Strategies to Combat Minimum Wage Increases

As of January 1, 2024, seven states, including Maryland, New Jersey, Washington D.C., Massachusetts, Connecticut, Washington, California, and most of New York now have a minimum wage of $15 or more. Compare this to just four states and Washington DC in 2023.

There are also big sector-specific wage hikes forthcoming in some states. Starting in April, California’s fast-food employers must compensate their employees at least $20 an hour and on June 1,2024, health care workers will earn between $18.00 - $23.00 an hour, depending on the role, size and type of employer.

Understandably, organizations face challenges when these mandated wage increases occur. Cost-effectiveness can become difficult, pay compression can impact pay equity, and employers who once had higher starting wages may suddenly lose their competitive edge. As employers attempt to remain compliant and competitive, success relies on creating or maintaining a strong compensation philosophy and strategy.

The strategies below can assist you with compensation management:

Organizational Design Review

Analyze your organization’s structure. This process can lead to revised or enhanced roles and this aids in the identification of gaps, overlapping roles and/or the creation of career paths. This may help identify operational efficiencies to better leverage your current workforce and may offset some of the costs associated with mandated higher salaries.

Create or Update Job Descriptions

Job descriptions act as the cornerstone for employee performance and expectations in addition to justifying exemption status and compensation. After analyzing job duties you may be able to adjust your roles to help counteract minimum wage increases by restructuring roles.

Review or Establish a Salary Structure. Ensure Pay Equity

Review or establish a current compensation salary structure. Ensure roles are competitive in the market and employees are compensated in an equitable fashion against their counterparts by conducting a pay equity analysis. Often minimum wage increases result in pay compression within the salary structure. It is important to see how these wage increases impact other relatable jobs and career hierarchies. Modeling out and analyzing how to integrate minimum wage increases into your full compensation structure is imperative. It is also important to look at these increases through a pay equity lens to see how these increases impact other comparable roles.

Are you struggling with any of these compensation issues? CEA and our sister association Cascade have a Compensation Team ready to assist you with CEA member discounts. Email us at ceainfo@employers.org for more info.