In March, Maryland passed a law mandating a $15 minimum wage. While it will not fully come into effect until 2025, it’s been and will likely remain a topic of heated debate. Critics note the same concern as Hogan whose veto was overridden: while Maryland is not the only state to set a goal of raising minimum wage to $15 an hour, the states surrounding Maryland are not among them. Some fear the rise in minimum wage in Maryland, but not in the surrounding states, will make Maryland employers less competitive to those companies that can pay their employees less. The concern is that this will lead to a hike in closures of Maryland businesses and a higher rate of unemployment. Experts suggest that the rise in minimum wage could result in some initial layoffs but in the long run will be better for the economy as a whole.
So, how will this impact your business?
The first rise in minimum wage will take effect on January 20, 2020. Minimum wage will then rise from it’s current $10.10 to $11 per hour. Then, on January 1st of every year there will be a gradual rise of $0.75 each year (2021, 2022, 2023, and 2024) until January 1, 2025 when minimum wage will hit $15 per hour. Companies with fewer than 15 employees will have additional time to comply; rather than a hike of $0.75, these companies will see an annual rise of $0.60 cents, until 2026 when the wage will reach the required $15 per hour.
There are some exceptions to this law. For instance, employees receiving tips will remain at $3.63 per hour (half of the federal minimum wage), and will not need to be compensated unless the accumulation of tips and the hourly wage are not equivalent with the state minimum wage. In such case, employers will be required to compensate employees for the difference. In addition, there is an exception for employees under the age of 18. These employees can be paid a “training wage”, which must be equivalent to 85% of the minimum wage. While these exceptions will still impact employers, the impacts will not be to the same level as the $15 minimum for all other employees.
While the new minimum wage will go into effect, there is a chance that the Board of Public Works (consisting of the Governor, Comptroller, and Treasurer) will delay the increase. Written into the law is the ability for the Board of Public Works to suspend the hike in minimum wage one time between 2020 and 2026. The hope is that this may provide some additional time for employers to strategize the best way to handle the rising costs.
Proponents of the new minimum wage think it will ultimately have a positive effect on the Maryland economy. Higher wages, mean more purchasing power which is ultimately a positive for any economy. Time will tell. Both sides of the minimum wage debate have strong, justifiable arguments but no matter how we feel, it seems the rise in minimum wage is coming. For more information on how to handle a rising minimum wage, see our March newsletter.