Understanding the Washington State Minimum Wage

seattle, washington
This article doesn’t constitute legal advice. Please consult a lawyer or accountant in your state to learn more about minimum wage legislation as it applies to your business.

With many states implementing multiyear minimum wage campaigns, it can be hard to stay on top of what you’re required to pay in your state.

Washington state raised the minimum wage in 2018 and plans to do so every year until 2020. Here’s what you need to know.

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What is the minimum wage in Washington right now?

The minimum wage in Washington is $11.50 an hour, but it will increase to $12.00 on January 1, 2019. Younger workers, ages 14 or 15, can expect to be paid $10.20 an hour (85% of standard minimum wage).

But if your business is in Seattle, the requirements are different. It’s one of a handful of cities across the country that has a plan to phase in a $15 minimum wage (San Francisco was the first to get there).

When it comes to wages, Seattle delineates businesses by size: 500 employees or fewer and more than 501 employees.

Businesses with over 501 employees are already required to pay $15 an hour, if they pay toward medical benefits. If they don’t, they must pay $15.45 an hour.

Seattle businesses with 500 or fewer employees must pay $11.50 an hour if they pay $2.50 an hour toward medical benefits and/or their employee earns $2.50/hour in tips. If that’s not the case, then the business must pay $14 an hour.

Keep in mind that other counties, cities, and towns may have their own minimum wage laws. You should do the research to determine which local wage laws may apply to you.

What’s happening to Washington’s minimum wage in the next few years?

Washington state increased its minimum wage by $0.50 in 2018 to reach $11.50. In 2019, it will go up again another 50 cents to $12. Then, in 2020, the minimum wage will increase by $1.50 to reach $13.50.

Starting in 2021, future minimum wage increases will be calculated using a formula influenced by the rate of inflation.

Seattle has a plan to reach a $15 minimum wage by 2021 (although larger employers are already required to pay at that level). Here’s what that schedule looks like:

Employers with 500 or fewer employees

  Pays $2.50/hour toward medical benefits and/or the employee earns $2.50/hour in tips  
Year Yes No
2018 $11.50 $14
2019 $12 $15
2020 $13.50
2021 $15

Employers with 501 or more employees

  Pays $2.50/hour toward medical benefits and/or the employee earns $2.50/hour in tips  
Year Yes No
2018 $15 $15.45
2019
2020
2021

How should I prepare for changes to the minimum wage as a business owner?

Washington state and Seattle are raising wages consistently for the next few years. Each year, you should examine your business and determine how those changes might affect you. Here are a few things you may want to do:

  • Know what your schedule looks like: Do your own research and talk to city officials to know exactly when the minimum wage will increase for your business.
  • Audit your expenses: Check your cash flow in detail and create a hiring plan that takes wage increases into account. You may also think about the type of worker you hire. For example, if you own a retail shop, you may think about temporary or seasonal workers as needed, which can be less expensive than taking on full-time regular staff.
  • Make sure you hire the right employees: Replacing employees is expensive — in terms of both time and money. You can decrease the total cost of recruiting and training when you hire (and then retain) the right people to do the job. Look for candidates with good track records, who come recommended, and who fit in with the company culture. Once the employee is onboarded, make sure you build a relationship and provide paths for employee growth; it makes it more likely that they will stay in their role.
  • Update your technology: Operational efficiencies can save you money (that you can instead spend on staff) and your staff time. Consider automating certain aspects of your work (like payroll), and find ways to reduce production costs.

As always, to make sure your business is prepared and stays in compliance, you should discuss Washington’s minimum wage laws with your accountant and lawyer.

Related Articles
Understanding the Federal Minimum Wage
How to Do Payroll Taxes and Process Payroll Yourself
Most Common Payroll Mistakes and How to Avoid Them

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