Since employees are your most valuable assets, you naturally want to pay them well for their services. What you pay depends, of course, on how well your business is doing and on other factors. As you’re planning for salary increases and hikes in pay rates for hourly workers next year, keep certain points in mind:
- Minimum wage rates. Eight states have indicated that they are increasing their minimum wages on January 1, 2012: Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington. Missouri and Nevada link their rates to inflation, so they, too, will likely increase their rates (even though they have not yet been announced). The hourly rates vary by state, with Washington at the high end at $9.04 per hour. The federal minimum wage rate, which is $7.25 per hour, remains unchanged for 2012; this rate applies in states with minimum wage rates at or below the federal level (i.e., the federal minimum wage supersedes the state rate if the state rate is lower than the federal rate). Find the minimum wage rate for your state through your state labor department or the U.S. Department of Labor (the 2012 rates have not yet been posted here).
- Cost of living adjustments to salaries. It has been estimated that the cost of living adjustment needed for wages in 2012 to keep pace with inflation is about 3.5%.
Where necessary or desired, include compensation increases in your budget planning for 2012. You must meet minimum wage requirements. You are not obligated to give cost-of-living adjustments or other raises for salaried workers, but should consider doing so to retain valued employees. Recognize that pay increases will also boost your employment tax obligations and can also raise your cost of benefits, such as contributions to retirement plans. Be sure to look at the big picture!