Nothing in this article constitutes legal advice. Please consult a tax attorney or tax professional if you have questions about minimum wage compliance.
Over the past few years, Arkansas has experienced a series of gradual minimum wage increases, and 2019 brings an even bigger increase. In November 2018, Arkansas voters passed a ballot measure that will significantly increase the Arkansas minimum wage over the next three years.
To make sure you’re up to date on the upcoming increases, we’ve put together this guide for Arkansas business owners.
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What is the minimum wage in Arkansas?
Effective January 1, 2019, the Arkansas minimum wage is $9.25, $2.00 higher than the federal rate of $7.25. The wage increase was approved in the 2018 November election, and it will boost wages for an estimated 300,000 workers — about a quarter of the state’s workforce.
The current minimum wage applies to most employees in Arkansas, with the following exceptions:
- Tipped employees, who must be paid a minimum of $2.63 per hour. This amount plus tips must equal at least the state minimum wage.
- Full-time students, who can be paid 85 percent of the Arkansas minimum wage if they are working up to 20 hours per week.
- Employees considered exempt under the Fair Labor Standards Act (FLSA), including domestic workers (e.g., babysitters and caregivers), federal government employees, and some agricultural workers.
Are there plans to change the minimum wage beyond 2019?
Yes. As part of the ballot measure passed in November 2018, known as Issue 5, the state minimum wage will increase over the next three years. The minimum wage will increase to $10.00 in 2020, and $11.00 in 2021.
Considering the series of upcoming wage increases, it’s important to take proactive measures to ensure your business is prepared.
How should small business owners prepare for changes to the minimum wage?
As an employer in Arkansas, you may be accustomed to making minimum wage increase adjustments already. In case you need some tips, we recommend the following:
- Evaluate your staffing: Review your monthly sales and overhead costs to determine if your current staffing levels are appropriate. 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.
- Use best hiring practices: 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 retention. 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: If you automate 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.
While these are helpful guidelines to follow, to make sure your business is prepared and stays in compliance, you should discuss Arkansas’ minimum wage laws with your accountant and lawyer.
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