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Pennsylvania’s state minimum wage hasn’t changed since 2009, when it was increased to match the $7.25 federal minimum wage. However, the state continues to consider increasing the minimum wage. In 2021, the state General Assembly considered a number of bills to boost Pennsylvania’s minimum wage to $12 per hour with the aim to eventually reach a $15 hourly pay rate. As a small business owner, it’s important to stay current on the latest developments so you know what to anticipate and can plan for the future.
To keep you up to date, we’ve put together this quick guide for business owners in the Keystone state.
What is the minimum wage in Pennsylvania?
Unless you’re a state employee, the Pennsylvania minimum wage is $7.25, which is the same as the federally mandated minimum. The minimum wage hasn’t changed since 2009, when it was raised by $0.10 as a result of the federal increase.
Some exemptions from the minimum wage rate include:
- Tipped employees who earn more than $30 per month in tips. They must be paid a minimum of $2.83 per hour, and this amount plus tips must equal at least the state minimum wage.
- Full-time high school and college students, who can be paid 85 percent of the Pennsylvania minimum wage if they are working 20 or fewer hours per week (and up to 40 hours during school vacation periods).
- Employees considered exempt under the Fair Labor Standards Act (FLSA).
For state employees, the minimum wage is much higher. In the summer of 2018, Governor Tom Wolf signed an executive order, increasing the minimum wage to $12 per hour for state employees (up from $10.20 per hour). This increase went into effect on July 1, 2018.
Will the minimum wage change in 2023 and beyond?
While the Pennslyvannia state government continues to show efforts to expand increases in hourly pay rate to all employees, there are no concrete changes planned. However, independent businesses within Pennsylvania are showing support for a $15.00 hourly pay rate. For example, Bucknell University introduced a $15.00 minimum wage in November 2021 for non-exempt college employees who are eligible for at least one year of benefits.
In addition, the 2018 Philadelphia minimum wage increase for municipal government workers, contractors, and subcontractors boosted the hourly pay rate from $14.25 to $15 in July 2022. From July 2023 and on, the increase will follow a percentage based on the Consumer Price Index.
How should small business owners prepare for changes to the minimum wage?
While a change to the state minimum wage isn’t imminent, it’s best to proactively prepare for when the time comes. We recommend taking the steps below to ensure your business is ready:
- Evaluate your staffing: Review your monthly sales and overhead costs to determine if your current staffing levels are reasonable. Based on your monthly cash flow, decide if you need to make adjustments to your hiring plan. If you have a seasonal business, for example, it might make sense to hire contract employees instead of full-time employees.
- Make smart hires and keep them: To make sure you find the right employees, use best hiring practices and ask smart interview questions to thoroughly vet candidates. Once you hire employees, focus on keeping them engaged. It’s no secret that the hiring process is time-consuming and expensive, but if you take time up front for hiring and prioritize employee retention, you’ll save money in the long run.
- Upgrade your technology: By automating time-consuming and tedious tasks, such as payroll, you can streamline operations and free up time to focus on issues like staffing and growing your business. With Square, it’s easy to learn how to do payroll yourself and avoid making common payroll mistakes.
While these are helpful guidelines to follow, to make sure your business is prepared and stays in compliance, you should discuss Pennsylvania minimum wage laws with your accountant and lawyer.