A Comprehensive Overview of 2022 and 2023 Minimum Wage Changes

2022 Minimum Wage Changes

In the summer of 2022, multiple cities and counties in California raised minimum wage requirements. The increases are small, ranging from $.55 in some areas to $1.65 in others. Jurisdictions affected by these changes are Berkeley, Emeryville, Los Angeles City, Los Angeles County, Malibu, Pasadena, San Francisco, and Santa Monica. In West Hollywood, minimum wage increases are dependent on the number of employees a business has and the nature of the business itself. Companies with 50 or more employees had to raise their minimum wage to $16.50 an hour, while companies with 49 or fewer employees had to raise their minimum hourly wage to $16 an hour. Hotel employees in the county saw a minimum wage increase of $.70.

Maryland, Minnesota, and Illinois also saw minimum wage increases at the city and county levels. In Maryland, Montgomery County businesses with 50 or fewer employees must raise the minimum wage payments by $.50. Companies with more than 50 employees must pay their workers $.65 more per hour than before. In Minnesota, Minneapolis and Saint Paul instituted minimum wage increases based on the number of employees in the business. Wage increase range from $.50 to $1.00 in these cities. In Chicago, Illinois, minimum wage increases ranged from $.40 to $.50, based on the number of employees in the business. In Cook County, the minimum wage was raised across the board from $13.00 per hour to $13.35 per hour. At the same time, Washington, D.C., Connecticut, Nevada, and Oregon raised minimum wages for all workers in the state.

Florida raised the state minimum wage from $10.00 per hour to $11.00 per hour, effective September 30. The state also increased the minimum wage by $1.00 for tipped employees, who now must be paid $7.98 per hour.

2023 Minimum Wage Changes

A whopping 18 states are raising their minimum wage. In most instances, these changes are effective January 1, 2023.

In California, all companies will have to pay employees a minimum wage of $15.00 per hour; up until this point, only companies with 26 or more employees were held to this requirement. Delaware is raising its minimum wage from $10.50 to $11.75. Illinois, Michigan, Massachusetts, Rhode Island, Nevada, New Jersey, New Mexico, and Virginia are raising their minimum wage by $.23 to $1.00. Vermont, Ohio, and Minnesota have passed laws mandating annual minimum wage increases starting at the beginning of the new year.

Other states instituting minimum wage rate changes are waiting until the second half of 2023 to implement the new laws. Connecticut will raise its minimum wage from $14.00 to $15.00 in June 2023. Oregon will institute annual minimum wage increases beginning July 2023. Florida, which raised its minimum wage in September 2022, is set to raise it by another $1.00 in September 2023.

Furthermore, employers should bear in mind that 18 states and Washington, D.C. have their minimum wage rates indexed for inflation. Put simply, as inflation rises, the minimum wage in Alaska, Arizona, Colorado, Connecticut, Florida, Maine, Minnesota, Missouri, Montana, Nevada, New Jersey, New York, Ohio, Oregon, South Dakota, Vermont, Virginia, Washington, and Washington, D.C. also rises. This wasn't much of an issue in years past when inflation was rising by only 2% a year. In 2022, however, inflation has risen by more than 8%, which means companies may be paying significantly more to workers than in times past while also struggling with the increased cost of doing business.

State Minimum Wage Rates 2022 vs. 2023

Exact Payroll has compiled a list of state-by-state minimum wage requirements to ensure sure your company is informed.

Tipped Wage Changes for 2023

Tipped employees, such as waitstaff and bartenders, may be paid a lower cash wage than the prevailing minimum wage through a system known as a "tip credit". In states that allow a tip credit, the employer may subtract a certain amount of received tips from the minimum wage for each hour worked.  However, the tipped employee must still receive at least the minimum wage (with combined cash wage and tips).

For states that allow the tip credit system, each state must set its own maximum tip credit – which combines with its minimum cash wage to make up the basic combined minimum wage in that state.  While some states (like Alabama, Kentucky, Louisiana, etc.) follow the federal government with a $2.13 tipped minimum and a $5.12 maximum tip credit, most other states set their own tipped minimum and maximum tip credit. 

In states that have higher minimum wages, such as New York, Washington D.C., and Massachusetts, the maximum tip credit is higher, resulting in a higher combined minimum wage.

As of 2023, however, Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington have all chosen not to allow the tip credit system, meaning that all businesses in those states must pay their employees the state minimum wage, regardless of whether they are tipped or not.

Why Use a Payroll Company

There are serious consequences for paying workers less than the minimum wage, even if the business owner made an honest mistake and failed to keep track of ongoing minimum wage increases in his or her city, county, or state. What's more, minimum wage changes are ongoing as localities push to raise wages for those in minimum-wage jobs. Partnering with a firm that specializes in payroll can free a business owner to focus on other important aspects of the business while resting assured that all employees and contractors are paid in accordance with local and state regulations.

Exact Payroll is a UKG partner that has, since the early 1990s, offered comprehensive payroll-related services to companies of all sizes and in all industries. Services are customized to meet each client's needs, and our firm stays abreast of all minimum wage rate changes to ensure that your company is in compliance with minimum wage laws at all times. What's more, we can also keep track of attendance, benefits, compensation, HR, and other related tasks to keep your business running smoothly now and in the future. Get in touch with us at your convenience to learn how we can help you navigate minimum wage increases and streamline your payment system to meet your needs and those of your employees.