lawsuits

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[1] Url: https://www.govdocs.com/whats-the-difference-between-indexed-vs-planned-minimum-wage-rate-increases/

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