What are the new minimum wage changes that just took place, or what is the minimum wage?
The minimum wage in Illinois is $9.25 for both tipped and non-tipped employees ages 18 and over. Minors (ages 18 and under) may be paid a minimum wage of $7.75 per hour.
If you run a business with tipped employees, you may take credit for your employees’ tips; however, this amount may not exceed 40 percent of their wages. Additionally, non-tipped employees may be paid a minimum wage of $7.75 during their first 90 days with an employer.
Please keep in mind that the minimum wage is higher in two local jurisdictions: Chicago, where the minimum wage is $13.00 per hour (may increase to $13.00 per hour on July 1, 2020), and Cook County, where the minimum wage has been $12.00 per hour since July 1, 2019. The base wage for tipped employees in Cook County increased from $5.10 to $5.25 on July 1, 2019.
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Are there plans to change the minimum wage?
Illinois’ state minimum wage is reevaluated each year and based on the values of the Consumer Price Index (CPI), which is intended to raise the rate along with inflation.
In early of 2019, the Illinois House and Senate approved a proposal that would increase the state’s minimum wage to $15.00 by 2025. This bill was later vetoed by Governor Bruce Rauner, who cited a University of Washington study that found that low-wage workers saw a decrease in hours worked and income earned when wages increased to $13 per hour in 2016.
What’s happening beyond 2020?
Illinois is one of a number of states that is transitioning to a $15 minimum hourly wage. Chigaco’s mayor, Lori Lightfoot, is working to increase Chicago’s minimum wage to $15 per hour by 2021. This would be four years sooner than the state.
How should small business owners prepare for changes that are being made?
Every business is different, so there isn’t one right way to prepare. Here are a few options you may want to consider:
- Audit your expenses: Check your cash flow in detail and create a hiring plan that you can afford. In some cases, you may find that hiring temporary workers as needed is less expensive than taking on full-time regular staff.
- Make sure you hire and keep the right employees: Replacing an employee costs a lot. You decrease the total cost associated with recruiting and training when you hire (and then retain) the right people. Look for candidates who have good track records, come recommended, and fit in with the company culture. Once employees are 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.
- Increase prices: This is a great way to increase cash flow. Customers are rarely happy with a price hike, but keep in mind that your competitors will be forced to do the same. Just make sure you keep track of trends, and don’t raise prices too high.
- Update tech: Consider automating certain aspects of the work (like payroll), and find ways to reduce production costs.
As always, to make sure your business is prepared and stays in compliance, we recommend that you discuss these upcoming changes to the Illinois minimum wage laws with your accountant and lawyer.
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